Over the past decade, the effects of Canada’s housing shortage have become increasingly widespread. Despite both federal and provincial initiatives, a swelling number of young professionals and even families are finding themselves priced out of the market. 

As this trend becomes more severe in high-demand areas like Ontario, concerned parents are searching for new ways to ensure their children will have access to quality housing in the future. This has led to a growing number of Canadians considering purchasing homes for their children. 

In addition to sheltering them from future costs and having great potential for return on investment, buying a home for your child has a handful of more-practical advantages too. That being said, there are some financial pitfalls that you should be aware of before you buy.  

Here’s everything you need to know about buying your child a house in Toronto. 

Thinking about buying property in Toronto? Learn how you can find success when buying in a seller’s market on my blog.

Planning Ahead

As a parent, you want what is best for your child. Not only can buying a house for your child now help them avoid a potentially unforgiving seller’s market in the years ahead, but it can also serve a pragmatic purpose as well. For instance, if your child is currently in high school and considering leaving home while they attend university, purchasing a property near campus can ensure they have a safe, secure place to live while they study. On the other hand, if your child is planning to attend school in another city, purchasing a local home can help them have a strong start as a young professional when they return. 

Why It Works As An Investment

As the demand for property across the province grows, selling prices and rental rates are steadily trending upwards. Unfortunately, this means that housing could become significantly more expensive for potential buyers in the future. However, one upside to these trends is that buyers have the opportunity to set up lucrative investment properties which they can then pass on to their children. 

In an ever-evolving housing market, timing is everything. Whether you’re buying or selling, home prices can vary drastically monthly or even weekly. By purchasing property early, you can secure great housing for your child before prices soar. In the meantime, renting out that property can bring in some serious passive income. You will have the option to put rental income towards the mortgage or put it aside for your child down the line. 

---

Want to learn more about ROI-building property upgrades? Explore these resources from our blog. 

• Building an Outdoor Oasis With ROI in Mind
• Renovations For Active Retirees
• High-Tech Items to Add to Your Home

---

The Red Tape 

As you may expect, purchasing property for someone else comes with a handful of tax considerations and other potential pitfalls. That being said, each circumstance is unique and there are methods for reducing financial penalties. In most cases, how buying a house for your child impacts you financially will depend on their age. 

In Canada, if you gift property to a minor, there can be new tax implications for both you and them. When it comes to investment properties, any income from rental tenants would be passed onto your taxes until your child turns 18. 

Regardless of your child’s age, attribution rules will apply when you transfer the property to them. In some cases, it may be best to simply provide the financial resources for your child to purchase a property for themselves. As with most legislation, these tax laws are subject to change, ensure you are up-to-date with the latest regulations.

While there is not always flexibility when it comes to taxation, there are strategies to make these regulations easier on your wallet. Working with a real estate agent who has experience in family gift transactions can help minimize any financial penalties to both you and your child.  

---

Want to learn more about affluent living in Toronto? Check out these lifestyle articles from our blog.

• Our Favourite Toronto Restaurants For Date Night
• A Closer Look at Ethical Luxury
• The House Plants of a Generation

---

Start With An Agent

From locational factors and property details to taxation and legal considerations, buying a home for your child requires a specialized approach. The good news is there are real estate agents who have extensive experience in these kinds of transactions. Should you consider buying property for your child, a great first step is to seek expert support. 

Not only can the right agent help you find a great home for your child, but they can also help you optimize the property from an investment perspective and navigate the regulatory and taxation challenges that come with the process. 

Have questions about Toronto’s real estate market? We’re here to help. Contact us.