Property investment is how this mom is providing for her kids' future
Jennifer Johnson was growing alarmed as she watched home prices begin to escalate four years ago in the GTA, including in Ajax where she lived.
She feared that with prices on the rise, her young children would never eventually be able to afford homes of their own. Johnson, a single mother, was doing contract work after losing her full-time marketing job during the 2008-’09 Great Recession, and was also concerned she wouldn’t have finances — or an inheritance — to help her kids.
What she did have was her mortgage-free family home. After another homeowner told her about the multiple houses he owned and how he’d financed them, then reconnecting with an old friend who was a mortgage broker, Johnson made a bold decision: she used the equity in her own home to buy houses for each of her pre-teen children. She did it, despite being warned against it by two financial advisers.
Her priorities were for homes that she could afford, that were detached houses, and were in her neighbourhood close to Lake Ontario. She felt homes with proximity to the water have greater value in the future. Her first purchase in 2014 was a four-bedroom side-split for $408,000. Because her son, Braden, 14, is an avid sailor, she chose that one for him since it’s between two sailing clubs.
A year later, higher prices put Johnson out of the market in Ajax or Pickering, so she purchased a $430,000 post-war bungalow on a large lot in Brooklin, in north Whitby, for her daughter Sydney, 16. “We’re country people and we like suburban living,” says Johnson.
Since mortgage rules require 20 per cent down payments for rental properties, Johnson took out a $200,000 line of credit on her own home to provide the down payments, and she makes the minimum monthly payment required. The balance of the purchase prices of the two houses is mortgaged.
The Ajax house rents for $2,500 a month and the Brooklin home for $2,150. The rents, though, don’t fully cover the carrying costs.
“I’m subsidizing the houses by $1,000 a month,” says Johnson. “I’m short-term cash poor, but in 20 years each of my kids will have a house and I can move into one of their basements.
“It’s forced savings,” explains Johnson. “I could put $1,000 in stocks or mutual funds a month and only earn three or four per cent a year on that investment. Since I bought them, I have put $50,000 of my own money into the two houses and they have gone up almost $500,000 collectively. But I’m not going to sell them. These are for my kids.”
(According to August 2018 MLS statistics, the average house price in Ajax was $629,418; according to listing.ca, prices have increased 56.3 per cent in Ajax from 2014 to 2018).
Her job situation has improved since she bought the houses — she’s found full-time employment, thus a regular income, working for a company that provides self-serve kiosks to airports.
Johnson has also found good tenants for her properties. She does a full credit check on potential renters, has an application they must fill out and she calls their employer and their current and past landlords for references.
“I require first and last month’s rent and I want to meet them in person and look them in the eye,” she says. “If possible, I go to their current house and look around and see if they are taking care of it.”
Despite her vetting procedure, she recently accepted a new tenant for her Ajax rental who arrived from Singapore for work. Although she couldn’t meet him in person, she researched his LinkedIn profile, found him to be very articulate during their conversations and has met a co-worker who vouched for him.
Johnson prefers long-term tenants and her lessees in Brooklin include a couple with children. The father is a contractor and has made repairs and improvements to the house and she anticipates they’ll stay for more than a decade.
It all comes down to her three rules for her tenants: pay the rent; take care of the house; get along with neighbours.
While the two rental houses are intended for her children, Johnson plans to keep them in her name and will pass them on as inheritances. That way, they’ll avoid having to pay massive capital gains taxes on the properties. And if they marry and live with their spouses in the homes, the houses won’t have to be split as part of matrimonial property in the event of a divorce.
Johnson didn’t tell her children at first that she had purchased the houses for them. Now, she involves them in all decisions, and work, regarding the homes: they have to help clean up after tenants move out, and assist in choosing new floors, for example, when they need replacing.
They also understand the sacrifices involved: Johnson drives an older car, she and her kids shop for clothing at thrift shops and seldom eat out.
“I explain to them about rent increases, what the costs are and really get them involved,” Johnson says. “Now my son wants to be a contractor or builder.”
Tracy Hanes is a GTA-based writer and a freelance contributor for the Star. Reach her at
- Report an error
- Journalistic Standards
- About Us