As a 40-year-old man, I can personally attest to just how interesting the child-parent relationship is.
I’ve rounded that corner – the one where you cease to become the one who needs to be provided for, and instead, becomes the provider. Many of you can relate, and from a variety of ages, I’m sure.
Watching my mother or my father play with my two children is a real trip. It’s like watching an older version of my parents play with me, forty years ago. They’ve both mellowed, as people do in their 60’s and 70’s, and the kids worship them. It’s a beautiful relationship. It’s so innocent and pure.
The phases of the child-parent relationship seem to lose a level of dependence as the child gets older. You begin your life in an utterly helpless state, rely on your parents for anything and everything for a decade, and only then are you really able to fend for yourself in some areas of life. But for the necessities – food, clothing, shelter, most rely on their parents until they’re technically “adults,” and some continue to do so for far, far longer.
When I bought my first condo, I put everything I had into it. Money I had saved from childhood. Money I made working in the meat department at Bruno’s Fine Foods and the fish department at Dominion, pumping gas at Sunoco, waiting tables at East Side Marios, bartending at Shark City, from my infamous 2001 internship at Celestica, and from those entrepreneurial years that I spent selling concert and sporting event tickets on eBay and speculating on this new thing called the “X-Box” for which there was a massive shortage before Christmas, 2001.
And as I wrote on this blog a long, long time ago, I also had a little financial help from my mother when I bought my first condo. I blew through about $60,000 to get started in real estate, which was a lot at the time, and of course, I had years earlier lost my $25,000 life savings in the stock market during the tech bust. But I wanted to put down 25-30% on my first condo, and I was short. Not by much, but enough to ask my mother.
Sixteen-years later, both of my parents are aware that it’s now my job to take care of them. They won’t pay for anything, ever again. Not dinners, not trips, not hobbies, not repairs on the house; nothing.
The circle of life is interesting.
I have a long, long memory. My friends know me for it. My oldest memory takes place in September of 1982, which would have made me 25-months-old. I was rolling on the carpet in the hallway of our house at 128 Parkhurst Boulevard, and I stuck a pen up my nose. The cap dislodged and wedged in there, and my parents had to rush me to the doctor at Avenue & Lawrence to remove the pen cap – all this, just an hour before my uncle Matty’s wedding.
Since then, my parents have nurtured me, provided for me, housed me, clothed me, taught me, given me a university eductation, and helped me become an adult.
Now I’m going to pay it back to them for the rest of their lives. I’m going to spoil them at every opportunity.
My trolls might give me shit now – for having parents who paid for things, or for needing money for a down payment when condos were only $350,000, and that’s fine. Go for it.
But my life is an open book on TRB, always has been. And to introduce a topic like this one – the intersection of parents and real estate, what better than to start with my own story?
I’d love to hear from the readers on this too.
The more interesting stories might go back a ways…
Throughout my career, one of the very few constants has been buyers receiving financial help from their parents.
As early as I can remember, this has been the case, and I’ve seen everything arrangement you can think of.
I’ve seen parents give their kids $5,000, $10,000, or $1,000,000.
I’ve seen parents loan their kids the same amount.
One of my friends was loaned money from his father, who charged my friend 5.79% interest, compounded semi-annually, every single month. When interest rates dropped as low as 4.99% (for a 5-year fixed), my friend asked his father to reduce his payments, only to have his father say, “You clearly don’t understand how mortgages work. Go ask a bank for the same reduction, and see what they say.”
I’ve had 19-year-old clients receive financial help from their parents and I’ve seen 46-year-old clients receive financial help from their parents.
I can tell you about a lot of hard-working, debt-paying-off, 30-somethings who needed money from mom and dad to afford their bachelor condo, but I can also tell you about spoiled-rotten, unemployed, trust-fund kids whose parents buy them $2,000,000 properties in cash.
Like I said, I’ve seen it all.
And as is often the case, we’re seeing some rather timely media about the idea of parents and how they help their kids buy real estate.
