Real Estate

How to fund my daughter's and friend's condo downpayment?

  • Last Updated:
  • Apr 13th, 2018 12:48 pm
[OP]
Sr. Member
Nov 17, 2014
762 posts
218 upvotes

How to fund my daughter's and friend's condo downpayment?

I have a daughter who shares her $1600/month 2-bedroom rental apartment with a friend in Toronto for a few years. Their apartment will be torn down soon for a new condo construction. My daughter will be given by the current landlord a 2-bedroom replacement unit in the new condo 3 yrs from now.

Now, my daughter decides to buy a condo to live for the next 3 years partly as investment, but she intends to move back to the replacement rental unit in the newly-constructed building later ("because cheap rent under rent control would continue to apply to her 2-bedroom replacement unit in the newly constructed building"?) and leave the purchased condo to her friend to live and rent out.

My daughter has asked my wife to gift her 80% of the condo downpayment, and loan the 20% downpayment interest free to her friend.

My daughter earns $80k a year, with about $25k savings, while her friend earns $50k a year, with no savings. They intend to buy a condo at 80/20 equity split, but share the mortgage & expenses 50/50?

It is my opinion that: (a) they may be better to rent another 2-bedroom apartment, instead of buying, for next 3 yrs until their replacement rental unit in the new building is ready, (b) for the condo downpayment, it should be a loan (interest bearing or interest free)instead of a free gift to my daughter, as we also have 2 other children who may also ask for same, (c) her friend should get a personal mortgage or loan from a bank instead of getting a loan from us, and (d) they have should have their agreements (equity and expense split) in writing or see a lawyer, although my daughter says that a verbal agreement is good enough.

What are your recommendations?
By the way, what is the maximum mortgage if any can her friend get with $50k salary?
84 replies
Newbie
Mar 29, 2017
57 posts
7 upvotes
Definitely talk to a lawyer.

Agree with this : (c) her friend should get a personal mortgage or loan from a bank instead of getting a loan from us
Jr. Member
Nov 23, 2008
107 posts
56 upvotes
Vancouver
I don't know if you are for real or not... but this is a bad idea on so many levels.
IMHO Your daughter seems like an entitled brat already... I wouldn't enable her further
Sr. Member
Dec 19, 2010
705 posts
191 upvotes
Toronto, Ontario
agreed with above, this sounds like a bad idea.
if she's making $80k/year, i think there is no need for you to help.
Deal Addict
Jul 29, 2006
3692 posts
532 upvotes
This could end badly on so many levels if you give them the loan. But I also understand why you would go ahead with it as well. The only way this would work and protect you properly is with a lawyer that is separate from your daughter and her friend.

To the above poster: their income levels are fine, it's the downpayment portion that they are asking for a loan.
Newbie
Sep 14, 2004
66 posts
30 upvotes
Am I the only one that see the issue here?

That since she will be buying her own place, and yet still want to take advantage of the rules to maintain rent after the apartment has been renod? I would wish the same upon her when she rents out her place to have to deal with tenants that abuse the system for their own gain, at the cost of the landlord following the laws, intended to protect those who truly need it.

It is unfortunate that the current legislation doesn't address scenarios like this clearly, but it is so over-rotated to protect the entitled tenant where it becomes easy to make money off the the landloards back.
Deal Guru
Aug 2, 2010
12938 posts
3232 upvotes
Here 'n There
Beefeater wrote:
Apr 10th, 2018 9:01 am
I have a daughter who shares her $1600/month 2-bedroom rental apartment with a friend in Toronto for a few years. Their apartment will be torn down soon for a new condo construction. My daughter will be given by the current landlord a 2-bedroom replacement unit in the new condo 3 yrs from now.

Now, my daughter decides to buy a condo to live for the next 3 years partly as investment, but she intends to move back to the replacement rental unit in the newly-constructed building later ("because cheap rent under rent control would continue to apply to her 2-bedroom replacement unit in the newly constructed building"?) and leave the purchased condo to her friend to live and rent out.

My daughter has asked my wife to gift her 80% of the condo downpayment, and loan the 20% downpayment interest free to her friend.

My daughter earns $80k a year, with about $25k savings, while her friend earns $50k a year, with no savings. They intend to buy a condo at 80/20 equity split, but share the mortgage & expenses 50/50?

It is my opinion that: (a) they may be better to rent another 2-bedroom apartment, instead of buying, for next 3 yrs until their replacement rental unit in the new building is ready, (b) for the condo downpayment, it should be a loan (interest bearing or interest free)instead of a free gift to my daughter, as we also have 2 other children who may also ask for same, (c) her friend should get a personal mortgage or loan from a bank instead of getting a loan from us, and (d) they have should have their agreements (equity and expense split) in writing or see a lawyer, although my daughter says that a verbal agreement is good enough.

What are your recommendations?
By the way, what is the maximum mortgage if any can her friend get with $50k salary?
The way I was raised you don't go to your parents begging for money as a gift. You tell them what your plans are. If your parents want to help out they should offer that not have to deny a direct request. Has she no shame? Parents should not be ATMs for children unless it is unilaterally the parents decision. My thoughts:

a) Agreed.
b) If anything, interest bearing. Perhaps interest only which lessens the burden, perhaps at a rate slightly better than the bank. However only loan what you can afford to loan each of your other children at the same time. Also, no doubt your other children will also ask for similar treatment once they find out their sibling received a loan from you.
c) Agreed. You are not your child's friends bank either.
d) Agreeing to it verbally is begging for problems down the road.

