My Recent Experience with Assignment Condo Investors...
What you need when buying condos for the purpose of investment is quite simple. You need a looped in advisor who can skim all the fat away and get you a real deal. My current favourite deals are good assignments in good buildings with good floorplans.
Why?
Assignments are a glitch in the system. The near perfect exposure via MLS of resale listings allow for the absorption rate to be high and prices to be based on standard rules of supply and demand. There aren't "deals to be had" on MLS. If its priced too low, the market is efficient and the end price moves up. If its priced too high, it sits around until sellers become realistic and the end price moves down.
But what about assignments?
What if I could tell you that a desperate seller, who will have trouble closing his unit, is willing to take a hit on price and sell at a loss to walk away from his deal?
What if I could tell you that I know of a property that is not on MLS, and is being sold at 2012 prices in 2015?
What if I could tell you that a couple going through a divorce has split all assets except for a pre-construction condo that they are dying to off load?
These are all stories that are very true and very real.
Right now, I'm helping a great couple buy their first assignment condo. They are asking a lot of questions and I wanted to share this experience with you:
1. What is the current market value of this unit?
The current market value of this unit is $30,000 higher then what you will be paying. Because this property isn't registered it can't be sold through conventional means. The lack of exposure to the market is creating this downward pressure on sale price.
2. How much will it cost me monthly to carry this unit?
This is a 2 part answer. Until registration, the cost will be $1400. This is your occupancy fee. Post registration, your mortgage, maintenance and property tax will come up to $1547 based on the terms of the mortgage we discussed.
3. How much will I be able to rent this unit for?
Immediately upon closing the assignment, you will be able to rent this property for $1650. (Immediately based on the terms negotiated by your realtor.)
4. What will it cost to close this unit?
You will have to pay the following closing costs: Municipal Levies, Legal Fees, Land Transfer Tax and HST. The HST you pay will be given back to you in total. You will have to pay $20,000 in HST which you will receive back in approximately 4 months. Your other closing costs work out to roughly 4% of the purchase price.
5. How much money do I need to purchase this unit?
You need somewhere around 25% of the purchase price. That number is based on down payment plus closing costs. Part of your down payment will be paid to the seller (assignor). The rest of your down payment and your closing costs will be paid to the builder upon final registration.
6. Why should I buy this assignment and not invest my money in something else?
The buying opportunity is great here. Mainly because you are buying it below market value! You're building a great piece of equity right now. You're also walking through the unit and seeing it first hand. Your also able to negotiate heavily with a seller despite it being a sellers market. You also have the benefit of a TARION warranty. You also have the opportunity to be cash flow positive month to month. You're also buying a floorplan that is very good. You're also buying a coveted building that will outperform the market averages. The list goes on and on. But the main thing is your buying a unit that is worth the assignment price + $30,000.
7. What risks am I exposed to?
There is the chance of a prolonged occupancy period. There is also the standard risks with all investment properties including tenant issues and repair costs. In the long run though, you actually can not go wrong. You will make money. The key is holding power and long term thinking.
8. What would be next?
I have an agreement to Assign. We would submit this to the sellers representative and negotiate the hell out of this deal. Upon acceptance we would deliver funds and let lawyers close the assignment.
This couple is taking a leap of faith in my abilities, but all of my statements are based on strong research and real data. Do yourself a favour this up coming year... invest in real estate. You'll be thanking me! If this couple can do it, you can too.
And as always, if you want to talk real estate, we are happy to help!
I have 5 off market opportunities via assignments at some of the best buildings:
Thompson Residences
12 Degrees
King Charlotte
Casa
King + Condos
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