Investing in Real Estate Wins Top Grades

By Monica Sirohi

With the ever increasing cost of tuition, many parents are worried about being able to save enough for their children’s education. In the last decade alone, tuition has increased dramatically depending on the program. Carrying this burden has not been easy. A recent survey by the Canada Millennium Scholarship Foundation discovered that currently more than 70 per cent of post-secondary students finance their education through debt. This trend will likely continue in the future.

So how do I save for my children’s education?

With low to negligible interest rates being offered on many savings products (bonds, savings accounts, term investments, etc) and the volatility of the stock market, traditional investment vehicles may not be sufficient to save for your children’s education. Some investors are now taking comfort in the diversification offered by real estate investments.

Owning an investment property may enable you to save money for your children’s education and at the same time, act as a forced savings tool. All the while building equity.

Consider this example:

Mary Jane and her husband Bob purchase an investment property (condo) for $145,000 and put 25 per cent down. They rent it out for $900 a month. While they have to put in an additional $75 a month for the first few years, by the time their two-year-old Carson is old enough to go to university, they will have built a sizeable equity in their property in addition to paying most of it off. At that point, they can do one of three things; sell it and use the proceeds to pay for Carson’s schooling, continue to rent it out and have the rent subsidize his living expenses while in school or refinance the mortgage and use the built in equity to finance his school.