Condos for Students - Buy or Rent

So, your kids or you have decided to pursue post secondary, masters degree, MBA in Toronto. A major investment of time and money is about to happen.

Residence is tough to get into.  Ryerson, for example, permits first years by distance away from home. A huge commuter population with students as far as Barrie  & Coburg considered within commuting distance.

The search for rentals and shared accommodation begins, and you are appalled at what is within the planned budget. NOTHING! So, you up the budget, and suddenly you are paying $1000- 1250 a month for shared accommodation and they have to cook, clean and commute.

My question is this why not buy a condo, have your child pick her room mate and know she has a suitable place to live for 4 years and upon graduating still has a place to live while working in Toronto. 

So here's the math.

$ 1100 / month x 12 months x 4 years = $52,800 you will spend on housing to complete a 4 year degree.

1 plus 1den 600 sq feet $333/ month maintenance fees ( these go up never down), listed at $660,000 walk to Ryerson on Church St.

20 % down = 132,000 down, leaves you with mtg of $528,000 +$19,350 land transfer tax

preferred rate 3.59 %* 25 years = 2661/month + 333 fees = 3000/ month - so if your child and room mate cover $2200/ month you are investing another $$800.on top. 

Sell in 4 years assuming minimum 2%* increase/ year for 4 years  = sale price of $714,405* - realtor fees 5%* $35,720 =$678,864.

$678,864 - $679,350 = - $486 purchase  to sale  value  

Additional considerations : capital gains , increase in condo fees/ special assessments, vacancy of roommate. roommate income, interest rates, insurance

* estimate only, could be more or less.

Now if your child is attending a school such as U of T Scarborough or Centennial College on Ellesmere Road - you can pick up a 2 bedroom older condo for under $400,000, walking distance with fees around $600. for 800 sq feet, payments of $1500/month = $2100/ month and rent is equivalent .  No additional cash  input required and much less upfront. You may not see the same gain here, but your cash flow is better, even if you sell for flat and you are still ahead,