Using RESP to buy a property to my child?

[LotharBriones]

Hi, quick question: I am planning the amount of contributions for both of my very young children and would like to know whether the money saved in the RESP can be used to buy the first property for my children in the location of their studies.



Can this be considered reasonable expenditure for the purpose of their studies?



Thanks for your feedback!



Lothar

 

[Matt Crowley]

I believe it was in the most recent issue of the REIN magazine where Calum Ross covered this topic. It is my understanding that you cannot withdraw without penalties. However, in some cases, you may actually be able to borrow against it.



It would probably be worth a conversation with his team to evaluate whether your situation would fit into the strategy he suggests.



This is the number on his website: 416.410.9905

 

[Thomas Beyer]

An RESP, RIF, LIRA, RRSP, or TFSA canNOT hold real estate directly.





Three broad options exist to participate in real estate within your RRSP, RESP or TFSA:



Option 1: Mortgages or Mortgage Investment Corporations (MICs) - as a lender but not a co-owner.



Option 2: Publicly traded stocks that invest in real estate or REITs.



Option 3: Private firms that invest in real estate.

 

[LotharBriones]

Thanks both for your replies. While I am aware of the ways to invest in real estate using a registered account mentioned by Thomas, my question is more in regards to withdrawing funds from the RESP when my children are at university age to pay for post-secondary studies expenses.



I understand that the government grants and interest have to me used towards education expenses only. What about my contributions and interest, can they be withdrawn when my child is at university to pay for a property for him to live in while studying?

 

[Alvaro Sanchez]

RESP/OSAP (Ontario) are to be used for education expenses and sometimes bank/operators will request to see invoices or pay directly to universities. I would suggest to continue saving on your child's education while you explore the option to invite some investors to JV in a property where your kids might be attending.



If your plan is for him to own the property, he will also quality for 5% down payment as first time home buyer plus other grants/discounts tax. The caveat here is that you might have to co-sign on mortgage as he will not qualify. This a great way to teach kids about managing their money and gives them a great sense of being responsible for their future.



Also note that this is very attractive to a JV (aka Parents) as money spend on accommodations is not going out the window. If you do not have capital then I will structure a JV.



One of my kids did exactly this and she is currently on her second year (at University and as landlord) with 4 roommates. So far its been working nice and she has plan to buy a second property before she is done school. I still have two more kids to send to university and they already asking how to setup theirs based on what they learn from their sister.



If you want to chat about it, let me know.

 

[MonicaPaslawski]

Do your own homework with your financial institution, but we structured our RESP as a family plan from the beginning, then as the kids started University, we withdrew only the Grant portion over the last few years - taxable in each student's name. It gave us tons of flexibility to have a family plan instead of a plan for each child. At this point, there is pretty much only the contributions left which I plan to withdraw to use for RE investments for the kids. We still need to have proof of registration, but these funds will not be taxable, and according to my bank - can be used for any purpose.

 

[LotharBriones]

Alvaro, Thanks for the input. That's exactly what I want to do with my kids and I'm glad to know you are going through this. I may axk ask you some questions along the way and I appreciate your feedback!