RESP vs Rental Calculator
Two ways to fund a child's education. The RESP grows a portfolio you draw down for the bill. The rental takes the same monthly dollars, uses them to carry a HELOC that funds a property, and lets the property's own cash flow pay that HELOC off while equity compounds. In the education year you refinance the rental for the bill, and keep the property. This runs both side by side and shows where the rental pulls ahead.
At these numbers, the rental strategy comes out ahead.
Rental net worth advantage, year 25
+$1,568,088
After both plans fund the same $100,000 education bill, this is the extra net worth the rental path leaves behind. The rental overtakes the RESP in year 1.
The RESP's built-in limit
An RESP is capped at $50,000 of contributions per child for life. At $5,000/yr you reach that ceiling in year 10 and have to stop, though the fund keeps growing. A rental property has no contribution cap, which is part of why it pulls ahead.
How the same dollars do double duty
Monthly the family would put in the RESP
$417
HELOC that payment carries (interest-only)
$101,010
Funds to close the rental
$112,000
The RESP-equivalent payment only carries part of what it takes to close, so you add $10,990 in cash on top at purchase.
Net worth, side by side
The RESP fund builds, then the education bill is drawn from it (any surplus keeps growing). The rental funds the same bill by refinancing, and keeps the appreciating property. Where the lines cross is your break-even.
Property value, year 25
$1,046,889
Rental equity, year 25
$1,046,889
Cash built up, year 25
$569,042
The HELOC drawn to buy the rental is fully repaid. After that, the rent keeps coming in and piles up as cash.
What the model is telling you
- The serviceable HELOC ($101,010) does not fully cover the funds to close. You inject $10,990 of cash at purchase.
- Surplus cash flow is redirected to the mortgage, so the rental is paid off free and clear in year 17. After that the full rent banks as cash.
- Both paths aim at the same $100,000 education bill. The rental refinances to draw it and keeps the property; the RESP draws it from the fund and keeps only any surplus.
Total wealth built by year 25
$1,604,941
Your property equity (appreciation plus the mortgage paid down), plus the cash the rental has banked, net of the cash you put in to buy.
And you fully funded your child's $100,000 education along the way.
RESP limits vs. the rental's flexibility
The dollar comparison above misses two things that often matter more than the numbers: what the money can be used for, and what it costs to get it out.
The RESP is restricted
- Education only. The money has to go toward schooling. If your child starts a business, buys a home, or skips post-secondary, the RESP can't just be redeployed: the government grant is clawed back, and the growth is taxed at your marginal rate plus a 20% penalty.
- Frozen at $50,000. The lifetime contribution limit hasn't moved since 2007 and isn't indexed to inflation. As tuition and living costs climb, the most you can ever shelter in an RESP keeps shrinking in real terms, which makes an already-rigid account even less flexible.
- Taxed on the way out. It grows tax-sheltered, but the grant and growth are taxable when withdrawn, in the student's hands, so usually at a low rate. Your own contributions come back tax-free.
- What's left over. Once school is paid for, the RESP has to be wound down (by its 35th year). Your contributions come back tax-free, but any unused grant is returned to the government, and leftover growth is taxed at your rate plus 20%, unless you can roll up to $50,000 into your RRSP. The chart keeps growing the RESP's leftover at the full return to stay generous to it; in reality that leftover is smaller than shown.
The rental stays flexible
- Use it for anything. The equity is yours: more property, a business, a down payment for your kid, whatever life calls for. Nothing ties it to school, no contribution cap, and you decide the timing.
- Grows tax-deferred too. Like the RESP, the property's gains compound untaxed: you owe nothing on the appreciation until you actually sell, and nothing at all if you keep refinancing instead of selling. Same tax shelter, none of the strings.
- No tax to access it. A refinance pulls cash out of the property with no tax at the time: borrowing against equity isn't a sale, so there is no capital-gains event. Tax only comes due if and when you actually sell.
General information, not tax advice. RESP and capital-gains rules have exceptions; confirm your situation with a CPA.
How to read the result
- Both paths aim at the same education bill. The RESP grows your capped contributions toward it; the rental refinances to draw it. The headline is what each path has left over afterward, which is why it favours the asset you keep, and why the RESP's $50k contribution cap matters when the bill is big.
- The HELOC is the engine, and the risk. The same monthly dollars that would have gone to the RESP instead carry an interest-only HELOC. If rates rise or the rental sits vacant, that payment still comes due. The RESP has no such obligation. The model assumes the payment is always made.
- Appreciation and rent growth do a lot of the work. Set them to numbers you'd defend, not hope for. A point of appreciation over 20 years swings the result materially. The default 3% is a long-run estimate, not a promise.
- Liquidity and effort aren't on the chart. An RESP is hands-off and liquid. A rental is a second job with tenants, maintenance, and a property you have to sell or refinance to access. The dollar advantage has to be worth that.
For the strategy in plain English, including who it fits and where it goes wrong, see the strategy page.