Investors Corner

Valuable Resources For Real Estate Investors Of All Levels

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The very first book I read that started me on the path to become a real estate investor, was Rich Dad, Poor Dad. In that book, Robert Kiyosaki uses an analogy on how wealth is built.

Think about wealth as water and your finances are a bucket holding that water. Most people have one tap filling that bucket – their job. But they’ve got lots of holes in that bucket – bills, car payments, their mortgage, and **TAXES**. To build wealth, you’ve got to turn on as many taps as possible and close as many holes in your bucket as possible.

Improper tax planning can be one of the largest drains on your real estate investments, so join us on March 20th and lean how to pay less tax! We’ll be covering topics like:

Corporations – When should I incorporate? Should I buy in a corporation? Taxes on corporations? Active vs passive income? Business corps – using profits to invest?
Estate Planning – How do I pass my assets down to the next generation?
Taxation Best Practices – What is building depreciation and why is it important? What is eligible for interest deductibility? How do I deduct the interest of my HELOC?

It’s essential to understand these things even if you only have one property. If you’ve already accumulated a few properties, it’s even more important to correct any mistakes you’ve made. Bad planning can completely kill some investment business cases, home flipping for example, so come learn how to do things right with one of the best in the industry!

Peter is a Real Estate Investment focused accountant and well known in the investment world. He regularly presents in front of hundreds of people at REIN meetings and is making the trip from Kitchener to speak to our group. His accounting firm provides strategic accounting and taxation services to grow your business and and protect your real estate investments. His partner George Dube literally wrote the book “Tax, Accounting, and Legal Strategies for the Canadian Real Estate Investor”.

Their services include:
> Assurance Services
> Business Advisory
> Real Estate Tax Planning and Structure
> Retirement & Estate Planning
> Tax Consulting
> Business Tax Compliance
> Personal Tax
> US and International Tax Services

To ensure that we are covering topics that are relevant to YOU, email your questions or scenarios to ming@volitionprop.com and we will “incorporate” them into the presentation… 😉

 

You can access the Meetup slides and the Meetup video here 


Volition Properties

Volition Properties is an award-winning Toronto boutique real estate investment firm that provides advisory and turnkey real estate investment services. Its mandate is to help real estate investors sustainably invest to build wealth in the Toronto real estate market by investing in low-risk, freehold, cash-flowing income properties over longer-term real estate cycles.

[Volition (vō-ˈli-shən): The power to make your own choices or decisions; free will. Living life by design, not by default.]

Contact us today for any questions about investing in real estate in Toronto! ming@volitionprop.com

34 joined our first ever REI Coffeehouse Webchat!!  About 20 stayed for the entire time, and 11 stuck around at the end to fill out a poll.  Pretty positive response… Most people rated it between 8-10 (out of 10)!!  And 10 out of 11 people said that they would join again.  I myself thought it was kinda boring, but maybe that was because I was staring into a blank sea of black screens (most people kept their webcams off) and so it kinda felt like I was talking to myself!!

Topics covered:

  • AirBnb (and possible tax implications)
  • Executive Fully-Furnished rentals
  • Condo Assignments
  • HELOCs
  • “Flipping to yourself” as a strategy
  • Including/excluding utilities in rents
  • Property Management

 

 

You can access the web chat video here 

 

 

This is an ADVANCED-LEVEL MORTGAGE PLANNING session. This doesn’t mean you have to be at an advanced-level and/or expert in order for this to be applicable to you, this just means that the LEVEL OF SOPHISTICATION that we will be bringing is top-notch.

Financing is the SINGLE BIGGEST CHALLENGE facing real estate investors. There are only two types of real estate investors out there: ones who HAVE run out of money, and those who WILL run out of money. It’s no wonder when we polled our members, a session on mortgage planning was their #1 pick.

We strive to solve problems, so we’re bringing in a titan in the industry, David Goncalves to analyze your financing in REAL TIME. David Goncalves (award-winning Mortgage Broker who specializes in real estate investors) has funded over $1.5 BILLION in mortgages. David is MASTER at finding untapped opportunities within your real estate portfolio. Imagine being able to capitalize on higher returns and reach financial freedom even faster thru restructuring your real estate portfolio and mortgage portfolio?! David can make this a reality for you. David usually packs full auditoriums of people when he speaks at events across the country, so COME AND TAKE ADVANTAGE OF THIS INCREDIBLE OPPORTUNITY!!