My view is your child is way to stretched financially to be investing in real estate. She doesn't even have money for a down payment. Once you enable her to purchase real estate with your money don't think the money requests are going to end. Real estate is a financial commitment than can keep growing, especially with a condo where you have zero control over the expenses. However, if it doesn't bother you that she came begging for money for something that she cannot afford and also begging for a handout for her friend in the form of free interest, then that is your business.
Deal Addict
Nov 22, 2015
3408 posts
2361 upvotes
Beefeater wrote:
Apr 10th, 2018 9:01 am
I have a daughter who shares her $1600/month 2-bedroom rental apartment with a friend in Toronto for a few years. Their apartment will be torn down soon for a new condo construction. My daughter will be given by the current landlord a 2-bedroom replacement unit in the new condo 3 yrs from now.

Now, my daughter decides to buy a condo to live for the next 3 years partly as investment, but she intends to move back to the replacement rental unit in the newly-constructed building later ("because cheap rent under rent control would continue to apply to her 2-bedroom replacement unit in the newly constructed building"?) and leave the purchased condo to her friend to live and rent out.

My daughter has asked my wife to gift her 80% of the condo downpayment, and loan the 20% downpayment interest free to her friend.

My daughter earns $80k a year, with about $25k savings, while her friend earns $50k a year, with no savings. They intend to buy a condo at 80/20 equity split, but share the mortgage & expenses 50/50?

It is my opinion that: (a) they may be better to rent another 2-bedroom apartment, instead of buying, for next 3 yrs until their replacement rental unit in the new building is ready, (b) for the condo downpayment, it should be a loan (interest bearing or interest free)instead of a free gift to my daughter, as we also have 2 other children who may also ask for same, (c) her friend should get a personal mortgage or loan from a bank instead of getting a loan from us, and (d) they have should have their agreements (equity and expense split) in writing or see a lawyer, although my daughter says that a verbal agreement is good enough.

What are your recommendations?
By the way, what is the maximum mortgage if any can her friend get with $50k salary?
This all sounds like an awful, awful idea.

Don't lend money that you can't afford to lose, especially to family. Just give them the money if it makes sense, otherwise, it sounds like they make enough income to figure it out on their own.
Member
Jan 15, 2010
340 posts
232 upvotes
Toronto
If you "loan" the money to your daughter it will affect her borrowing power and will likely reduce her ability to borrow enough to buy a place. I would only give her the money if you can afford to gift it, and don't expect a repayment. If you are expecting to lend your daughter 60k+ and have her repay that loan while also paying 50% of the expenses on a 500k+ condo she will not be able to do so.

As for the friend, she needs to deal with a bank and not you. Whatever they agree to, they must get the agreement in writing. And I would advise that any money you gift your daughter be contingent on having a legal agreement in writing. IMO whatever the equity split is on the downpayment, that is how they should split the expenses. Otherwise your daughter takes all the risk for the downpayment while her friend profits disproportionately from appreciation of the property in the future.

Also, good luck finding a 2 bedroom place they can afford on 130K income. It will be very tough.
Deal Fanatic
Feb 22, 2011
5086 posts
4707 upvotes
Toronto
This is a great idea except for one caveat. Your daughter owns it 100% and rents a room to her friend, or someone else.
Member
Jan 15, 2010
340 posts
232 upvotes
Toronto
rjg4235 wrote:
Apr 10th, 2018 10:17 am
This is a great idea except for one caveat. Your daughter owns it 100% and rents a room to her friend, or someone else.
That is the proper way to do it, but not possible on 80k income.
Deal Expert
User avatar
Apr 21, 2004
46782 posts
12754 upvotes
Not trying to offend the OP but I wish I can demand money from my dad/mom, lol.

100% loan to the daughter is probably the better way. Is the prescribed rate to family members still 1% per annum?
Last edited by alanbrenton on Apr 10th, 2018 10:25 am, edited 1 time in total.
Deal Addict
Mar 27, 2015
1023 posts
278 upvotes
Thornhill, ON
The grown adult daughter making 80K a year has her nerve asking her parents to fund her real estate purchases, and even more nerve to ask them to fund her friend's.
I wouldn't touch this scenario with a ten-ft pole.
Deal Addict
Oct 18, 2004
3803 posts
583 upvotes
Wat
Beefeater wrote:
Apr 10th, 2018 9:01 am

My daughter has asked my wife to gift her 80% of the condo downpayment, and loan the 20% downpayment interest free to her friend.
She only asked her mom.. not both of you?

Recommendation, don't get involved. If she wants to do this, she should be saving for the DP herself.
[OP]
Sr. Member
Nov 17, 2014
762 posts
218 upvotes
Wiseman wrote:
Apr 10th, 2018 11:06 am
She only asked her mom.. not both of you?
Yes, my daughter only asked my wife for the 80% downpayment gift to her and 20% downpayment loan to her friend. If my daughter asked me, I would likely say no as I still have 2 other children who may ask for same. But, somehow, I appear to be a bad person to them for not helping out.

Top