Tell me if you’ve seen this billboard downtown:
One of my clients emailed it to me last week, and it wasn’t long before the billboard made the news!
That’s a Toronto Star article from last Friday.
The article explains that this billboard was put up by an advocacy group appropriately called “Canada Housing Crisis.”
The group is raising money through GoFundMe to pay for these billboards, and it looks as though the group lives on Reddit.
I have no problem with their mandate: to raise awareness, and to “see common sense housing laws.”
There’s not a lot of data on this group, nor quotes to analyze, so while I’m dying to speculate about how they feel the housing crisis should be handled, I won’t. Not today, at least.
The billboard is sarcastic, but within that sarcasm, there’s a truth: that many Canadians are only in the housing market because of their parents. By extension, many home-owners only own their homes because of how, where, and to whom they were born.
But this is like so many other facets of life. I wake up every day and realize that I am where I am, in part, because my parents lived in Toronto, when I was born, and not some place else where I wouldn’t enjoy the same advantages in every day life. Where you are born, when you are born, and to whom are three things you can’t control, but which have a larger impact on your life than just about anything else.
So I see the merit of this billboard’s message, but I also see the attempt at shame.
We could shame anybody for just about anything out there. But we don’t punch attractive people in the face to let them know that other people are ugly, nor do we attempt to use legislation to create a world where they aren’t as good-looking.
I commend the creators of this billboard for drawing attention, but nothing more.
Last weekend, this article appeared in the Globe & Mail:
“Wealth Shifts To Next Generation As Parents Help Kids With Down Payments”
For starters, this isn’t a new fad.
This has been happening, as noted above, for the near-two-decades that I’ve been in this racket.
A few notable points from the article:
Laura Martin, chief operating officer of mortgage brokerage Matrix Mortgage Global, estimates that 60 per cent of her millennial clients are getting some help from their parents, either with the down payment or as co-signors of a mortgage, which puts parents on the hook for the monthly payments if their child is unable to make them.
Neither Statistics Canada nor Canada Mortgage and Housing Corp. track intergenerational wealth transfers. But the Rennie Goup, a Vancouver-based real estate brokerage and research group, estimates that about 70 per cent of Canadian homeowners over the age of 65 are mortgage free and hold $1.2-trillion in equity in their homes.
Think of all the blog posts I’ve written about how historical indicators of a market’s health, particularly, 1) debt-to-income ratio, and, 2) ratio of income appreciation to housing appreciation, no longer apply in today’s society because the largest transfer of wealth in the history of mankind is happening as baby-boomers give money to their children.
I’ve said that, what, a few dozen times?
Only now because it’s been written in the Globe & Mail, are the masses beginning to understand?
I had a client once tell me that she was buying a condo “with her inheritance.”
Naturally, I said, “Oh my, I’m so sorry for your loss,” to which she replied, “Oh, don’t worry, my parents aren’t dead yet.”
I was kind of stumped. I had always been under the impression that inheritance occurs when somebody dies and leaves you money, but it was soon explained to me that my client’s parents figured that, since they would be leaving her money one day, that day might as well be today.
Huh.
It sounds a bit odd, given the lack of death, which I thought was a major part of an inheritance, but the logic is sound.
If your parents have $300,000 in cash that they’re going to leave you when they die, could you make more use of that money now? I don’t mean “use” as in blowing it on bottle service at nightclubs and throwing it down on 24-Black on the roulette wheel, but rather putting it to use for present-day shelter and future-investment?
Sounds like a good idea, but is this coddling? Is this standing in the way of children “pounding the pavement” or “learning the value of a dollar?”
What’s the difference between giving a child their inheritance twenty years before you die, versus simply giving them a cheque?
There is no difference.
It’s simply semantics.
“I gave my child $50,000 for a down payment on a house” versus “I decided to allow my child to access his inheritance early, so that he may use it for a down payment on a house.”
Tomato, tomaaaaato…….
There are many, many ways in which a parent can help a child own real estate, from handing them money (called an “inheritance” or not), to loaning them money, to taking equity out of their existing home, to going on title to the property with them.
