Is buying a student condo for my child a good investment?

Sometimes a parent decides to buy a place for their children while they hit the books in university or college. It can be a good alternative to paying thousands of dollars toward residence fees or rent. Just look at the math:

Student rent of $500 a month = $6,000 a year = $24,000 over 4 years of school.

That money could go to your mortgage instead as an investment for you.

In Ottawa, for example, you can buy an older one-bedroom condo for about $195,000. Or, buy a 2-bedroom for $240,000 and let your child’s roommate help cover the mortgage by paying rent. Let’s assume you pay 20 per cent down. Here’s an example of what your monthly costs could total when mortgage rates are low:

Think about it: if your child rents a place, your money is helping the landlord pay his or her mortgage and other costs. If you buy a place instead and rent it to them, you have a real estate investment with a guaranteed tenant: your child. If the investment goes up in value, you will make money. Just remember that those gains will be taxed.

Also remember, mortgage rates and other costs change, and these changes will impact the numbers and your decision.

Things to consider before you decide:

You can buy the property in your name, in your child’s name, or both. If you buy the property in your name, you should consider:

• The rental income you charge can pay a lot of your costs. Just remember you have to declare that income on your tax return.
• As a landlord, you can also claim many of your expenses, including mortgage interest. Assess your costs carefully before you buy. They will vary with the local real estate market, mortgage rates and other factors.
• Plan for some vacancies. Your child (or their roommate) may not stay in the condo over the summer break. Are you really going to ask them to pay rent if they are living somewhere else for a few months?
• Remember that you will own a greater share of the equity as you pay off the mortgage. And, the value of the condo may rise over time. This can offset your costs. But whether you do more than break even depends on what happens to housing prices in the area.

There are other benefits, too. Your child won’t need to look for a different place to live each year. They also won’t have to worry about subletting every summer. And their furniture won’t be coming back with them if they live at home over the summer break. Not a bad deal.

Remember: you may not make money if you buy a student condo.
But there are other reasons you may decide to go ahead. At the very least, you can provide your child with a nice place to live in a good neighbourhood while they go to school.

http://ca.finance.yahoo.com/news/Is-buying-student-condo-child-getsmarteraboutmoney-2800756642.html;_ylt=Ak.Gk2aT_bWOvnX0IMVfDRTg2ppG;_ylu=X3oDMTFkYzZwc2o2BHBvcwM0BHNlYwNuZXdzSHViQXJ0aWNsZUxpc3QEc2xrA2lzYnV5aW5nYXN0dQ–?x=0

Please note this example uses very high end of the scale, with the products our team has access to the options are much more in your favor. Please contact us to review your options

Angela Calla Mortgage Team 604-802-3983

Good Morning,

As suspected rates have held steady this morning, meaning no change to variable rate mortgages or lines of credit with the current payments. Lenders appear to be minimizing the discount avaliable on variable rate mortgages which has been one of the most benifical options to help borrowers over the last decade pay there mortgages off faster. With timing being a key componet to financial freedom we encourage you to ensure that anyone with a renewal or shopping for a home has a rate held in for as long as possible to have the most amount of options moving forward. If anyone you care about is paying over 4.5% it’s best to review the mortgage now instead of waiting for renewal. Should you have any questions, require a rate hold for you or someone you care about, or ensure you have the mortgage to result in the most savings please email us today at acalla@dominionlending.ca.

Some key points from this morning’s press release are below

Have a good week.

The global recovery is proceeding as expected at a modest pace, limited by household balance sheets.

Growth in Europe is gaining momentum, but risks have increased with Japan effecting supply chain disruptions.

Commodity prices have declined recently but are expected to remain at elevated levels. Those high prices and exess demand pressures are contributing to inflationary pressures. Despite the challenges financial conditions remain stimulative.

In Canada the economy grew 3.9% in the frist quarter reflecting a strong business investment, smaller contributions from goverment and a modest drag from net exports. Although disripted slighlty this is expected to be made up in subsequent quarters.

