Don’t get me wrong, it’s not hard to find a condo investment in Toronto! The fact is that we are having difficulty finding a Quality condo investment in Toronto! It’s funny what a single word can mean but when it comes to condos, it can mean the difference of good and bad!
There are tons of condo units and new ones coming on stream all the time. We pretty much bought out the remaining inventory of Plazacorp’s West Harbour City which was, in my estimate one of the last great investments in Toronto.
With most condos coming on stream at over $500 per square foot, and rental incomes struggling, it is difficult to recommend buying anything these days. Oh, I’ve heard the spin that “Toronto is becoming Manhattan so these prices are justified”, but I would recommend assessing the source of these comments and if they are coming from the developer community or those compensated for representing them, then you should file this information right where it belongs – in the garbage can!
Look, even a bachelor condo in the city now sells in the quarter of a million dollar range! If you see this as “chump change” then good for you but most hard working people that I represent can’t afford to make any mistakes at this price point and remember a quarter of a million buys you a studio unit only!
Hell, even Cityplace is selling units in the $550/square foot range, and with all due respect, Cityplace presales are just not worth that kind of money. I bought up lots of units in Cityplace over the past few years but I stopped about a year and half back when prices passed the $400 per square foot mark. I was considered one of their top producers winning awards a couple years in a row but that was when they were running in the $300 - $350 per square foot range. At $550 I just don’t see the value any more.
So the local ad rags are full of so called exciting investment opportunities but a knowledgeable investor knows better than to trust these ad rags! We’ve heard phrases like “negative cash flow” being re-introduced into the condo industry jargon but let me set the record straight! Negative cash flow is simply a rather lame approach to cost justify investing in a condo unit that will lose you money each month! It’s fuzzy math introduced by slick sales and marketing people to motivate you to turn a blind eye to logic and invest in something where the income fails to meet the ongoing costs. And this doesn’t even factor in the over supply of units coming on stream and the over density in most developments.
Watch out for the “hysteria selling” approach that most developers are using to convince you that the market is still sound! It is not! You can’t mathematically have rental incomes decreasing while prices escalate from $300 - $600 per square foot in just a couple years but realistically that’s what is happening in Toronto.
With so many high density, middle market condos coming on stream and the decided majority of them being sold to small individual speculators who are not sophisticated in their approach to investing and who will turn around and rent out the units at “negative cash flow” (not understanding what this term means) even an idiot can anticipate where the market is heading.
The best advice that I can give you is first, contact us before you even start looking at condos (developers won’t underwrite our fees making our services FREE to you if you register with them without us) and second, “believe nothing that you hear and only half (if that) of what you see”. And please . . . . please, stop just walking in to condo sales sites on your own. They have some of the best high pressure sales people working at these sites that you will ever find!
There is huge inventory of speculator condos that will inevitably come on to the market thanks to unsophisticated speculators buying in to the high pressure polished tactics of developers sales people who cannot close on their transactions. These are called “Assignments” and we’ve seen a decided jump in the number of these units coming on stream.
This is actually where we are focusing our time. I started telling my investors over a year ago that the next wave of investing rests with “assignments” and the number of assignments that Romey (my partner in Toronto) has been doing fully supports this.
My advice to you if you are an investor or end user looking to buy a place to live in is to contact us right away and get on to our investor hot list, hold on to your cash and be ready to snap up one of these assignments as they come on line. You can rest assured we are there every day watching for you and with our prominence in the Toronto condo scene, we are usually the first people these speculators turn to when they realize that they are choking on their investment.
I’m Charles Hanes
Oh ya! Merry Christmas
Dec 21, 2009
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