Real Estate investing for your kids
I read this is in a news letter from a mortgage broker Pauline Tonkin & thought it would be a good idea to put in place so moving the kids out of the nest would be a softer transition.
| Mortgage Strategies - Making Money for You and Your Kids! |
| What would you do if you knew you could help your children get into the real estate market and make money for your own retirement at the same time. With the price drop in real estate and record low interest rates, I have been receiving more calls from clients wondering about taking equity out of their home to purchase a rental property and have their adult children pay the rent. After 3-5 years with the principal reduction and value appreciation you could refinance the property to remove equity and gift some money to your child for a down payment when they purchase their own first home. Since your adult child is not on title to the rental they would not lose access to the first time home buyers benefits such as waiving of property purchase tax. For example, if your purchase a condo for $200,000 by taking the full amount in equity out of your home, you would have payments of approximately $1070 (4.19% 5-year fixed - 25 year amortization) that could be covered by rent. After 5 years of regular payments (excluding any value appreciation) the balance on your mortgage would be approximately $175,000.00. When renewing the mortgage you could take the $25,000 in equity out of the condo and gift that to your child for a down payment on their purchase and continue to rent the condo to someone else building a nest egg for your retirement. Or you could sell the condo. Check with your accountant for tax benefits. This is just an example. Each situation will vary. Call me anytime to run the numbers for your specific situation. |