FOR THREE LUCKY PEOPLE, DAVID WILL ANALYZE THEIR SCENARIOS – BUT THERE IS ONLY ONE WAY TO SIGN UP!

GIVE US YOUR PROBLEMS!! If you’re a first time buyer, we want you; if you have a bunch of properties, we want you too; heck if you’ve got multiple corporations, self-employed, have to consider estate planning, give us your toughest scenario, we want you too!

This won’t be one of those sessions where there are a bunch of “ifs” “maybes” “I need to see documents”, FOR THOSE WHO VOLUNTEER AHEAD OF THE SESSION, we will ensure that we get all the right documentation and numbers ahead of time, so that you’re essentially getting a custom planning session from David! THIS IS A FIRST COME, FIRST SERVE BASIS, so please reach out ASAP!

You can access the Meetup slides and the Meetup video here 

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Volition Properties
www.volitionprop.com

Volition Properties is an award-winning Toronto boutique real estate investment firm that provides advisory and turnkey real estate investment services. Its mandate is to help real estate investors sustainably invest to build wealth in the Toronto real estate market by investing in low-risk, freehold, cash-flowing income properties over longer-term real estate cycles.

[Volition (vō-ˈli-shən): The power to make your own choices or decisions; free will. Living life by design, not by default.]

Contact us today for any questions about investing in real estate in Toronto! ming@volitionprop.com

Volition is starting a FREE Monthly Online “REI Coffeehouse” Web Chat!  Based on feedback from our clients and investors, you want MORE!  More networking, more Q&A time, more learning, more community, more like-minded people, more engagement… And that a Meetup once a month wasn’t enough!  Volition’s mandate has always been to remove obstacles and roadblocks… and now the REI Coffeehouse will solve this problem!

Why did we call this a “Coffeehouse Chat”?  Because the format is simple.  No format.  No presentation.  No script.  Just an informal 1hr online web conference chat that you can log into from your computer during your workday lunch hour (12pm-1pm)… not too much different than if you were meeting a friend for a coffee at a nearby coffee shop.  Just real people with real problems, and maybe the occasional guest speaker.  Send in your questions beforehand, and then we’ll chat about them and answer your questions with everyone else on the line… others may even jump in with their own input or experiences.  Even if you don’t have a specific question, join the web chat anyway because you can join from your computer!! (and it’s FREE!!)

The REI Coffeehouse will be using Zoom.us, so have your laptop’s webcam and microphone on to join the web chat.  And we’ll be screen recording it and posting each REI Coffeehouse Chat on our website, along with our Monthly Meetup content.

We will be scheduling our REI Coffeehouse Chats thru Meetup.com (www.meetup.com/Volition), so make sure you go there and sign up to get notified of the next one!

What do you think? Will you be logging on and joining us to talk about all-things-real-estate??

(1. Also, if you have any suggestions on the format, content, etc., let me know by posting it below!)
(2. If you have a suggestion on the SPECIFIC TIME other than the planned 12pm-1pm, also let us know by posting it below!)

 

 

EXECUTIVE SUMMARY: WHY SQ2 & WHY THIS PARTICULAR CONDO UNIT ASSIGNMENT?

  • Actual Unit Available.  The Volition team has an ACTUAL condo unit currently available for assignment, not just phantom inventory that “theoretically” may become available if an owner decides to assign it (like other agents/websites).
  • Highly In-Demand Location. Steps to King West, Queen West, Theatre District, Kensington Market; one of the hippest, most desirable areas of the city.  This neighbourhood is popular with Millennials because of work/live/play.
  • Low-Risk Profile.  This is a risk-mitigated investment due to the in-progress gentrification cycle of Alexandra Park (following the successful mixed-income model being carried out in Regent Park) and proximity to where the tenants’ jobs are located (i.e. downtown core, financial district, etc.)
  • High Walk Score.  Walk Score 100/100 “Walker’s Paradise”, Transit Score 100/100 “Rider’s Paradise”, Bike Score 75/100 “Very Bikeable”.  All important considerations to Millennials.
  • Best Tenant Profile.  Professional millennial, university educated, 2-5 years out of university, salary $60-80k/year, works in downtown core.  This tenant profile will be easy to manage and always pays their rent.
  • Cashflow.  Target rent is $2500, which is projected to be cashflow neutral.  As a point of comparison, normal resale condos in this area would easily be cashflow negative by $200-400
  • Discount Pricing.  Roughly $950/sqft, while other resale condos in the area are $1000/sqft+, and other preconstruction condos in the area are $1200sqft+
  • Reputable Builder.  Tridel.  Nothing more needs to be said.  Tridel has been building homes for over 8 decades. With over 80,000 homes built in Toronto, it’s safe to say with Tridel comes a high-level of quality and a high standard.