High energy prices and changes in provincial taxes are expected to keep CPI inflation at 3% short term and converge to 2%by middle of 2012 while supply is absorbed

Greater momentum in household spending represents an upside risk to inflation. On the other hand a higher dollar will put downward pressure through weaker than expected net exports.

Reflecting these factors the Bank had left rates and is carefuly watching excess supply with absorbtion and the withdrawl of monetary sitimulus with careful consideration.

The next announcment will be July 19th 2011

Angela Calla, AMP

Dominion Lending Centres-Angela Calla

Mortgage rules to push housing lower: CMHC

Housing starts and sales will fall more into line with “demographic fundamentals” this year and next, according to the latest housing outlook from the Canadian Mortgage and Housing Corporation.

The crown agency said it expects housing starts will range between 166,600 to 192,200 units in 2011, with a point forecast of 179,500. That’s a slight dip from 2010 numbers, when Canada saw 189,930 housing starts.

“Modest economic growth, in conjunction with relatively low mortgage rates, will continue to support demand for new homes in 2011 and 2012,” Bob Dugan, chief economist for CMHC, said in a release. “Nonetheless, we are expecting new and existing housing markets to fall in line with demographic fundamentals, as changes to mortgage rules take hold.”

CMHC expects housing starts to grow again in 2012, with a forecast of between 163,200 to 207,000 starts, and a point forecast of 185,300 units.

The crown agency also expects home prices to start moderating later this year, and to end up lower next year. In its forecast, CMHC said prices this year will still record an overall increase due to monthly gains seen in the first half of 2011, but moderating prices will take hold in the the second half and continue throughout 2012.

CMHC does expect existing home sales to climb this year and in 2012, however. The crown agency forecasts a range of between 429,500 to 480,000 units in 2011, with a point forecast of 452,100. That’s compared to the roughly 447,010 homes that traded hands over the Canadian MLS System in 2010.

For 2012, CMHC forecasts existing home sales to range between 410,000 to 511,900 units, with a point forecast of 461,3000.

This week on an abbreviated Big Picture podcast (co-host John Shmuel is off in parts unknown): If you’ve been in the market looking for a home the past few years, you’ve likely griped about how seemingly far out of whack prices have become. This is especially true if you happen to live — or want to live — in certain neighbourhoods in Vancouver that have suddenly shot out of your price range.

Phil Soper, chief executive with real estate firm Royal LePage, joins the podcast to explain why the West Coast is the best coast at more than just hockey at the moment (Go Canucks, for some of you out there) and imparts some sage advice to both buyers and sellers thinking about taking the plunge.

http://business.financialpost.com/2011/05/27/podcast-why-is-housing-so-hot-in-canada/

The Bank of Canada released a special issue of its Review, “Lessons from the Financial Crisis,” which examines the recent research on the role of liquidity in the financial system, and the public policy responses that aimed to restore stability to the financial system during the crisis and foster economic recovery.

The Globe and Mail’s Rob Carrick asks Jeff Schwartz of Credit Counselling Services of Canada how Canadians can prepare for bigger mortgage payments. Click here to watch the short video.

Australia is seen as having the best quality of life among industrialized countries, one ranking ahead of second-place Canada, according to a report from the Organisation for Economic Co-operation and Development.

However, it appears the clincher for Australia could be its high voter-turnout rates, which policymakers in that country agree are largely the result of mandatory voting laws.

Canada scored at or near the top in areas such as housing, education, health and life satisfaction among the 34 major industrialized countries that make up the OECD. Sweden ranked third, the US was seventh and Turkey was dead last.

The Better Life Initiative survey marks an attempt by the OECD – an economic and social policy think-tank funded by its members – to provide a broader measure of a country’s success than gross domestic product figures.

Click here for the National Post article.

No matter how many stories I read about housing price bubbles and rising interest rates, there’s no way I would go back to renting, and most Canadians feel the same way. 

For three long, miserable years, my husband and I rented a unit attached to our landlord’s sprawling house in northeastern Toronto. Every time the landlord lit a cigarette, the stench filled our apartment. Every time we took a shower, someone would flush a toilet and scald us. The owner kept two cats but didn’t allow us to have pets, so the mice that infested the place took refuge on our side of the house. 

