Covid-19 has naturally had an impact on all sectors of the real estate market including buying assignment condos. Now that we are two months into this pandemic, we’ve begun to see the resale market pick up from a very brief moment where prices had fallen. We are now seeing a resurgence of properties being sold over-asking and in multiple offer scenarios. However, the rental market has been one of the biggest hit sectors of the real estate market. Tenants are choosing to stay put rather than move (likely for safety reasons). Rental prices are down and the market is much more saturated with available listings. This means that buying a re-sale investment condo is less advantageous since rent is low and tenants are harder to come by. No one wants their condo to sit vacant. This doesn’t mean that you can’t still find a good re-sale investment condo—because you absolutely can. It just means that there might be a better investment property out there.
Analyzing the market for buying pre-construction condos in relation to condo assignments
Although the re-sale market is on the road to getting back to normal, the pre-construction market has continued to stall. Many construction sites are still open, but there have been significant changes such as implemented safety precautions and changes to the work environment. As a result, there will be less workers on sites that are still open and the progress has slowed down. Prices will rise and and units will be increasingly harder to secure when construction companies are back to working on pace. However, this does not mean that pre-construction condo prices will drop. Developers don’t need to sell their projects at any given time because they are the ones controlling the inventory and will sit on their properties strategically, in phases, so they do not overwhelm the market. For more information on this topic refer to this article for everything you need to know about buying pre-construction properties during this time.
Prices of many brand new pre-construction condos were hard to justify pre- Covid-19. Many were launching at $1200psf and up. We pride ourselves on constantly analyzing the market and finding you the best deals on any investment condo. We’ve been advocating for a number of pre-construction projects that are good deals. From 57 Brock in Parkdale where we’ve secured our clients an off-book discount to Linx Condos on the Danforth in a gentrifying neighbourhood that’s right on the Subway and Go Lines, to Scout Condos which is one of the best priced projects in the city right now.
Due to the current state of the market amidst Covid-19, we’ve been noticing condo assignment deals are one of the best options to invest in right now. So, naturally we’ve been scouring the market for assignment condos that are good deals and sending them out to our clients. But before we dive into why we believe condo assignments are the best opportunity right now, let’s quickly discuss what they are and why people are choosing to assign their condos right now.
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What is a condo assignment sale?
An assignment is a sales transaction between the original buyer of a condo (the assignor) and another buyer (the assignee) before the original buyer closes on the condo. The assignee is not buying the condo from the assignor, they are buying the “right” to acquire condo from a builder or original seller. The assignee then agrees to preform all of the assignors contractual obligations under the original agreement. Basically the assignee is stepping into the shoes of the assignor, and will ultimately be the one to complete the deal with the original builder or seller. An assignment sale is possible for both homes and condos but is much more popular among condo pre-construction buyers. Another thing to keep in mind is that not all builders will consent. Some will put a “No Assignment” clause in the Agreement of Purchase and Sale. Refer to this article for reasons for everything you need to know about buying a pre-construction condo.
Why would someone want to assign a condo?
With pre-construction sales, there is usually a long wait period before you can officially move in. Sometimes, buyers are in good financial shape at the beginning of this period, but during this time they have gotten married, had a child, switched jobs etc. which has changed their financial status. Instead of continuing to make payments or closing on the condo they decide if it makes more financial sense for them to sell. Buying a pre-construction condo, also known as “flipping a pre-construction condo”, with the intention of selling is not recommended for a number of reasons.
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What are the advantages of buying a condo assignment right now in Toronto?
The reason pre-construction is expensive right now is because the prices that builders are charging to buy new is based on the price they need to get to make the site profitable. That doesn’t always align with the true value of the condo which is based on the resale market or the active market that people are buying and selling homes every day. With pre-construction, often times you are paying a premium on the asset but with a condo assignment you have the opportunity of buying a brand new asset at what the assignor is willing to charge. This will be more than what they payed but could be significantly less than what you could get in the pre-construction market, or the resale market for something brand new. Condo owners are willing to put their condo on assignment for less because they do not want all of the added expenses that come with closing.
Why are condo assignments selling so quickly in Toronto?
The reason condo assignments are selling very quickly is because there is a real appetite in Toronto for real estate and the market has been going up significantly despite our temporary ‘stall’ due to Covid-19– prices are up year-over-year and are expected to continue. If there is any good opportunity for investors to buy a condo that appears to be a discount, people will be quick to jump on those deals when they know its true value. Our realtors are always looking to find these deals for our clients and we pride ourselves on having tons of experience to guide you in a direction that we know will be profitable for you.
Why shouldn’t I buy a condo with the intention of selling as an assignment?
Typically for an investor to get their money out of an agreement through an assignment, the new purchaser has to match the deposits that the buyer has given to the builder plus any additional profit. In order for someone to want to sell an assignment the likely motivator is that they don’t want to obtain a mortgage and go through the hassle of closing and renting their condo for a year — essentially they want to get their proceeds out. For those reasons, usually the assignments that are realistic to sell are the ones that there is an advantage of price. No one is going to give you full value on a condo that isn’t built 3 years in advance so typically on a condo assignment you have to sell on a discount and this is one of the reasons we always guide our investors to never sell an assignment, unless they absolutely have to. Some complications with this intention is that you have to sell your property through word of mouth, you will never get the full condo value, and there are tax disadvantages regarding HST and capital gains. For more information, refer to this article.
We can help
If you’re looking for a great investment condo it’s a great time to consider buying an assignment condo because those that are selling are likely doing so because they don’t want to close on the condo, get into a mortgage, or absorb the expenses. They are looking to get their profit out as soon as possibly likely due to the Covid-19 pandemic and the affects this has had on them personally. This means that it is a great time to take advantage of the current market and snag a good deal.
There are still tons of investors looking for a good deal on real estate. This means that the moment a great opportunity comes along it’s being snatched up like hot cakes – so you need to be prepared to move fast if you are serious about securing a great investment during these times.
We are always looking for amazing deals and within the market right now there are assignment deals that are priced lower than we have seen in the last few years. Book a call today to hear about current investments that could be extremely profitable for you.