I’ve seen all of these methods used.
So my question is simply: how does this make you feel?
Is it unfair?
There’s a large portion of society, including those who produced the billboard above, who think it might be.
“Unfair” is a matter of opinion. There is simply no definition of the word, beyond “not fair,” that could help us to determine whether parents helping their children purchase real estate is fair or not.
There are some folks out there who are my age and haven’t worked a day in their lives. They won the genetic lottery. What can we say about that?
But are we, as individuals, envious house buyers, or as a society as a whole, going to resort to shaming home owners to feel better about happenstance?
I fail to see how this solves problems in the housing market, and it simply seeks to make financial help from parents a dirty little secret moving forward, even though, per the article above, 60% of millennials are receiving assistance.
I thought 2021 was supposed to be about positivity, celebrating everyone, and anti-shaming?
Or maybe this falls into a different category?
In any event, to end this blog on a positive note, please share your stories about how your parents were involved in your home-buying experience! No judgement here. I think the billboard folks are stuck in a sub-Reddit somewhere…
Bal
at 7:04 am
My parents helped me taking care of my little boys . That was huge help. i was only able to work because they helped me with my kids. It also gave me peace of mind that my little pumpkins are with my cute parents. ( I am not saying that baby sitters are bad or anything, but i was not comfortable leaving my 3 months and 4 years with baby sitter and top of i was not able to afford the expense of baby sitter)
Bal
at 7:07 am
even though i did not get any amount from my parents but i was only able to earn because they were there for my kids…that is indirect financial help.
Francesca
at 7:34 am
My parents gave both me and my sister 50 k as a gift towards a down payment to both our first property. For me this was in 2003 when my first condo cost only 185 k so it went very far. My husband was lucky to inherit a similar amount from his grandparents. When we got married we were lucky to have this combined help to help us afford our first property purchase together. We have a 14 year old daughter and are already putting money aside to help her purchase something in the future along with any inheritance we get once my parents pass. We realize how lucky we are that our families helped us both when we were young and that we are financially able to help out our daughter down the road. Truth be told one of the reasons we only had one child was to be able to afford to sign her up to many activities , to travel and to be able to help her with real estate eventually and to be able to afford to retire earlier . If we had more kids we would not have been able to downsize into a condo this year from a house which also allowed us to put significant money away. Which parents you have is a factor for sure but people often don’t want to talk about how family size can impact real estate opportunities as well. If you have 3-4 kids obviously you will need a larger house than no kids or one kid which limits what you can buy even more without parental help.
JL
at 9:06 am
It is “unfair”, but only in that general “life can be unfair” kind of way. As you say, we don’t pick our circumstances and some have it better than others. That’s just the way it is and always has been.
I’m sure most of us received some help from our parents during our lives, whether financial or indirect (or housing or non-housing related), and there’s nothing wrong with that – that’s the role of parents. I think the problem and the reason this is an issue now is that major financial assistance is becoming the determining factor. Back in the day a kid who got $50K to help with a $250K condo had an easy time, but it didn’t prevent another kid (with a bit of extra effort) buying that same condo without any assistance. Now we’re reaching the point where without that assistance a lot of people are almost locked out permanently, no matter their level of effort.
Appraiser
at 9:06 am
Looks like all those “rich parents” are making an impressive impact on the condo market:
“Condominium apartments, including units in low, medium and high-rise buildings, stacked townhouses and loft units, accounted for 3,619 new home sales in April, according to Altus Group*, BILD’s official source for new home market intelligence. It was the highest number of new condominiums sold in April since 2000 and 69 per cent above the 10-year average.”
https://bildgta.ca/ourindustry/newhomemarket/GTA-new-home-market-busy-in-April
Bal
at 9:45 am
people have no other options as detached houses are out of reach.
Average Joe
at 3:23 pm
Aren’t more than half of new condos bought by investors?