 

VIP Investment Calculator

 

With the success of the SQ Towers at Alexandra Park, trusted Toronto developer Tridel is unveiling SQ2, the second phase of the SQ Condos series. This is the second phase of a multi-phased series by Tridel with the revitalization of the Alexandra Park neighbourhood. Tridel is working on revitalizing this Queen West neighbourhood and raising the standard with high quality features and finishes.

One of the coolest neighbourhoods in the world according to Vogue Magazine. Vogue called this West Queen West Neighbourhood: trendsetting. SQ2 located at Queen and Spadina is in the midst of this booming, trendy neighbourhood that is getting global recognition for its contribution to art, culture and green space.

SQ Condos at Alexandra Park, the first phase, had a sleek, modernistic design which incorporated a very futuristic touch. SQ2 will have this similar iconic design that will stand out in the capital of Toronto’s most cultural neighbourhood.

 

Development Details:
Project Name: SQ2 at Alexandra Park
Developer: Tridel
Location:  Vanauley St
Major Intersection: Queen & Spadina
Architect: Teeple Architects
Storeys/Units: 14 Storey/169 Units
Est. Taxes: 1% of price / year
Est. Maint: $0.62 / sq ft / month (First Year Free)
Est. Occupancy: Fall 2019

 

Condo Unit Details:
Price: $545,000
Bedrooms/Baths: 1bdrm/1bath
Sqft: 574sqft
Balcony: Y
Floor: 11
Views: West (unobstructed)
Initial Deposit Required: $85,000
Remaining Deposit Required (at close): $24,000
Mortgage Required at Close: $436,000
Est. Closing Costs: $14,750 Land Transfer Tax + $8362 Levies (capped) + $1000 lawyer + $500 appraisal = $24,612
Est. Occupancy Date: Nov 13, 2019
Est. Closing Date: Spring 2020
Rent: $2500
Expenses: $210 property taxes + $355 condo fees + $1946 mortgage (80% LTV, 3.45%, 30yr) = $2511
Cashflow: -$11


Floorplan:

 

 

How To Purchase A Condo Assignment:

  • Buying the right condo assignment can be an extremely lucrative investment opportunity, but the process can be fraught with PITFALLS if you don’t know what you’re doing.
  • Assignments are not as straightforward as buying resale or preconstruction.  The assignment contract is extremely complicated and needs to be structured PROPERLY.
  • You need to work with an Investor Realtor who thoroughly understands the process and knows how to do assignments, or you could be opening yourself up to SIGNIFICANT risk.
  • The Volition team has bought & sold many assignments both personally and for our clients, and is quickly becoming the MARKETPLACE for assignment deals.
  • If you are interested in Condo Assignment, contact us for a FREE 60-minute Advisory Session where we will walk you through the ins & outs of buying a PRE-ANALYZED Condo Assignment from our inventory of assignments OR selling your Condo Assignment to one of our PRE-QUALIFIED buyers

 

Watch A Short Video on Assignments From Our Jan 2019 Meetup Mastermind

If you have any questions, feel free to email, text, or call Sam at 647-895-8945.

 

 

Edward Zhang of Volition Properties was the guest speaker of this week’s “Vine Rant”, the Vine Group’s weekly VLOG providing updates on everything and anything real estate.  

Whether you are buying, selling or investing in your first rental property, the Toronto real estate market is still growing – but with limited supply to meet the demand.  Edward sheds some light on turn-key investment properties, market trends, and (perhaps most controversially) why investors shouldn’t focus JUST on cash-flow.

The Vine guys are top-notch (how else do you get to finance almost $2 BILLION worth of mortgages?), and are a strategic partner of the Volition team offering our clients mortgage solutions and financing/wealth advice to our clients.  Check this and other videos at the Vine Group’s weekly Vine Rant.

