Here is how it works, you can invest 200 dollars per month which will equal $48,000 in 20 years. The government will also match up to $7,000 of your contribution. So this brings you up to $55,000 in 20 years. And over that 20 year period of time, the $55,000 can grow to about $100,000 if all goes well. This would put you in a position to be able to provide your child with about $100 thousand dollars. Pretty good. Could we do any better? Well, what if you bought one more property? How would that look, in 20 years? – How To Pay For Children Education
How to Pay For Your Children’s Education With Property Investment?
One of the most important questions that concern many people these days, is how are they going to be paying for their kids education? When you are buying your home, you are very excited, and once you become a homeowner and life begins to become normal again, you begin to realize that your problems are not all over, there are still things that keep you up at night.
You were able to figure out your down payment and your budget to qualify for your mortgage to get your house, but now what about the rest of your goals? You have a family, you have some children, and you want them to be able to go to college. The cost of an education, like with much of everything else, has gone up over the years and continues to go up. Our youth are being saddled with a lot of debt coming out of college, and that is not what you want for your children.
You also don’t want to have to sacrifice your lifestyle, and living in the present, so what do you do? Is this keeping you up at night? You are not alone. In fact this is a question that burdens millions of Canadians just like you. In Canada, the government has come up with a program known as the Registered Education Plan for Canadians. It is otherwise known as RESP for short.
Here is how it works, you can invest 200 dollars per month which will equal $48,000 in 20 years. The government will also match up to $7,000 of your contribution. So this brings you up to $55,000 in 20 years. And over that 20 year period of time, the $55,000 can grow to about $100,000 if all goes well. This would put you in a position to be able to provide your child with about $100 thousand dollars. Pretty good.
Could we do any better? Well, what if you bought one more property? How would that look, in 20 years?
Our webinar called One Property Away goes into a more detailed explanation, and we will take an example out of there to illustrate the possibilities for you below.
If you bought a property, and held on to it for 20 years, what would the outcome be? Assuming that the value of the property is $400,000 today. You require 20% down payment available, which would be $80,000. Assuming you can qualify, the bank will give you a mortgage for the remaining amount of $320,000. Historically, over the last 60 years, we have seen an average of just over 5% increase in the value of a home every single year. Now it has not been a straight line increase, there has been some fluctuations up and down, but the average over the last 60 years has been about a 5% year over year increase.
Assuming a few things in our calculations;
- that you rent out this property.
- that we will get this same average increase of 5% year over year
- and also taking into account the mortgage pay down,
- if you hold on to this one property for 20 years, and you decide to sell it then, you end up with just over $688,000 in profit.
If you take into account taxes, commissions and fees, call it $600,000 even. Which one would you choose, given the opportunity – the RESP route or the property route? The numbers here, the 600 thousand, it is a reality. Yes, you will require some more capital to start and to buy a property – with the RESP you start with just 200 dollars. For the property you require 80 thousand, maybe 100 thousand.
If you have this capital, or if you have the ability to access this capital, then why would you not consider this over the RESP alternative? One of the other things to consider is your day to day lifestyle and budget. With an investment property that pays for itself, you don’t have to budget for an extra $200 dollars per month (per child).
Not to mention, there quite possibly will be some money left over from this 600 thousand that your child can use towards purchasing his/her own property. This would be quite the advantage/head start that you could offer them, not only to come out of university or college with out any debt but also to be able to put something down on a property shortly after kickstarting their career.
If this interests you and you would like more information, visit www.themortgagespecialist.com/onepropertyaway and sign up for a free – no obligation – consultation.