Appraiser
at 9:09 am
According to the ‘meticulous data analyst’, it appears that investors are less than 20%:
“There were a total of 2,634 condominium apartments that closed during the first quarter of 2021. Of those, 447 units (17% of the total) were listed for lease on the MLS during the first four months of the year and of those, 283 or 63% found a tenant and were leased.” https://www.movesmartly.com/articles/is-investor-demand-for-condos-already-up-again
Average Joe
at 12:49 pm
If you’ve been doing this as long as you claim, you are fully aware this particular measurement approach would undercount investor activity by a wide margin. Particularily for new condos.
Appraiser
at 1:15 pm
Do tell.
Average Joe
at 3:09 pm
@Appraiser
I suppose I could. But it’s a lot funnier to see you use your favorite agent John Pasalis, unironically, as a certified real estate and analytics expert to try to win an argument. A true delight, and the best content here all week by far! Enjoy your weekend.
Joel
at 11:00 am
Parents also help their kids by allowing them to stay at their house and pay little or no rent.
I know a few people who bought pre-cons when there kids were still toddlers. The thought was, that they put down $100K deposit now, rent it out for the next 20 years paying off the mortgage, then their kids get a condo in a place they wouldn’t be able to afford when they are older.
I am a mortgage broker and the majority of people get help from their parents when they are buying their first home. Not many want to go on title, but plenty will give cash to help with a down payment or closing costs.
Bal
at 11:05 am
Damn what if parents cannot afford to give down payment….in that case kids are screwed …lol
Joel
at 12:31 pm
I would say 20% of first time buyers don’t receive a gift, certainly tougher.
Josh
at 10:47 pm
Help comes in many different forms. What about parents who pay for a child’s post-secondary education? Or car insurance? Or like Bal, above, babysitting? It doesn’t always go into RE, but every dollar a parent spends on their child frees up the equivalent dollar to go into a property purchase. I wonder how many folks who had their university/college (or residence/housing, etc.) paid for by their parents think they “didn’t get any help on their purchase”.
Jimbo
at 1:09 pm
Unfortunately my father only made $1,200 a month on disability (1 ton of steel fell on his back at work). So I didn’t get any help, but I was fortunate enough to move to a great city where I could easily get into a detached. As a kid I was also well aware of how lucky I was when I could walk into stores or down the street and wouldn’t be harassed by security guards or cops with random street checks (I’m white).
I remember back in 2002 era, parents were buying houses for their kids to attend university in the KW area, they would rent the rooms out to their kids friends to cover the mortgage. After 3-4 years they would sell the place if their kid left that city for employment elsewhere. That definitely happens a lot less now!! (I’m assuming of course) it was more cost advantageous than paying for their kids rent.
Two of my closest friends, both were given their inheritance early from grandmother’s who sold their homes to move into their kids house. One was given $50k in 2008 and the other $150k in 2003 I think. They both bought properties in Durham region. Coincidentally they never really found decent jobs after university, they worked as janitors and driving instructors etc. They don’t really need great jobs with their homes paid off though, so it is an advantage. (Both sold high in Durham and paid cash in the sticks in the last 5 years).
It isn’t worth getting angry about, we all have our advantages growing up, it is just a matter of recognising them and leveraging them to find success. Are you better today than you were yesterday, adjust and move forward. If you are proud of what you have accomplished that is all that matters. If I were to compare myself to Zuck, Gates et all I would probably be wasting away with a 40 on a stoop.
As an outsider we can look at yourself, Kyle and Apprais and say anything we want, but we can never know the struggle or the risk you had to endure to get and keep a home in Toronto, regardless of the help you may have been given. It is one piece of a complicated puzzle and rarely the sole factor that determines success (except trust fund families).
I’m lucky enough now to be in a very high income family with 3 kids. I would never be able to afford to live in Toronto now despite this income, but that is okay. Take the opportunities that work for you and things work out.
XYZABC
at 2:41 pm
My parents live back home and not in Canada. They really wanted to help but there are strict rules around how much they can send out another country.
So, they send us that much money every year on my son’s birthday :-). We saved that up over the years and put that as part of a downpayment for a condo a couple of years ago and rented it out.