** OUR POPULAR ANNUAL INTRODUCTION TO REAL ESTATE INVESTING **

The holidays are done and the credit cards have been filled just as high as stockings. January is looking tight and KEEPING YOUR JOB is on your mind, let alone early retirement. If this is you don’t beat yourself up – in fact almost *50%* of consumers go into debt to pay for Christmas. THIS WAS ME 18 years ago. Faced with huge student debt, holiday costs and getting laid off during the dotcom crash. Good thing I had started investing in real estate and had a reliable second source of income. Since then, our investments have grown considerably over the years and the Volition Team has now helped invest over $110M in real estate!

What we will be teaching is our systematic method for investing in real estate based on our years of experience! STOP THE CYCLE! Do something in 2019 to achieve financial freedom. Learn to make real estate work for you!

During our session we’ll be answer questions like:

Where do I invest? How to identify the best places to invest. Small towns, big cities?
Is now the right time to invest? How to know if this is the right time to buy an investment property? Should I wait?
How do I buy the right property? Are condos good investments? Should I buy multifamily?
Where do I start with $50k, with $100k, with $300k? With different amount of investment funds, there are different strategies to take.
How does real estate actually make money? If you think it’s about buy low, sell high, you only understand a small part of real estate investing!

Make a change this year. Keep that promise to yourself that you’re going to learn to take control of your finances and make work optional. If you have ever thought about investing in real estate this, you don’t want to miss this session!

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Volition Properties
www.volitionprop.com

Volition Properties is an award-winning Toronto boutique real estate investment firm that provides advisory and turnkey real estate investment services. Its mandate is to help real estate investors sustainably invest to build wealth in the Toronto real estate market by investing in low-risk, freehold, cash-flowing income properties over longer-term real estate cycles.

[Volition (vō-ˈli-shən): The power to make your own choices or decisions; free will. Living life by design, not by default.]

Contact us today for any questions about investing in real estate in Toronto! ming@volitionprop.com

WHAT IS SO SPECIAL ABOUT THIS PARTICULAR CONDO PROJECT??

  • Located right beside the MASSIVE Toronto Eastern Waterfront redevelopment (next 25 years, $30 BILLION of funding, 40,000+ new residents)
  • NEXT DOOR to the GooglSmart City development by Sidewalk Labs (50,000+ jobs, new Google HQ)!
  • Steps from the East Harbour development60-acre master planned commercial/office/retail development the size of Yorkdale Mall and new Transit Hub for the Downtown Relief Subway Line (50,000+ jobs)!
  • 15% Deposit Structure within 1 year
  • Volition’s take:
    • We cannot stress ENOUGH how much of a GAME-CHANGER the Eastern Waterfront is.  And this condo project is located literally in the heart of the entire redevelopment.
    • At ~$1100/sqft, still offers tremendous value vs. nearby condos ($1200-1500/sqft+)
    • Check out the INVESTOR KIT for further details.

Lake Suites
Platinum Price List, Floor Plan are Available!

Investing in Toronto’s leading waterfront community.
Toronto’s waterfront is the largest urban redevelopment project currently underway in North America, and its revitalization is expected to take approximately 25 years and $30 billion of private and public funding to complete. This transformation will be home to over 40,000 residents, one million sq. metres of employment space and 300 hectares of parks and public spaces.
Development Detail:
Project Name:  Lake Suites
Developer: Greenland
Location:  Lake Shore Blvd E, Toronto
Major Intersection:  Lake Shore Blvd E & Lower Sherbourne St
Architect:  Hariri Pontarini Architect
Storeys/ Units:  39 storey
Maintenance Fees: TBD
Taxes:  0.9% of total purchase price
Locker:$7,500
Parking:  $65,000 (Available for 2 Bedroom and Larger only)
Estimated Completion: July 2022

PLATINUM INCENTIVE- FIRST TWO WEEKS ONLY
*Extended Deposit Structure
*Free Assignment (Value $5,000)
*Right to Lease During Interim Occupancy
*Capped Development LeviesExtended Deposit Structure
$5,000 on Signing
Balance to 5% in 30 Days
5% in 180 Days
5% in 365 Days
5% in April 1, 2022
5% on Occupancy

Highlights

  • Walk score of 93/100
  • Transit score 98/100
  • Located in the Waterfront Communities – The Island
  • 5 mins walk to Dockside Dr at Queens Quay East streetcar and less than 15 minutes ride to downtown Toronto
  • 5 mins walk to Corus Entertainment, Sugar Beach, Loblaws
  • 10 mns walk to St Lawrence Market
  • 15 mins walk to The Distillery Historic District
  • 15 mins ride to Ryerson University, UofT, George Brown College
  • 15 mins ride to Financial District
  • 20 mins ride to Hospital for Sick Children, Mt Sinai Hospital, and Toronto General Hospital
  • Easy access to Gardiner Express Way and DVP
  • Less than 15 mins walk to Union Subway Station, the Go Transit, ACC and more.

