Investing in a Condo is a great way to make money. Primarily it is a long term strategy... just like bonds & mutual funds. However it can also provide short term windfalls- especially those who have "money".
Strategy 1 - Buying Pre-Construction (2-4 years)
- here you are banking on property values to increase by the time you take ownership of your unit 2 to 4 years down the road. This has worked great for buyers in the past 10 years.
Pro - Buy it and Forget about it. Little personal involvement.
Con - Requires 15 to 25% deposit, plus mortgage pre-approval for rest of purchase price. Not everyone has this type of money.
Strategy 2- Buy Resale Condos
- here you buy a condo in a "rentable" neighborhood where there is demand. Like Scarborough Town Centre. You put minimum 5% down and mortgage the rest. You are banking on the RENTAL income to cover all your "expenses". i.e. Mortgage payment, Property Tax, Maintenance Fee
Pro- Require only 5% of your personal money
- Rental income covers all expenses and ideally provides a small positive cash flow.
- Your mortgage principal is paid down with each mortgage payment. Increasing your Equity stake.
- By holding the unit for 3 to 5 years - you benefit with increased property values at the time your condo is sold.
Con - By only putting 5% down, you need to carefully do the math and make sure RENTAL income can pay for the unit.
Strategy 3 - Buy Assignment Condo
- Near the time the condo is to be occupied, many people sell their condos as an assignment. What you are purchasing is the original buyers contract.
People sell their condos for many reasons... Sometimes they move to a different city. Sometimes they need their deposit money for other investments. Sometimes they don't want to close on the unit for tax purposes, and so on.
Pro - you make money at the point of "buying" the assignment. You know market value and you are buying under market value by up to 10%.
Con- you need on average of 30% of the original purchase price to buy an assignment. So on a $250K assignment you would need around $70K.
In the past couple of months I have sold a number of assignments. The sellers are happy that they made some profit and the buyers are happy they bought $20K or more under market value just for having contacted me and not fearing the assignment process... which is simpler than buying or selling a house! Believe me! So contact me if you are interested or have any questions about buying an assignment.
The best people suitable for an assignment are.
1. SENIORS - who have built equity in their homes. They sell their house and use that money to buy a condo.
2. PROFESSIONALS - High income and have good line of credits. They borrow the money, write off the interest, and make money by investing in a condo. They further rent them out for long term strategy or flip them for a quick profit.
3. Anyone with Money or access to it.
The old adage that "money makes money" is so true in real estate. If I had millions I could just buy and sell assignments all year long and make a pretty good living! :-)
Tridel's tallest 40 Storey Towers in Scarborough, featuring luxury amenities (including pool) at the corner of Kennedy & 401 is selling. I have featured RESALE and ASSIGNMENT units. Low Floors (8th) and High (39th)!
If you are "seriously" looking to buy for yourself, invest or sell your unit, then call me and let Team Jagpal help! We believe in a Win-Win and fair deal for Buyers, Sellers, and Team Jagpal.
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© 2011 Jas Jagpal, BROKER, BSc. York University
