THE BEST WAY TO INVEST FOR CHILD FUTURE
Now that we’ve demonstrated how easy it is to generate high returns and why this is the best investment plan for child future, let’s implement this investment for your kids. Now, if you’re wondering can kids invest in real estate? The answer is obviously no.
In order to take full advantage you’ll want to invest in a property that will take occupancy when your son or daughter turns 18. The reasoning is two-fold:
1- They must be 18 years of age to own property and as a first-time home buyer they are eligible for significant First-Time Buyer Rebates.
2- Presuming they’ll be attending university when they’re 18 and will need housing.
Note: If you should choose to invest earlier, say, when they are in grade-school, you would purchase the property yourself, sell it and then re-invest those funds into one or two new properties: one for your child’s future and one for your own retirement.
The typical build time in pre-construction is three to four years, so you’ll want to be prepared to put a deposit down on a Toronto pre-construction condo when they’re between the ages of 14 and 15. It’s important to note here that beyond your initial down payment, you aren’t making any mortgage payments while the property is being built.
When the building takes occupancy three to four years later it is registered with the city and it’s at this time that you will want to change the registered name with the building from yours to theirs, assuming they are now 18 years of age. Now on title, they are seen as a first-time buyer and become eligible for a full or partial refund on the Land Transfer Tax, which is applied at closing when the building registers with the city. This rebate alone can amount to $8,475 in savings.
Download our comprehensive Guide to Investing in Pre-construction for all the details and timelines affiliated with pre-construction investments.
This is also when the mortgage for the property kicks in. Obviously, an 18 year old won’t qualify for a mortgage so you’ll be required to co-sign with them. In order to ensure that the Land Transfer Tax (LTT) refund and capital gains accrue to them and not you, have your lawyers set up the joint purchase by assigning 1% ownership to you and 99% to them. While the LTT refund will be based on the 99% ownership, you, as parents, can sign a trust declaration that you are only holding the 1% in trust for the child so that the capital gains would all go to them.