Perhaps the worst part was knowing that our monthly rent cheque was paying off our landlord’s mortgage. As soon as we had a down payment saved up for our own house, we moved out and never looked back. 

For people like me, no amount of facts, figures or common sense can sully the home ownership dream. A recent survey by Genworth Financial indicates that 92% of Canadians, both homeowners and non-owners alike, would rather own than rent and feel there are benefits to homeownership that go beyond financial value, including a greater sense of well-being and security. Of the 1,500 people surveyed, 40% own a home with a mortgage, 29% have paid off their home, 26% rent and 6% don’t own their home, but don’t pay rent. 

Click here for more from the Globe and Mail.

Home prices continue climb

Garry Marr Financial Post  May 17, 2011 –

Canadian home prices continued their upward march in April, driven by strong investor demand in Vancouver, as cracks in the Toronto condominium market may be starting to appear.

The Canadian Real Estate Association said yesterday the average price of a home sold in April in Canada was $372,544, up 8% from a year ago. It was the third straight month that the average price rose 8% on a yea-over-year basis but the Ottawa-based group cautioned that the figure was skewed due to “surging multimillion-dollar property sales in selected areas of Greater Vancouver.”

The group also shrugged off slow April sales, which dipped 4.4% from March on a seasonally adjusted annual basis and 14.7% on an actual basis from a year earlier. The slow sales are said to have been driven by new mortgage rules that came into effect April 19 and made borrowing tougher, leading people to rush into purchases in March.

The same sort of impact was felt in April 2010. Purchases moved forward to avoid mortgage rule changes, higher interest rates were feared and the harmonized sales tax loomed in two provinces.

“This makes it difficult to compare,” said Gregory Klump, chief economist of CREA. “Changes to mortgage regulations that took effect in April 2011 likely sidelined a number of first-time homebuyers. By contrast, higher-end homes sales in Greater Vancouver and Toronto had their best April ever.”

Worries about the sustainability of the housing market could be stoked by a report from Urbanation Inc., which monitors the Toronto condominium market. The group says more than 50% of condominiums purchased in the last year were by buyers who do not intend to occupy their units and plan to rent in many instances.

Condominium rents in Toronto in the first quarter of 2011 were $2.11 per square foot compared to $2.09 a year earlier, a 0.8% increase. Condominiums being registered now and ready to be occupied are priced for sale at $450 per square foot range while newer units are going for $550 per square foot.

“What happens when these newer units hit the market?” said Ben Myers, executive vice-president of Urbanation. “At $550 per square foot a 750 square feet [condominium] is $413,000. You put 25% down and you have a mortgage of $310,000. Take a five-year variable rate mortgage at 3% with 25-year amortization and you get $1,475 a month mortgage. Your condo fee is $345, property tax is another $345 and you are up to $2,200 in carrying costs. That’s a huge [operating] loss [given the average rental rate would bring in just under $1,600/month]. People are buying these for capital appreciation.”

Don Lawby, chief executive of Century 21 Canada, says the housing market has been affected by foreign investors — notably Chinese — who have reacted to tougher tax rules in their home country by investing abroad.

“They are buying investment properties and not just in Vancouver but to some degree in Ontario and Calgary,” said Mr. Lawby, adding many of those investors are not concerned with carrying costs. “They are not afraid to offer above price and they are not afraid to get into a bidding war.”

Nevertheless, Mr. Lawby says while these investors are skewing national averages, he maintains the overall numbers are small and the impact on the larger market minimal.

Toronto-Dominion economic analyst Leslie Preston said while April numbers present a market with falling sales and rising prices, she agreed market conditions were exaggerated by some one-time issues.

“I think the effect in April was a little larger and I would expect to see a bit of bounceback in May because of the decline,” says Ms. Preston. “But we have been calling for awhile now for a mild softening in Canadian housing markets overall this year, particularly as interest rates rise.” http://business.financialpost.com/2011/05/17/home-prices-continue-climb/

A variety of factors can keep you from qualifying for a mortgage. 