Rental Rate:
1 Bedroom  from $2000 – $2400
1 + 1 Bedrooms from $2500 – $2800
2 Bedrooms from $2800 – $3600

How to Purchase a Unit:

  • Platinum price list and floor plans are available!
  • Unit selection will be on a first come first serve basis.

Click HERE for price list
Click HERE for floor plans
Click HERE for brochure
Click HERE for investor’s kit
Click HERE for Worksheet

If you have any questions, feel free to email, text, or call me at 647-895-8945.
_______________________________

Volition Properties Inc.
(647) 895-8945
info@volitionprop.com
www.volitionprop.com
**REIN Buyers Group’s Preferred Toronto Investor Realtor Team
**Certified Real Estate Investment Advisors (REIA)
**Silver Award Winners from the Canadian Real Estate Investment Network (REIN)
**Featured in the February 2015 edition of the Canadian Real Estate Investment (REIN) Magazine.

During last month’s Street Smart Tour, we checked out 3 awesome cashflowing investment properties.  All of them were in the $7800-8200/month rent range, which is amazing… but they were also in the $1.75-1.85M range 🙁

These are the types of properties that we aspire to as sophisticated real estate investors.  But unfortunately, the reality is that only the 1%ers can actually ever afford to purchase them.  Right? Right?? WRONG!!

 

You will be able to purchase them too!!  Eventually. Maybe not today, maybe not tomorrow, but eventually.  How do we know this? Because we understand the mechanisms through which one builds wealth in real estate, and because we know this, we understand the “Stepping Stone Approach” to eventually reach our “Gold Standard” property.  And this is what we want YOU to also understand.

 

The focus of this session is to help you understand the journey to eventually reach MASSIVE CASHFLOW… not the $100-200/month that you might get from your properties today, but the $5000-10000/month type of cashflow that will truly impact your life, perhaps allow you to retire early, and help you reach your Belize (i.e. Life Goals).

 

The “Stepping Stone Approach” is a very fundamental concept to understand in your journey to eventually reach MASSIVE CASHFLOW.  Essentially, it is the concept of starting with smaller assets, building equity over time, and then leveraging that equity to grow your portfolio.  Many others also teach this concept (or a similar concept); however, the MISSING piece that very few explain is the follow through to the end game. As a result, investors know how to grow their portfolios, but they don’t know what to do after that.  We will teach some core concepts in order to help you understand how to TRANSFORM that hard-earned equity into MASSIVE CASHFLOW.

 

This approach is a preferred alternative to simply buying a property and then paying it off over the course of 30 years!  

 

(SPOILER ALERT: The outcome is that we will own MORE PROPERTIES FULLY PAID OFF in LESS TIME!!)

 

We will track Tommy & Gina, starting off in the school of hard knocks (he works on the docks, she works the diner all day), as they progress in their real estate journey from owning a condo, to more properties, and eventually reaching a massive passive income stream through their real estate portfolio.  

 

There are times when they feel down on their luck, and it’s tough.  But what they don’t realize is that they’re already halfway there! They also realize that it doesn’t make a difference whether they “make it” or not, because when they reflect upon where they are, they are actually much farther ahead than they initially realize.  Through the ups and the downs, they vow to persevere, because they don’t want to be just another face in the crowd. They know they aren’t going to live forever, so they have to start early so that they have time on their side… and so they can retire early and live while they are still alive.

 

Tommy and Gina’s story is really the story of all of us.  Like them, we gotta make our own breaks and get started, because if we don’t start today to leverage the power of real estate, tomorrow’s getting harder, make no mistake.

 

We at Volition want you to take our education, personalize it and apply it to your own situation, and like Frankie “Do it your way”.  Never back down, because ultimately you are making progress NOT because you are lucky (because really, even luck ain’t that lucky), but because you stood tall and stood your ground.  But more importantly, you’ll know that it’s about taking action, even in the face of uncertainty, and doing it now or never. Then nothing… not the market, not interest rates, not Trump… will detract you from you achieving your dreams.  Jon Bon Jovi knows this. Timmy & Gina know this. We know this. Now you too will know this.

