Helping Your Kids Get Started in Real Estate

By: Patrice Gale

Helping Your Kids Get Started in Real Estate

Tags: Helping Your Kids Get Started in Real Estate

For many parents, buying a home was a real rite of passage for them as they started building a life. These same parents are now watching their kids grow up in a world where real estate in big cities like Toronto isn’t nearly as affordable as it used to be, and generally want to help out. There are lots of ways to do this, but some ways are smarter than others.

The first thing to think about is whether you want to help them out by gifting them money or actual real estate. For some parents it makes more sense to gift their home since downsizing is on their agenda anyways. 

When gifting money, make sure you aren’t going to unintentionally give your child an even larger problem by putting them in a position where they have liabilities they can’t cover. The outright purchase of a home comes with cost of upkeep and property taxes, among other things. And that is assuming that there are no mortgage payments. You should find a balance between an adequate space to live and an impossible obligation to keep, otherwise you are just harming your children further. 

Giving a large cash gift to your adult children is tax-free in Canada. This makes it much less complicated than gifting a property. The downsides are that if you already own a property and would like to give it to them, then it becomes much more convenient to transfer the property to them. This would incur a tax liability based on your capital gain, but could work out to be more convenient. 

A final option to consider is loaning the money rather than outright gifting it. This is more like a business arrangement, and would be a reflection of whether or not you are expecting to receive the money back. All of this will depend on the number of children you have and your financial situation.

Getting started in real estate reduces the stress of worrying about housing and helps to set your kids up for life. There are lots of ways to do this, and the decision between loaning money, giving money, or giving a property will depend upon your individual situation. You should always consult your attorney or accountant before undergoing these complicated transactions, as their expertise can be invaluable in helping you to avoid major mistakes. 

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