The big ones include a low credit score, insufficient income for the size of the loan you want, insufficient down payment and excessive debt. All of these factors are within your control, however.

Click here to read the Globe and Mail’s five steps to scoring a mortgage.

First-time homebuyers have accounted for about one in every two homes sold in Canada in the past two years – with more than a quarter of a million sales per year across the country – says a new report.

A housing report by the Altus Group, an economic consulting firm, says the majority of first-time buyers are in the under 35 age group, with the 25-34 segment alone accounting for six out of every 10 first-time buyers.

Many first-time buyers are more ‘mature’ with about one in four aged 35-49 years old.

The report says more than one-fifth of first-time buyers purchased a newly-built home. Of these, about one in three opted for a condominium unit.

Click here for the full Calgary Herald article.

Julian Beltrame, The Canadian Press

OTTAWA – Stephen Harper has kept one economic lynch pin, promoted two others, and brought in an untried new face — but his Conservative government’s message and policies remain the same.

The top economic minister, Jim Flaherty at Finance, was brought back to cabinet Wednesday in order to re-introduce the March 22 budget the opposition parties rejected.

Another, Tony Clement, leaves the industry portfolio where he learned to say no to Australia’s BHP Billiton in its attempt to buy Potash Corp, and moves upstairs to Treasury Board — where he will need to find $4 billion in annual savings by saying nyet to the public service.

Replacing Clement at Industry is former natural resources minister Christian Paradis, who now inherits the task of freeing up Canada’s telecom industry to foreign competition.

And Harper added a brand new player, British Columbia MP Ed Fast, to continue the job of negotiating free trade arrangements with the European Union and India, both already well on their way.

“Although a number of changes have been necessary and desirable, the new ministry is fundamentally about stability and continuity,” Harper told reporters after emerging from the swearing-in ceremony at Rideau Hall.

“I’m confident that the team that was just sworn in … will hit the ground running.”

For Canada’s business community, it’s full-speed ahead with the previously established economic agenda, with possibly a few minor delays while new ministers get caught up.

That agenda includes continuing to reduce corporate taxes, controlling government spending, and expanding trading opportunities in the U.S. and globally.

“My group will feel it’s pretty much steady as she goes,” said John Manley, president of the Canadian Council of Chief Executives, representing the country’s largest companies.

Manley, a former Liberal industry minister, said the portfolio will be an especially steep learning curve for Paradis because of the complex files dealing with a new copyright law, rules on foreign takeovers and opening up the telecommunications industry to foreign competition.

“But I don’t think there’ll be a lot of surprises,” he added. “I think the Conservatives pretty much laid out their agenda in the election campaign and the expectation is now that they are elected, they will get to work on it.”

Flaherty is the safest of bets as far as his immediate intentions. He has said he intends to introduce his budget — likely on June 7 — with only minor tweaks and keep the government on a deficit-elimination track over the next four years.

That’s one year earlier than the March budget calculated, but officials say the earlier deadline can be achieved by including savings from a new Strategic and Operating review, which they claim will cut spending by $4 billion annually.

The task of finding those savings through staffing cutbacks or even elimination of low priority programs falls on Clement, who many expect will be known as Dr. No in Ottawa.

Although not regarded as an economic portfolio, the appointment of John Baird to Foreign Affairs may be the most critical to Canada’s economic well-being, said Perrin Beatty, head of the Canadian Chamber of Commerce.

Coincidentally, Beatty said Baird was hired as a junior adviser on his staff when he was foreign affairs minister in 1993.

“I expect he’ll have more time than I did,” Beatty said of his brief stint during the short-lived Kim Campbell government.

Beatty called Baird a quick study and, importantly, someone who has the ear of the prime minister.

“We need to make real progress on issues like energy and border management and this is someone who will be seen by the Americans and other countries as someone who has the respect of the prime minister,” he said.

Neither Beatty nor Manley said they knew Fast, the new trade minister, but expressed confidence that free trade talks with Europe and India would not be disrupted. http://ca.finance.yahoo.com/news/Harper-signals-continuation-capress-3303407985.html?x=0