He can use it when he grows up or sell it and use that as his downpayment for a different place.
We also bought back in 2010, things were a lot saner in those days.
XYZABC
at 3:06 pm
To clarify, the amount allowed out each year is $5,000 USD or it’s equivalent
Average Joe
at 3:46 pm
This is quite a stretch, David. It doesn’t seem like they’re criticizing people for helping their kids get by. Seems more like they’re pointing out that social mobility is evaporating due to choices the government has made. Perhaps coincidentally, the head of the sitting government is only there due to his father. As is his Deputy. As is the leader of the official opposition. As is the Premier. Even Tiff Macklem talked about their monetary policy inflating asset prices and increasing wealth inequality. Not all that long after blocking a daycare from his own neighborhood. History has shown us time and again, that people start getting restless once they realize a tough situation will never improve. We’ve been seeing that on the news for the past year already.
Pragma
at 12:38 pm
Right on. It’s not about “fair” and “unfair”. It’s about how you want society to be structured. One of the founding ideas of the “new world” was to get away from the “old world” of generational concentration of wealth, where the rich got richer and the poor lived in service of those living at the top of the hill. The US used to have punitive inheritance taxes, and it was brilliant. Our society is supposed to be about working hard and reaping the rewards. Wealth inequality is terribly corrosive to society, and I say this from a position of privilege. It kills productivity and growth. It foments anger, makes us all more polarized, leads to isolation, depression, drug abuse. Everything is correlated!
Michael Christoff
at 7:20 pm
You were right the first time: inheritance follows death. It’s funny when people talk about “early” inheritance. It’s just mom & dad giving you money, nothing more. I guess people just like the sound of it.
I was wondering why your friend would borrow money from his father at 5.79%? You might as well just go to the bank at that point.
Sirgruper
at 11:46 pm
Wonder if they declared the interest:)
Condodweller
at 6:35 am
I have come across this once, and I’m still not clear why they do it. I mean it’s a help if they don’t otherwise quality for a mortgagee. It does help teach them financial responsibility while giving them independence and the satisfaction that they did it themselves. Everyone has a philosophy and reason for doing things.
I do wonder if there is some unique circumstance that gives it some sort of estate planning benefit. This type of thing is typically done between spouses for income splitting purposes.
Jennifer
at 12:05 pm
banks dont approve everything. maybe he got lower interest rate from dad than had he gone to the private market.
JPR
at 12:14 am
Assistance from one’s family is neither a matter of ‘fair’ or ‘unfair’…it’s a personal & private decision between the parties involved.
With that said, what I’ve increasingly noticed among my peers (I’m in my late 30’s) is how much of a status symbol home ownership has become and the subtle shaming of NON home owners by the owning class (again, anecdotal personal experience here).
The only thing I take issue with are the individuals who were born on third base (e.g. received assistance from their parents or some permutation thereof) but who trot around as though they hit a grand slam.
Condodweller
at 6:23 am
This idea of when and where someone is borne is an interesting one. I first heard of this concept from Warren Buffett who feels he won the genetic lottery. He was born in the US at a time when his intelligence in a capitalist county served him well. If he was born a thousand years ago he probably would have been some animal’s lunch. Sorry to keep quoting him but I’m fascinated by the biographies of successful people. I fully agree with his idea of giving your kids enough so that they can do anything, but not so much that they can do nothing. Which dovetails nicely with the idea of parents helping kids with buying homes which they could not otherwise afford.
Generally when people complain about inequality, and I’m talking purely financial here, they don’t appreciate the challenges successful people may have overcome to get where they are. However there is power in numbers so if they organize they just might be able to affect some changes. Look at unions. I don’t want to get into politics here but Ford is not opening schools, even though his advisors are for it, because the teachers union has so much power that they are affecting government decisions in the middle of a pandemic.
The idea of providing an inheritance while still alive is not a new concept. Perhaps technically it’s not an inheritance while alive, but many people choose to pass on some funds they don’t need because it makes them happy to be able to watch the recipient enjoy it. This can be done in many ways and it’s a very personal thing. I don’t understand why people need to be jealous about this.
