The short answer is YOU. Over the past several years anyone that has owned real estate in Southwestern Ontario has realized an incredible increase in their home’s value. And let’s be honest, this is amazing for most but will come as a detriment to the generations following, most notably our children.
There will be a couple of options of trends moving forward:
- Multi-Family Living – there will be more of this type of situation whereby aging parents and/or our kids are moving back home and potentially starting families either with basement in-law suites, or another option is grade level home additions providing separate living quarters
- Living Wills/Gifting – instead of the typical period when we pass away and Will our children our estate, you will find more people passing down that income sooner than their passing. For example, if parents live to 85 years old it does not make much sense to pass down money for a home to their 50 year old children. Whereas, someone in their 60’s that has owned real estate for the past 30+ years has seen outstanding gains so it make more sense to “gift” your children in their 20’s or early 30’s their proceeds well in advance, to help them get into the real estate market. This comes with a whole new set of questions that would be better answered by someone covering Estate Planning, a lawyer, mortgage broker or accountant, but the premise is there. Allow your kids entry into the real estate market ASAP.
- New Builds/Pre-Construction – throughout my 12 years in the business we have found anyone that has bought pre-construction in the West Niagara area has been up within 2-3 years of closing. The benefit of this option is you are locking in prices for “tomorrow” in “today’s” dollars. In addition, the initial down payments is typically 10% within the first 2-3 months, with the remainder due on closing which is usually 1-2 years after the complex has been completed. The additional benefit of this is that it allows your kids another few years to save.
- Co-Sign a Mortgage for Income Property – the benefit here would be two-fold:
– Using the parents’ financial strength will allow the children to qualify for a mortgage.
– Buying a multi-residential property, or property that could be converted to generate additional income will be very beneficial. With discipline, any income generated should be put down directly onto the mortgage as principal. This will again have tax consequences, but it is an amazing way to get into the market.
The entire Home Team Realty Group has experiences with or have helped clients with situations similar to this. The key is to think outside the box – gone are the days where you finish school, start working and save for a down payment. We realize some of these options are not available to everyone, but again, we are trying to provide options for discussion.