Who Wants an Assignment?

What is an assignment? I’m not talking about a school paper or a job your boss gave you. An assignment is a legal term that has a similar meaning in real estate as is does in the law of contracts. Assignments deal with the transfer of rights from one party (assignor) to another party (assignee). I just gave you some legal terms that you will probably never use and you’re probably asking why am I telling you this?

All of  my blog topics are to help real estate investors especially condo investors make money. The law of assignments in real estate makes it possible to sell ownership of your pre-construction property before the building is completed. Which brings us to another question? Why would I want to sell my pre-construction condo before it’s built?

Real Estate is usually considered a safe and wise investment. I have yet to hear someone say “I should have never bought that condo! I would have made more if I invested that money in RRSP’s.” Why, because property values usually increase. This is also true with pre-construction condos. When a developer starts selling condos preconstruction they sell them for a set price. As people start buying up the units a developer will probably raise the price. The developer continues to build and just before it’s completed raises the price again.  By the time the condo is complete your property value increased by 10%. Isn’t that amazing!

Assignments can be built into a contract as a clause when you are purchasing a pre-construction condo. Due to their nature buyers cannot advertise properties that they have assignments on since it would be in direct competition with the developer. If a potential buyer was interested in purchasing an assignment they would need to contact a real estate agent to find one.

How much can I make on an assignment? Let’s say that you did all your research and you found a pre-construction condo being developed by a reputable builder. For our sakes and easy math we will say that the units are selling for $400,000. After half the units were sold the price went up to $420, 000 and then finally $440,000. You being a novice real estate tycoon bought your unit for $400,000. The price goes up the first time you’re happy knowing that you made a good investment.   When the price goes up the second time you remember that you have the assignment clause in your contract and decide you want to exercise it.  To see a example for the breakdown of an assignment click on link provided below.

Assignment Breadown Link: http://wp.me/P2k0HD-7W

Before anyone purchases an assignment they should seek proper real estate and legal advice.

Do you see where you can make money selling assignments? You paid $80,000 and the assignee pays you your deposit plus the difference in Assignment Price from Original Price. You just made $40,000 that equals 50% return on your investment. If you can tell me other ways to make that type of return on your investment I’m all ears.

In summary, assignments are very, very good. They are complicated but if you’re selling one you’ll probably make a big return on your investment. If you are interested in buying or selling an assignment makes sure you SEEK PROPER REAL ESTATE AND LEGAL ADVICE.

I hope that you learned something about assignments today. If you have any questions please leave a comment, ask a question or go to my website www.mytorontocondos.ca for more information.

See you next week.

Buying Pre-Construction Condos

Last time we spoke about some of the myths surrounding pre-construction condos. I thought it was important because some of these myths stop investors from capitalizing on amazing opportunities. If you’re looking to purchase a Toronto condo as an income property pre-construction condos should be your first choice.

The first step to buying a pre-construction condo is visiting a sales office to purchase one. Once you’ve filled out all the paperwork, applied for a mortgage and put down your first deposit you’re ready to go. The reason I say first deposit because there is a deposit schedule. Let’s take for example that your planning on purchasing a $340 000 condo downtown the schedule would look like this:

1.        5% down on signing                     = $17,000
2.    5% down 90 days after signing      = $17,000
3.      5% down 270 days after signing    = $17,000
4.      5% on occupancy                        =$17,000 

           Total                                             =$68,000

By putting 20% down you will own the property.  By the time the condo is complete it will increase in value which means that you’re already making a return on your investment.

 

Another benefit of buying pre-construction is the developer’s incentives. These usually come in the form of unit upgrades or rebates. Can you buy a pre-existing condo where the sellers say they will put in a new kitchen for free? The answer to that is highly unlikely. Other benefits of buying pre-construction are the wide selection of condos to choose and they are brand new.

The downside to buying pre-construction condos is there might be delays in construction. If we lived in a world where everything happened exactly when it was supposed to happen life would be amazing. Unfortunately,the reality of it all is that there might be some unforeseeable circumstances that may delay construction. If you’re a wise investor you probably did some of your own research about the current developer, architect, designer, and other businesses associated with the development . No one likes surprises especially when money is involved.

You’re probably asking yourself how much will the investment increase before completion. The amount of increase is contingent on many different factors. Speaking conservatively say the condo you bought pre-construction for $340,000 is now selling for $360,000. This means that you just made $20 000 on your $68,000 investment which is a 30% return on your investment. If you just left your money in the bank they will give you a about 2-3% return. I’ll take 30% over 2-3% any day of the week. Wouldn’t you agree?

In summary Toronto pre-construction condos are a great investment opportunity. You will see a return on your investment before it is completed and developers offer upgrades and rebates. On the downside there might be a delay in the completion of your condo.

I briefly touched on the benefits of buying pre-construction condos and I am sure you have some more questions. Please feel free to leave a comment, ask a question or visit my website for more information www.mytorontocondos.ca . Next week we will explore the world of assignments.