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Buying a condominium townhouse or apartment is a good alternative to the tiny on-campus dorms or the over-priced and often sub-standard rental options for Canadian post-secondary students. While buying can be a pricey undertaking in some cities (hello Toronto, Vancouver!), it is very attractive in Calgary, Edmonton, and other centres that are not yet thoroughly yuppified.
There are three factors that could lead students and parents to consider purchasing housing: investment value, comfort and control. Rent over a four-year degree-program term, even starting at $400 per month, will amount to $20,000, none of which has investment value, and which might obtain only the smallest dorm room or a sub-let room off campus. If you spend substantially more, you can certainly buy comfort, but in a rental situation that could deteriorate, rise in price, or end ("My buddy's taking the room, you have to move.").
Only through buying a place will students have absolute security of tenure and some control over costs, as well as being masters in their own house. Ownership can be a valuable lesson in itself, of course, and one that parents and even grandparents might support with a full or partial down payment. Let's go through an example based on Calgary prices and see how it works out.
At $140,000 you can buy a very nice 1,500-square-foot, three-bedroom, 2.5-bathroom resale townhouse condo in Calgary's north west, albeit not within walking distance to U of C or SAIT. A walking-distance place or a brand-new home would cost more, or offer only two bedrooms and one or 1.5 baths. Then again, considerably less might be spent to buy the same in other parts of Calgary near DeVry Institute or Mount Royal College, or closer to the major institutions in many other Canadian cities. Mom and Dad, prompted by shrewd Grandma who offers to invest, decide that buying makes sense, especially since the sister may follow the brother in studying in the city, even if at another institution. Because the son will attend U of C, they opt to buy in the north west, Calgary's most expensive corner. A down payment of $14,000 is assembled toward a $140,000 purchase, with a further $1,000 set aside for legal and other closing costs. At today's interest rates, the mortgage costs $890 per month, while condo fees, utilities and taxes bring the total monthly cost to a maximum of $1,300.
The buying student then rents out two comfy rooms to classmates for $450 per month, but keeps the master bedroom with en-suite plumbing for himself for a net monthly cost of $400 ($450 X 2 = $900 from $1,300 = $400). With the mortgage being paid down by about $200 per month, the buying student is already ahead of the game. Add in, say 2% annual compounding appreciation, and you could say that he's living for free, other than that he and/or family have made the down payment. Looked at from Mom and Dad's point of view, the son would have spent at least $400 for housing anyway. For their $15,000, then, the mortgage progress and appreciation yield a total $5,200 per year, or about 35% per year return on their investment. Grandma smiles.
But further benefits ensue. The purchasing son has more home than $400 per month could ever rent. Mom and Dad know he's well housed and where their daughter will be staying when she moves to the city. As well, since the purchasing son is the landlord, he finds that his roommates actually listen when he tells 'em to wash their dishes and stock the 'fridge with their own food. If they don't, they could be out searching for a new place to stay that might not be half as nice for the money. But perhaps then they'll shop for their own student condominium home.
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