Just because an assignment seller is losing, doesn’t mean that you are winning.
Listen, I’m all for investing in Toronto Real Estate and I love a good deal, but there seems to be a new thought-track in the pre-construction and assignment world that is simply, well, flawed. For the last 6 years, I’ve been publishing educational content on the pre-construction industry, focusing on the nuances and strategies of investing in Toronto Assignments. My goal is to educate potential buyers and sellers because an educated investor is a smart investor, and I want you all to win! Today, I’m debunking the latest investor trend of purchasing assignments below their original purchase price with the assumption that the seller’s losing so you must be winning.
But to do that, we have to start at the beginning…
Table of Contents
What Makes A Good Investment?
Simply put, a good investment is characterized by your return. More specifically the highest return in the shortest amount of time. How I spot a lucrative pre-construction deal is nuanced but a few major factors I consider are up-and-coming neighbourhoods, a neighborhoods demand vs supply constraints, but above all, it’s based on market comparables, specifically, buying pre-construction condos as close to, or below current market value. This means that your timeline to profit, your ROI should you sell sooner than later (we recommend minimum hold time of 2 years post interim occupancy) will be higher than purchasing in a building where you have to wait for the current market price to catch up to the price you’ve paid during the pre-construction phase.
We previously wrote this blog post titled, Pre-Construction Vs Re-Sale Toronto Condos, where we talk about how not all pre-construction condos are a good investment.
The Average Price Per Square Foot In Toronto
We all know Toronto is expensive. But is $1600PSF or $1800PSF expensive? Absolutely not. The average price per square foot in Toronto is roughly $1400PSF with many re-sale condos at $1100PSF. While many projects are being sold well above this price. Some iconic buildings, take Frank Ghery’s latest as an example may warrant such a price, most are simply unjustifiable.
Platinum Pre-Construction Launches Don’t Always Equal Profit
This year specifically, I have not been promoting Platinum pre-construction launches, because I simply do not believe in them. My clients have been with me now for nearly two decades, some with over a dozen properties under their belt. I’ve built up loyalty and trust – and I’m not going to tell you to buy or sell if I don’t believe that it’s a profitable move for you. Over the last decade or so, I’ve specifically recommended projects I believed would be profitable. You won’t find our team emailing out every-single-project. It’s not my style, as I said, I want you to win!
Many assignments you will find on the market today were purchased not slightly above market value, but significantly above market value. These purchasers are slashing prices and yes in many cases they are taking losses. But just because the seller is losing, does not mean that you are winning.
Let me say that again, their loss does not equal your gain.
Buying Assignments Below The Original Purchase Price
Simply put, yes some assignments are a steel of a deal. In the current climate, many purchasers are finding themselves strapped – and they don’t want to close or rather they can’t close on that property. Slashing prices well below their original purchase price, eating a loss simply so they don’t take an even greater loss. Their loss can be your gain.
But when does this not make sense?
Overpaying For A Property That Someone Else Overpaid For
Purchasing below the original purchase price doesn’t automatically make you a winner. Everyone loves a good deal, I get it. Our brains also love that dopamine hit.
But this is like when designer brands create products specifically for discount stores, they tell you the MSP is $100, and then immediately slash it to $50 – it was never valued at $100 to begin with, its true market value was always $50. But that dopamine hit is everything. Now, this wiring and ‘high’ is essentially harmless when it comes to small purchases like clothing, but this is the wrong logic and thought process when investing. Real Estate should not be purchased lightly you need to do your due diligence or find yourself a Top Toronto Real Estate Agent who will do it for you.
Buyers of Toronto Real Estate Assignments Want Blood In The Water
We recently sent out a killer assignment deal to our network of Realtors and Real Estate Brokers, this Riverside Square assignment at Queen & Broadview is the perfect opportunity to pick up equity on signing. The sale price is below market value by over $100PSF at a minimum. The response from one of the Brokers was something to the effect of, “The investors I have looking at the moment are only looking at assignments with sale prices below the original purchase price. They want blood in the water before they act.” And I get it, we all want that crazy deal. But let’s be honest, what we really want is crazy profit!
Finding Profitable Toronto Assignments
Whether they are assignments below the original purchase price, or above, there are plenty of deals on the market for real estate investors to snag. I wrote this blog post, “How To Spot The Right Pre-Construction Deal in Toronto” and the majority of these points rain true for assignments too. But like I said before, finding a profitable investment property is nuanced. If you want someone on your team to do the leg work and heavy lifting for you, we’re here with nearly twenty years of experience in the industry to help you make smart financial decisions.
My motto when guiding my clients has always been, “math not emotions”!
P.S. If you’re looking for built-in profit on signing, our latest assignment at Riverside Square is well below market value. It’s the best terrace floor plan in the building and it’s a steel of a deal. We sold three condos at Riverside Square in the last few months, and this past month sold a 2-bedroom suite comparable to this one for over $1220PSF. Compare that to this suite listed at $1076PSF… it’s all about the math not emotions!