 

Anyway, back to the current decade again – bring your notebooks and calculators… this is going to be a working session and less about airy-fairy theory and more about actual number crunching of various scenarios using pre-construction condo as the starting point, to see how to eventually get to a healthy passive income stream… and to also see how long it will realistically take to do so.

Nov 15, 6:30pm-10:00pm

RSVP NOW!!!

Entry Fee: The workshop is $20 at the door or $15 when you pay online!

Schedule:
6:30pm-7:00pm: Arrival, meet and greet and networking
7:00pm-9:00pm: Presentations begin at 7pm SHARP
9:00pm-10:00pm: Networking

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Volition Properties

Volition Properties is an award-winning Toronto boutique real estate investment firm that provides advisory and turnkey real estate investment services. Its mandate is to help real estate investors sustainably invest to build wealth in the Toronto real estate market by investing in low-risk, freehold, cash-flowing income properties over longer-term real estate cycles.

[Volition (vō-ˈli-shən): The power to make your own choices or decisions; free will. Living life by design, not by default.]

Contact us today for any questions about investing in real estate in Toronto!

Investing in Toronto Preconstruction Condos 101.

What should I invest in? Houses vs. Resale Condos vs. Preconstruction Condos.

Preconstruction condos have their place in real estate investing.  If you’ve worked with the Volition team, or if you’ve attended our meetups, you’ll know that we preach that freehold (i.e. land) is generally the best investment.  But land comes as a price… both in terms of monetary perspective and from a time/energy perspective.

Condos are easy.  You buy a condo, and if it’s in a half-decent location, it’s easy to rent it out, and it’s easy to manage it.  The building itself and the amenities is largely taken care of by the condo property management.  Your unit is generally fairly new and thus not likely to run into too many issues.  And if you’ve chosen your location carefully, you should be able to attract what we consider to the our A+ tenant profile (millennial, a couple of years out of school, making $60-80k, working for a large firm in downtown Toronto, etc.).  And again, if you’ve chosen a good location, then the economic fundamentals of the area will support economic growth, job growth, population growth, etc.  Pretty straightforward.

Houses are a bit trickier.  Funny enough, the reason you want to buy a house is not actually because of the house… It’s because of the land.  It’s the land is that is the appreciating asset.  The building is actually a depreciating asset, because it gets older over time.  But the hard part is that land is generally not an income generating asset (with the exception of a few use cases, like mobile home parks, etc.).  So you need a building on top of the land in order to generate some income.  And then you need to lease out that building in order to cover your expenses and hopefully generate some positive cashflow.  So now, not only are you managing tenants, but you now have a building that you are having to take care of and worry about.  Generally, freehold/land/houses have been a better investment in Toronto over the past 10-20 years (and even longer), averaging a 10% compound growth over the long term… this is why the nice Italian grandma who lives next door who bought her house for $20,000 40 years ago now owns a property that is worth $1.2M… (Recall the “Rule of 70”: at 10% growth, it will take 7 years for prices to double.  At 7% growth, it takes 10 years to double).  So here we go, $20k -> $40k, $40k -> $80k, $80k -> $160k, $160k -> $320k, $320k -> $640k, $640k -> $1.28M.  That is 6 doubling periods, which is equivalent to 42 years at 10% growth.  Therefore, I’ve just been able to prove that Toronto houses grew at 10%. QED.

Condos, on the other hand, have grown at about 7% compounded over the past 10 years.  That’s not bad either.  A real life example is the preconstruction condo I bought in 2008.  I bought it for $295k and a recent comparable sold for $550k in 2018.  That’s roughly a doubling period of 10 years, which generally equals a 7% growth.  QED.  Also not bad, considering at a 20% downpayment, a 7% growth actually equates to a 35% return annualized.

More specifically, I bought it in 2008, and it wasn’t built and I didn’t take possession until 2012.  It normally takes 4-5 years for a preconstruction to be built.  When I took possession, it was worth about $350k.  So at 7% growth applied between 2008 and 2012, that figure ends up being $387k.  The difference between the figures is accounted for due to the fact that condos were not very hot during that phase, so it was only closer to 5% growth.  Condos in the last couple years (2017-2018) really took off for a variety of reasons (I’ll leave that for a future article), so the growth in condos in 2017 and 2018 has been closer to 10%, which picks up the slack.

