How to Invest in Pre-Construction Condos - Successful Investment Niches To Consider in 2023
This content is published in partnership with Zhen Liang from Prime Properties TO.
See how these pre-construction condos investors have made their money. Stay tuned to this episode, I promise to present real-life examples of how investors made their money in the pre-construction market.
The video episode is located at the bottom of the page.
How to Invest in Pre-Construction Condos
Good day Toronto, welcome to another episode of Prime Property be so glad you could join us here real estate is such a Hot Topic in everyone in Toronto is so passionate about I love that what I love even more is that the passionate debates constantly between the Bears and the bowls and every single Market there are bowls and in every Market there are bears. The bear is sounds weird radio. I'm saying out loud but are bearish on the market. Yeah.
I know and the Bulls are bullish on the market thinking everything will be great. It reminds you quite a lot of the debate of Apple versus Android both are great platforms of phones and they both Have their strengths and weaknesses having just switch from Apple to Android doesn't hate me Apple fan. I think I can see them are for both. There are things I miss about the Apple ecosystem and how things run smoothly and at the same time, there are things I like about the Android system about the big battery and the customization.
So I digress but this isn't well talking about in this video. The reason why I brought the phone debate is that I can see the same thing for Real Estate between the Bears and the Bulls both sides have a very valid argument and I find always great to take an empathetic approach and understand both sides before coming to To a conclusion, of course, everyone's opinion is slightly skewed just a little bit based on their own emotions and ultimate end goals. If you've been priced out of the market recently, you're probably a little bit more bearish in hopes that you have Market will correct itself.
So you can buy a home again or if you're a new investor, you're probably hopeful and bearish that the market will do better because you want your new investment to kick butt. So recently I had line has taken a life of its own and I wanted to give you an analysis from both sides the bear and the bolts to headline says this condo markets make big gains, but nearly half aren't making enough rent to cover their costs. Hmm.
I've got a lot of questions about this and it's exactly for this reason why I'm going to be talking about this and give you both perspectives in this video from a bearish perspective this article is correct. I know a lot of pre-construction condos that are launched recently that didn't make any investment sense. I didn't recommend them as Investments to any of my clients when the asking price is way too high for the rent. You can get your solely relying on capital appreciation to make money.
That's risky that's almost like gambling you want to buy a property that would be able to pay for itself on completion and not a property that you have to pay into on completion being out five hundred dollars per month means that you didn't select the correct project and floor plan, which really should you have make more rent than you would pay in expenses.
However, because the condo market has been so strong in appreciation and the rental market is equally as strong these condo investors who took a little bit of risk could potentially win out at the end and look like Geniuses for taking the risk your approach to condone investing from a bullish perspective when I read the headline condo owners make big gains but nearly half Are making enough rent to cover the cost. I was mind-boggled because that reads to me condo investors get rich on the appreciation.
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But our cash flow negative that has me scratching my head. So I took out three pre-construction Deals that we are expecting to close shortly to give you an idea of some real numbers because what I'm reading and seeing are completely Polar Opposites of one another in each example, I'm going to give you the purchase price the address of the said condo the purchase date the layout and what the expected cash flow is after property taxes insurance and condo fees right now for Privacy reasons the unit number and the purchaser's name are going to be hidden.
Okay. So example one grid condos 181 done that treaties purchase price about $342,000 back on August 30th, 2016 the kit projector cash flows right now about three hundred twenty-six dollars positive cash flow per month current market value $480,000 or so and depreciation over one point five years $137,000.
It's pretty good great condo scheduled to occupy this year in 2018 and Rights and prices to increase even more before occupancy if my client decides to use a den as a second bedroom. They can probably get even higher rent if they run two students example to the Met 78 96 Jane Street and Vaughn purchase price 333,000 a little bit less than that back on February 13, 2016.
The projected cash flow right now is $300 a month roughly positive cash flow. This unit was recently assigned purchasing the condo in the pre-construction phase. You lived ninety-three thousand dollars in profits over two years or thirty-four points.
Four percent return on investment pretty good for simply just signing a contract two years ago, even at the new purchase price and the expected rinse. This unit is just about to break even on occupancy that isn't happening until 2019 example 3 Harbour Plaza 8 E8 Harbor Street Toronto purchase price a little bit less than $359,000 on November 12, 2013, the projected cash flow numbers on this is 400 when $1.00 per month positive cash flow.
The current market value is about $540,000 the appreciation over the And a half years as a hundred and eighty-one thousand dollars Harbour Plaza has already occupied being the people have moved in. The tenant is currently paying twenty-three hundred dollars a month right now during occupancy and on closing my client will have positive cash flow about $400 a month and have almost 200,000 dollars in equity appreciation and then here's the bonus and kicker of this they'll be able to pull it eighty thousand dollars in equity and still break even on cash flow with the rental numbers right.
Now. This was an absolute home run. So when I see these articles are indicating con investors are paying about $100 a month. I had a pocket to benefit from the capital gains of the condo that makes no sense to me. I'd be bearish if I was in that position as well just to protect myself.
However on the flip side if the property pays for itself like the three examples I showed you I would be bullish because you're protected by your rents. You're not going to be paying any extra what condo you invested makes a big difference. If you're a negative cash flow five dollars a month. You may need a new realtor who specializes in condo investment and not just someone selling you something to make a commission.
This is why not every pre-construction condo is worth Again, make sure you understand the game and not just blindly purchase a pre-construction just simply for capital gains because that's gambling. If you're interested in learning more about how to make these returns. You can contact me. I'll leave my contacts over here. Thank you guys for watching if you learned something this video.
Make sure you give me a thumbs up if you like the content on the channel subscribe to Primus RTO Channel buttons right here. If you have any questions or comments, you can leave the section below or contact me as well. If you want to learn more about how to make this kind of return contacts are right here until next time guys. Happy real estate investing.
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