Why pay rent when you can build equity?

You’ve probably been thinking about the cost of your child’s future education for years. Now it’s hear and you may be finding the costs to be staggering. Renting student housing at UBCO is a major expense. The University of British Columbia Okanagan is now home to just shy of 10,000 students but there is currently space for less than 1,700 of them to live in on-campus student residence. This means that 83% of students will have to find housing off-campus. Couple this incredibly high demand with a City with one a rental vacancy rate among the lowest in Canada and you have the perfect conditions for steadily increasing rents. While the development of University District Kelowna has provided excellent off-campus housing within walking distance to the UBCO campus, many students must still seek accommodation in other parts of the city.

1-bedroom apartments now rent for between $1,400 - $1,600 per month.

 

Do the math! Renting a 1-bedroom apartment at University District Kelowna will cost roughly $18,000 per year or $72,000 over the 4-year span of a typical undergraduate degree. That’s a serious amount of rent. Most of the residences in the neighbourhood’s buildings are actually 2-bedroom and 3-bedroom apartments where students often live with one other or two other roommates. Even in this scenario, a room typically rents for $900 per month. That’s nearly $11,000 per year or $44,000 over that 4-year span.

Paying for housing while your child attends UBCO is inevitable.

 

Yes, it’s true but you don’t have to be funding someone else’s retirement. You owe it to yourself to give some serious consideration to owning at UBCO and building equity in a solid real estate investment for you and your family instead. Even if you don’t think you have saved the required downpayment or don’t think you have a high enough credit score to arrange a mortgage, you can’t afford not to explore this option. To help you get started, have a look at the three sample scenarios below.

1-Bedroom
Apartment


RENTING:
$62,400 PAID IN RENT

vs.

PURCHASE:
$22,000 IN EQUITY
AFTER 4 YEARS

The estimated total carrying cost of this sample purchase calculation would be $58,800 over 4 years. So not only would you have $22,000 in equity in the end, you will pay a little bit less every month than if you rented.

If after 4-years you decided to sell, you would be a position to likely be able to cover most if not all real estate fees, closing costs, mortgage cancellation penalty, and even some additional maintenance to dispose of the property.


Purchase Details

Estimated Sale Price: $300,000
Strata Fees: $120/month
Property Taxes: $135/month
Mortgage Payment: $970/month
Carrying Cost: $1,225/month


2-Bedroom
Apartment


RENTING:
$86,400 PAID IN RENT

vs.

PURCHASE:
$29,000 IN EQUITY
AFTER 4 YEAR


The estimated total carrying cost of this sample purchase calculation would be $58,800 over 4 years. So not only would you have $29,000 in equity in the end, you will pay about $130/month every month out of pocket compared to if you rented.

If you rent out the 2nd bedroom you can offset your carrying costs by $9-12,000 per year. This means you could end up with that $29,000 in equity in the end while only paying $670/month out of pocket.

If after 4-years you decided to sell, you would be a position to likely be able to cover most if not all real estate fees, closing costs, mortgage cancellation penalty, and even some additional maintenance to dispose of the property.


Purchase Details

Estimated Sale Price: $400,000
Strata Fees: $200/month
Property Taxes: $175/month
Mortgage Payment: $1,295/month
Carrying Cost: $1,670

3-Bedroom
Apartment


RENTING A ROOM:
$43,200 PAID IN RENT
OR $900/MONTH

vs.

PURCHASE AND RENT
2 OF THE BEDROOMS:
ONLY $13,440 PAID
AND $36,700 IN EQUITY AFTER 4 YEARS

In other words, pay only $280/month out of pocket while building $765/month in equity.

The estimated total carrying cost of this sample purchase calculation would be $99,840 over 4 years. However, in exchange for your entrepreneurial approach and associated investment risk, you would cover less than 15% of that out of pocket - paying only $13,440 for your child’s “rent” over 4-years!

Operating expenses including cost of borrowing are completely covered by roommates. Your contribution goes solely to principal repayment.

If after 4-years you decided to sell, you would likely take cash proceeds that would easily reimburse you for this capital contribution to the equity created.


Purchase Details

Estimated Sale Price: $500,000
Strata Fees: $240/month
Property Taxes: $220/month
Mortgage Payment: $1,620/month
Carrying Cost: $2,080


* The above sample scenarios are examples only intended to illustrate the opportunity to a broad spectrum of potential purchasers. Actual purchase price varies. Rental incomes are not guaranteed. Strata fees and property taxes are estimates only as they vary depending on the building and the exact residence purchased. The following examples do not take into consideration applicable Property Transfer Tax or other applicable taxes, nor do they include other closing costs, utility costs (most rentals do not include utilities in advertised rate) or unforeseeable expenses associated with ownership. Sample mortgage calculations are based on 20% down payment, 2.69% interest rate, and 30-year term.

 
 

The Reality of On-Campus Living


More than half of the on-campus student residence accommodations are in connected single rooms with a shared bathroom and shared common areas. There are options for private studio and 1-bedroom living as well as family living; however, these are very limited.

Living on-campus in student residence can be a great experience, especially for new students. It offers accommodation that is central to student life and makes it easy to make new friends. However, spaces are incredibly limited with only 17% of students being accepted. Only first-year students are guaranteed a spot in on campus student residence and that guarantee is subject to various conditions. The majority of on-campus accommodation is in either 4-bedroom suites or single room dormitories. Many students prefer the privacy of living on their own or with only one other student but there are less than 100 private studio or 1-bedroom apartments available.

Lastly, students living in the Cassiar, Nicola, Purcell, Kalamalka, Valhalla and Similkameen Place residences are required to purchase a meal plan. Yes, it’s mandatory! While having a meal plan comes with several advantages such as eating together with other students and saving preparation and clean-up time, it is not necessarily what every student wants and can be quite the added expense.

For students that don’t get accepted into on campus student residence or students simply looking for accommodation that is a better fit for their lifestyle and preferences, off-campus living is the solution. The University District is home to several hundred apartment style condominium residences built with students in mind.

For more information on on-campus student residence visit the UBC Okanagan Student Housing website.