That was the background info.  Ok, now to preconstruction.  Why is preconstruction a good idea?

I’ll sum it up quickly.

 

Why Preconstruction Condos?

  1. Resale is cashflow negative.  Condos right now are generally cashflow negative at 20% down (there are a few exceptions, but this is the general rule).  Cashflow negative is bad for many reasons.  It means that you are continuing to fund your investment out of your own pocket.  It also makes it harder to get financing for your next property because of your Debt Servicing.  Real estate is supposed to work hard for you, not the other way around!  It literally means that you have to work harder at your job just to keep your investments afloat!
  2. Potential for positive cashflow.  Rising rents allow for preconstruction to be cashflow positive after the building is constructed.  Rents rose 10.7% in Toronto last year according to Toronto Star or 15.7% according to Toronto Storeys, so if you grow current rents at even just 3-4% for 5 years, you’ll be into cashflow positive territory by the time you take possession.
  3. No tenants. As per a previous article we wrote entitled “Why Invest in Toronto“, tenants are the BIGGEST RISK TO YOUR BUSINESS!  It’s not “the market”, or interest rates, or Trump, or any one of the thousand things that regular average joe investors think… quite simply, it’s tenants.  Preconstruction allows you the luxury of not having to deal with tenants for 4-5 years while the building is being built.  AWESOME.
  4. Delayed Deposit Structure.  Most preconstruction condos have a delayed deposit structure, with 5% initially, then 5% in 90 days, 5% in 270 days, 5% in 720 days, or some variant.  This means that you don’t need all the capital upfront.  In fact, some developers (i.e. one developer in particular that we are working with and are Platinum VIP Brokers for) are offering an INSANE deposit structure: 5% initially, then $1000 a month until you make up another 5%.  For example, for a $600k 2bdrm, this would be $30k initially, then $1000 a month for 30 months.
  5. Mortgage.  As investors, the biggest roadblock we all face, at one time or another, is financing.  Some will hit their financing wall earlier, some later, but everyone will hit it eventually.  Preconstruction offers a way to continue to invest, and not have to continue to qualify for mortgages.  You don’t need a mortgage until the condo registers (i.e. 4-5 years down the road), which is amazing.  This can be great if you have too many mortgages already.  This also can be great if you cannot qualify for a mortgage right now, but anticipate that you will be able to in the future (new to Canada, bruised credit because of divorce, new job, don’t make enough salary now but will in the future, etc, etc, etc.  There are a dozen different use cases that follow under this category).  Also, precon doesn’t hit your credit bureau, so you could potentially buy preconstruction, and then CONTINUE to invest in regular buy-and-hold investment properties that need mortgages.
  6. VIP pricing/incentives.  As Platinum VIP Brokers, we have early ground-floor access to projects.  This is important, because it can often mean built in equity as soon as the NEXT phase is released.  We recently had one client purchase a preconstruction 800sqft condo at $1000/sqft, and within 3 months, the next phase pricing was released at $1200/sqft.  He made a paper gain of around $160k in 3 months, without hardly lifting a finger (well, he did have to sign his cheques, I suppose).  This is obviously not guaranteed, nor a typical case, but it can happen.  A more typical scenario is the price-per-sqft goes up maybe $25-50 for the next phase… but either way, it’s built in equity.  And then there’s the regular incentive crap that most people buy into… upgraded countertops or something like that.
  7. Today’s pricing. This ties into #1 and #2 above.  You are buying at today’s prices and will be getting tomorrow’s rents.  The problem with #1 above is that you are buying at today’s prices and getting today’s rents.  If you were able to get today’s rents and you bought at yesterday’s prices (i.e. you bought years ago), then you could also be in cashflow positive territory.  And in terms of valuation, you’re buying at today’s prices for a future built condo unit (which is traditionally worth more after it’s built).  Why is it worth more after it’s built?  I could write an entire article on why, but to keep it short and sweet, it’s because of expensive developer financing (the “mezzanine” financing in the early stages of a condo project is very expensive, and only after pre-selling 60-70% of a building can they switch over to a triple A lender at triple A lender rates).  Also, it’s due to uncertainty… you are only buying a piece of paper, a contract.  At the presales stage, you aren’t actually buying a unit.  So you don’t know if it’s actually going to be built, or if the developer is going to go bankrupt, etc.  Also, you don’t have a physical unit to inspect prior to purchase.  You are HOPING that it will be built like you think it will be, and as per the floorplans and feature sheets.

