A Condo is a Home too!

Recently I was discussing real estate with a client and trying to determine her goals, requirements, budget for her next purchase. She’s been a condo dweller for a number of years and now with a child and a loving husband they’re considering a house. When speaking to her she kept saying: “I love the condo life but I really prefer a home”. Wait a minute; isn’t a condo a home? Please allow Spring Realty to clear this up for you: There are Condos, Lofts, Townhouses, Detached Houses, Semi-Detached Houses, Row Houses but they all share one thing in common. They’re all HOMES!

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Fabrik Condos by Menkes Coming to Fashion District

Steps from Spadina, Fabrik condos is coming soon to the Fashion District.  This boutique style condo will feature attractive modern architecture along with a huge variety of floor planstop notch amenities, a great neighbourhood, and excellent access to TTC.

Units will start from the mid 200’s and range from 424 sq. ft. studios to 825 sq. ft. 3 bedroom.  Most units are in the 6-700 sq. ft. range and include a terrace.  Occupancy July 2015.  Units will feature nine-foot ceilings, laminate flooring, individually controlled heating and cooling, quartz kitchen countertops, glass, porcelain or ceramic tile backsplashes and Energy Star appliances.

Amenities will include a stylish lobby with 8-hour concierge service, modern fitness centre, multipurpose room, dining room, games room, screening room, pet spa, guest suite, and interior/exterior 11th floor (rooftop) lounge overlooking the city.  Wow!

Fabrik is having an exclusive preview on Saturday February 18, 2012 so you’ll want to Contact Spring Realty right away to book a visit and benefit from our exclusive builder incentives.


New Development vs. Resale: Which is the better Investment?

As we approach 2012 there have never been as many new project launches in Toronto. With over 143 currently in pre-construction or just about to launch the city has no shortage of options. That being said, who’s buying these units, how much are they and why aren’t there any small (investor friendly) units left when you walk in to a sales centre?

 

Who’s buying these units?

A lot of my clients ask me: “There are so many new condos going up! Is there enough demand to support them?” The answer is quite simple. YES! The main reason why the Toronto Real Estate market is so strong, and why it has been so strong over the past decade is the massive number of foreign purchasers. These overseas buyers/investors are gobbling up pre construction condos in record numbers.

Most developments are funded or owned by foreign builders & investors.  As such their friends, family and top investors have priority access to these developments. It is not uncommon for 75% of a building to completely sell out before any public announcement is made. Only top producing sales reps, brokers and true developer insiders have access, and of course, their clients all buy the 300-500sqft investor suites.

If you are able to physically walk in to a sales centre, you’ve missed the boat by up to a year. Some developers open sales centres shortly after their initial launch but local ones like Lamb Development Corp (Developer of: Theatre Park, Parc, Work Lofts, Flatiron, Glas) launch to insiders up to 18 months before the project is even approved. For example, Theater Park was one of the most successful launches of 2011, even with a $650-800/sqft price tag it sold very quickly. When I was interviewing for a position with Brad J.Lamb Realty in 2009 I already saw deals on the board for Theatre Park; that’s two years before any public announcement was made.  They hadn’t even purchased the website address yet!

How much are they?

With prices at $600/sqft for your average development and up to $966/sqft for something “higher end” like Yorkville Plaza at the Four Seasons it’s hard to envision making any significant profit on occupancy. The main concern is with the unknown Development Charges, Land levies and other municipal charges passed on to the buyer via the developer. Even with builder standard “closing cost caps” it could cost up to $25,000 to close on a Jr. One bedroom or One bedroom investor unit. That’s not including legal fees and potentially a Land Transfer Tax.

Some Numbers:

These days new developments ask you for 15 – 20% within the first year of the purchase. What this means is, on a $300,000 (for a 450-500sqft unit) you’re putting down $45,000 – $60,000. This money isn’t earning any significant interest and is just tied up for up to 4 years while the building goes up and then registers. My argument is, couldn’t you put that same $45,000 down on a resale property now (and there are many to choose from), begin collecting rent immediately and the sell in three years? This makes much more sense to me.

That being said, if you’re buying to occupy, new developments can be a great option. You can select the perfect floor plan and even customize finishes and modify layouts to suit your specific needs. It just no longer makes sense solely as an investment in my opinion.

If you are interested in learning more about pre construction developments and the purchase process please contact us. Spring Realty has all of the latest floor plans and prices.

 


Toronto Condo and Loft Assignments Explained

You may have heard the term “Assignment” lately as it has become really popular with speculative condo investors.

Assignments are defined as follows: The Assigning or Selling of your rights to purchase a property.

To clarify, you’re not actually selling the property. Since the Assignor (Seller) hasn’t taken possession yet (usually because it’s not built or has not registered yet), they are simply assigning the rights to the Assignee.

I’ll give you an example.  If I walked in to a condo sales centre,  signed and bought a pre construction unit from the floor plans I would have the right to purchase said unit when it was constructed and registered. An assignment is when I take that paper that I signed, my right to purchase, and sell it to someone else; The Assignee, for a certain amount. To break it down, if I agreed to buy the condo for $300,000, then found a Buyer or Assignee, the Assignee has the right to purchase said unit for $300,000 but he/she has paid me a premium on top of the $300,000 for that right.

A client just went through one of these for a condo that he had bought pre construction. He, as usual, got in over his head with purchases and decided to assign a unit in order to free up some cash to make the deposits on another place that he had purchased pre construction. After spending some time spreading the word and marketing the property I received a call from a colleague saying he had a buyer for me and we eventually made the deal happen. Here is how I structured the deal to make it work for my client:

He had paid $356,400 for this unit (I should say, he had agreed to pay that amount when it was ready a year or so from now).  He had made initial deposits of $53,750, or 15% of the purchase price. My goal was to recover as much of that now for my client. Next, the buyer or Assignee agreed to purchase said unit from my client for $380,000. What this means is that he will eventually purchase the unit from the developer for $356,400 but give my client $23,600 for the right to do so (Total to the Buyer is $380,000).

So now the Assignee owes the initial deposit $53,750 plus the built in profit of $23,600 all totaling $77,350. Most people don’t have that kind of money lying around but since the money was needed right away we worked out a plan where he would pay the initial deposit of $53,750 now (borrowed from his parents) and the remainder of the cash from his mortgage when the condo was built and ready to register. We were lucky because the Assignee had the ability to come up with the cash.

Sometimes when the Assignee doesn’t have the option of paying out the Assignor it can be agreed that all the money will be transferred when the condo is ready and registered. An Assignor would likely agree to the latter only if the profit margins are much higher and the money is not needed right away. In this case since my client needed to be paid out now he accepted the small profit and was able to cash out and pay for his most recent purchase.

Assignments, unlike resale transactions can get quite complicated. It is very important that you have an experienced Spring Realty Broker to work out the contract and an experienced real estate Lawyer to help mitigate risk for the client. I have been involved in dozens of assignment transactions and with the help of Feld/Kalia Team of lawyers we get the job done right. Contact Us to get started.