I don’t know why but I was always very good at managing money. I was fortunate to have a good job while in highschool and I actually helped my parents buy real estate when I was a teenager. I recognized opportunities early on that I was able to capitalize on resulting in buying my first condo in my early 20s and started buying investment properties in my early 30s.
I noticed some of my colleagues were surprised, and even jealous as I made my purchases, while at the same time questioned, and even made fun of my decisions. Again, as Buffett says if you do your research and you know you’re right it doesn’t matter what anybody else says. You have to tune out the nay sayers.
I guess the Friday blog is about to drop…
Bal
at 6:52 am
Impressive Dondoweller
Bal
at 7:55 am
spelling correction Condodweller…
Steve
at 12:24 pm
I think it’s fine when people are open and honest about it, as you are, on the impact that cash injection can have at the right point in your life.
I think what gets people’s goat is when folks who have gotten into the market wonder why others are complaining it’s so hard without the introspection that not everyone is able to get a sizeable handout from the bank of mom and dad to get started in the game.
These situations are the source of endless clickbait articles from Toronto Life and Blog TO about “this millennial couple got a house in , here’s how!” and of course buried in the details is a sizeable contribution from their family.
Tamir
at 12:27 pm
Take $50k now that a pair of Boomer parents have readily accessible in cash that they want to give their adult kids. They can either:
a) save it conservatively in a TFSA getting <2% interest for the next ten years they MAY die and leave to their grown child which could maybe get to ~$60,950 after compound interest. Not including the portion that goes to probate;
b) give it to the child NOW towards a property they can live in to save thousands in interest and earn value in capital growth, assuming over ten years that even if there's a "bust" or "burst bubble" or "decline" in housing and an eventual recovery, the child and their family need to live somewhere and the gains are all tax-free.
The math checks out on this for those who have the means to share/gift to their adult kids! Better ROI to give your kid money now because it'll be worth more now in RE than in cash.
WestEnder
at 5:26 pm
Good take, Tamir.
Homeowner
at 1:19 am
I just want to say I enjoy reading your posts and they have become my leisure read in the evenings. They are both educational and entertaining. Thank you!
I applaud those who can buy their first home on their own, and for those who do it with parent’s help, I congratulate them. It is a financial and lifestyle commitment that they are making, therefore, no shame at all. For those who plan to own, filter all the noises and stay on course, but “never” time the market, as only investors do.
Finally, we all have won a geographical lottery because of where we live, ????????❤ Canada!
Gregory
at 1:12 pm
Great article as always. Can say that that co-signing from parents helped my sibling and I start our real estate journey in the late 90s. Buying a $225k house. Within a few years the parents were no longer co-signers. The property allowed me to pull out a good chunk of equity gains in 2002 allowing me to purchase another home with my fiancé. My sibling continued to hold until 2011 and sold for $555,000.
the parents Co-sign was one of many variables that made this journey get off the ground. As a parent of a few kids I have spent many hours picking them up of the floor, ice and receiving hugs in return.
I plan to co-sign their mortgages if needed in the years to come.
Frances
at 3:41 pm
I’m impressed your parents will accept you paying for stuff David. My partner is 41 and his parents are well into their 70s, they refuse to let him pay for anything even though he could afford to. The very idea that he would put his hand in his pocket is upsetting to them. He has given up fighting them on it.
Motogonif
at 4:13 pm
These billboards are just more of the same neo-Communist hate and shamemongering that’s being spewed all over us these days. The end game of the spewers will be Antifa mobs burning down Forest Hill then working their way down the ladder to Dorset Park until nobody owns property and we’re all in re-education camps learning about ‘equity’ and how to ‘de-centre’ ourselves. We need to wake up.
Irish Flores
at 2:20 am
Thanks for taking the time to share all this. Both parents are responsible for raising their kids and as an adult child you’re responsible also for caring your aging parent. You cannot just pay back by money it is also by taking care of them.