How can I make money in pre-construction investing? This is the number one question we get asked by clients, friends, family and even fellow brokers. With the media blasting uncertainty about the market in their headlines, and fears about developer issues, building cancellations and sky-high prices, the outlook may seem pretty negative.
But this couldn’t be further from the truth. There are many good pre-construction investments available in today’s market. And there are many good opportunities that anyone from first-time buyers to seasoned investors should have on their radar.
We’ve worked with clients for over 10 years and have seen many of them make $1,000,000+ simply by investing in pre-construction condos. How does it work? How much money can you make? We wanted to share a recent case study with you to show you real numbers from a real client.
Best Neighbourhoods For Pre-Construction Investing: Riverside
Our client was looking to invest in a pre-construction condo that was in a desirable neighbourhood. We suggested one that was gaining in popularity and wasn’t already saturated with condos – the neighbourhood of Riverside on the city’s east side.
Riverside, a 9-block stretch along Queen Street east is today, one of the most sought-after places to live in Toronto. It’s home to many historic sites, over 4 acres of parkland, The Broadview Hotel, The Opera House, 2 community centers, 2 brewpubs and Toronto’s first urban cider house. It’s also home to vibrant public art installations, festivals, walking tours, schools, over 100 local businesses including original fashion creations, eclectic home design and décor. There are also plenty of award-winning restaurants featuring award-winning chefs.
The Building: Riverside Square
Riverside Square, in 2016 during its launch, was the most talked about pre-construction development in Toronto. Streetcar, the developer boasted a solid reputation, and this was one of their biggest projects.
Riverside Square offers a wide mix of units ranging in size from one-bedroom to family-friendly three bedrooms, dramatic glass window walls, dynamic angles and innovative green roofs to integrate within the surrounding neighbourhood while reflecting environmentally sustainable design. A public square will anchor the development and feature a mix of smaller and larger retail spaces fronting Queen Street that will include a grocery store, cafés, restaurants and an assortment of shops and commercial spaces.
Riverside Square 1-Bedroom + Den 1-Bathroom
We recommended our client purchase a 1-bedroom + den, 1-bathroom (with locker) as this type of unit would be highly desirable within both the rental market and resale market.
Here are the purchase details:
Purchase Date: April 2016
Unit Type: 1 bedroom + den, 1 bathroom
Square Footage: 602 square feet
Purchase Price: $334,900.00
Purchase price per sqft: $556.31/square foot
Deposit: 15% / $50,235.00
Deposit structure: 5% = 30 Days from signing, 5% = 120 Days from signing, %5 = 370 days from signing
Building Occupancy: August 2019
Area average price per square foot at time of pre-construction purchase was approximately $650.00/square foot, so the purchase price of this unit was below current market value which is something all buyers should be looking for in their pre-construction purchase.
Selling on Assignment: Riverside Square
Our client wanted to weigh the pros and cons of selling on assignment versus closing and selling, versus holding and renting. So after a financial deep dive into these three scenarios and much discussion, we made the decision to sell on assignment. This is something we worked into the purchase agreement with the developer so by having this in our back pocket, proceeding would be easy.
The condo was put up for sale just last month – early May 2019, and we’re happy to say we just closed the deal this week.
Selling Price: $525,000
Price per square foot: $872.09
Our client was thrilled with his decision to sell on assignment. He avoided having to close the purchase and secure a mortgage, he didn’t have to pay any of the closing costs and didn’t incur any financing fees.
At the end of this transaction, he made a brilliant profit off of a smart pre-construction purchase.
Our client turned his $50,235.00 deposit into $190,100.00, and his annualized return on investment was 126%/year for 3 years.
Now our happy client is taking his profits and turning that into two new pre-construction purchases to keep the machine churning.
And sure, we hear it all the time, “that was the market then”, “things are different now”. But guess what – we heard that in 2016 as well. 😉
Our clients who listen to our strategy of buying a good unit with us at VIP Broker status, in a good building by a reputable developer, in a projected growth neighbourhood at below current market value prices and follow our financial projections that we prepare for them always succeed. Always.