Because of some of these aspects, some investors tend to think that preconstruction condos are just for speculators, and that they don’t fall into the tried-and-true buy-and-hold investing model.

I disagree.  At the end of the day, real estate investing is all about identifying risk, figuring out your strategy, and mitigating risk.  There is definitely an element of uncertainty, but that uncertainty can be mitigated thru careful research and location selection.

For example, one of the areas that the Volition team is helping our clients with is in the Eastern Waterfront area.  Why?  Two words: Google Smartcity (or three words if you think that Smart City are two words).  Technically, it is Sidewalk Labs (Google’s sister company), but for all intents and purposes, we can think of them as Google.  They won a proposal from the City of Toronto to develop the eastern waterfront called Quayside, which is an area just east of Parliament and south of Lakeshore.  It’s potentially a gamechanger, with 50,000 new jobs, and the new Google Canadian HQ will be going in there as well.  You can read a descriptive Globe & Mail article about Google Smartcity here.  So we naturally selected a preconstruction development right beside it.  Boom.

And even in the event that everything falls thru, the City of Toronto has mandated that it will be developing that area.  So even if it’s not Google who’s going to be developing it, someone will be.  And if it’s not that… George Brown is near there, Corus is nearby, it’s close to downtown, it’s near other developments and condo buildings that are already more expensive on a $/sqft basis meaning it still has upside potential.  And the area is definitely going to continue to gentrify.  And it’s still proximity to Distillery District, and to East Harbour (50,000 new jobs, new transit hub).  These are types of defensive measures that we take to mitigate “market” risk (again, refer back to our Whitepaper for the 4 Types of Risk in Real Estate Investing).

 

Ok, you’ve convinced me.  What do I do now?

So now we know why Preconstruction fits in as a investment strategy into your overall business strategy.  But how do you actually execute?

Buying Preconstruction is not actually as easy as it sounds.  It’s actually very challenging… if you aren’t working with the right agent.  I know it sounds cliché… and maybe it is.  But it’s also very true.  When trying to get early access and ground level pricing, developers in Toronto only give a select number of Platinum VIP agents access to units.  This is called “allocation”.  This is often because of that agent’s reputation and relationship with the developer.  So if you wanted to walk in off the street and get access to VIP pricing, good luck.  Similarly, if you wanted to work with your brother or aunt or sister-in-law’s chiropractor who is an agent on the side and wanted to get access to the best possible deals and best possible pricing, also good luck.  I’m not trying to being pretentious or condescending.  This is just the reality.  Those agents are only going to get access only after the presales early phases have already sold out, and now the developer can switch over to Triple A financing and start their construction, and then they can just sit and wait for the other unit to sell… now at a much higher premium.

So what do you do?  Align yourself with an agent who has early access, and one who can get allocation, and one who can be your advocate, and one who can get you assignment rights, and one who can cap your development fees, and one who can help you select effective floorplans that minimize wasted space, and one who can help you identify your tenant profiles & projected rents & projected cashflow & projected returns.

This article has focused on the why.  The next article will focus on the how, including touching on HST, HST rebates (and the forms to use to get the rebate back), assignments, occupancy, owner occupied vs. rental, pros/cons,and exit strategies (i.e. what if can’t qualify for a mortgage after it’s built?)… and most importantly, how Preconstruction Condos help new investors get started as part of a broader investment strategy using the “Stepping Stone Approach”, and how to build up to eventually owning land in Downtown Toronto!

 

Meetup: Pre-construction Condos – Do they make sense as an investment?

We actually delivered a meetup presentation specifically for Preconstruction Condos in May 2018.  Details of it are available here.  Contact us for the slides/video/audio.
https://www.meetup.com/Volition/events/rcztmpyxhbwb/ 

 

About Us

The Volition Investment Properties team are experts in Toronto real estate.  We’ve helped investors invest in over $110M+ in real estate, build over $47M+ in wealth, and generate $4.5M+ in cashflow.  We’ve also educated over 650+ investors at our Monthly Real Estate Investment Mastermind meetup (www.meetup.com/Volition).  Contact us today for a free 60 minute complimentary consultation to see how we can help you reach your real estate goals, so that you too can “Live Life By Design, Not By Default”.

 

 

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