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I’m new to Canada, should I invest in pre-construction condos?

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Leonardo came to Canada from Brazil less than a year ago but he’s hitting the ground running, doing his research on the Toronto condo market. He is interested in investing in real estate and building a portfolio of properties to fund his retirement. What advice is there for a new Canadian resident on where and how to start investing?

TRANSCRIPT

Andrew la Fleur: Welcome to the Ask Andrew Podcast. Real questions from real condo investors. You ask, I answer.
Hi and welcome back to the Ask Andrew Podcast. And once again, this is a show where it is just live, unscripted conversations that I’m having with real condo investors or people who are looking to become condo investors, would-be condo investors.
So, on today’s episode, I’m chatting with Leonardo. And Leonardo is new to Canada. He’s been here less than a year, just under a year. He’s from Brazil, he’s got some property in Brazil, but he does not have any property yet here in Canada. He’s looking to get into the pre-construction condo market. And so he’s wondering if that’s a good option for him. He’s wondering about the market right now in general. Is it a good time to buy, or not? And wondering what’s the right approach for him as he makes his first investment. So without further ado, here is my conversation with Leonardo.
Leonardo: I wanted to talk to you a little bit about my situation and see your perspectives on how can I kind of start my plan here. Because I moved back to, I mean, I moved to Toronto end of last year. Now, I’ve been kind of following the real estate market because that’s something that I’m very interested in investing long-term. And build an actual portfolio of properties. And so I’ve been following your podcast and everything, and I think you’re kind of a reference in the condos facet for sure. So, my idea was to kind of talk to you, to see, to get your perspective, if this is a good time. And what is the opportunities to make the first step?
Andrew la Fleur: Sure.
Leonardo: Yeah, because as of now, I don’t have any properties here in Canada.
Andrew la Fleur: Okay.
Leonardo: I have one. So we have one real estate back in Brazil, but yeah.
Andrew la Fleur: Okay.
Leonardo: The investment side rather than buying to lease.
Andrew la Fleur: Okay. Well, what’s the biggest question on your mind when it comes to investing right now?
Leonardo: Well, I mean, so, I heard that, I mean, I looked at the numbers in the market, kind of the days of the [inaudible 00:02:34] are a little bit increasing, right? And the price seems to be dropping a bit. But on the other hand, seems like things are happening on the upper side of the market rather than the lower priced properties. I feel like two points, I know some people say the market’s softening a little bit, the other one’s saying this is just giving all the integration numbers and the population here. The growth and all, the fact that Toronto is kind of an international city. This is just a buying opportunity. Do you see this as a buying opportunity or do you see this on the buying side for sure?
Andrew la Fleur: When did you come back here? Or are you new to Canada?
Leonardo: Yeah.
Andrew la Fleur: Or you lived here before and came back, sir? I’m confused on that part.
Leonardo: Oh no, no. I’m new to Canada. Yeah.
Andrew la Fleur: You’re new to Canada, how long have you been in Canada?
Leonardo: It’s been like ten months, no.
Andrew la Fleur: Ten months? Okay.
Leonardo: Yeah.
Andrew la Fleur: Very interesting. Yeah. So you’ve come, it’s interesting ’cause you’ve joined us, so to speak, you’ve come to Canada.
Leonardo: Yeah.
Andrew la Fleur: You’ve come to Toronto at a very interesting time in our sort of real estate history because the last ten months has been very unusual; the last twelve months.
Yeah, if you’ve been following the market and sort of looking at the numbers and stuff, what’s been happening, roughly a year ago at this time the market was at all time highs, the demand was at an all time high, the ferocity of buyers, and the lack of supply, and the bidding wars; everything was just crazy.
In the early first few months of 2017, prices were increasing at like thirty-five/forty percent, year over year; this was a year ago. And then the Fair Housing Plan came into play. So I don’t know if you’re familiar with the Fair Housing Plan, but the government made a bunch of rule changes around a year ago of this time.
The whole market took a dramatic turn. So the news lately, over the past few months has been mostly just bad news or bad headlines overall for the overall market, right. As the market is, has been compared to the feverish highs of last year, the market right now looks bad when you compare it to that.
But when you compare it to, sort of more historical norms going back a few years, the market is actually doing okay. It’s not, it’s certainly not a market that’s crashing or anything to that effect.
But now, what’s interesting now, looking ahead as we’re having this conversation in early June, looking ahead to the summer months. Summer months is sort of when the market really bottomed out last year.
Leonardo: Mm-hmm (affirmative)-
Andrew la Fleur: So, now we’re going to be the numbers and everything and the headlines are gonna be comparing the market in 2018, summer 2018 to summer 2017. And the numbers are gonna start to change and the headlines are gonna start to change, things are gonna start to suddenly look a lot better than they had been looking over the past few months. So, it will be interesting to see how people respond and how that effects the psychology of the market. When instead of the headlines saying, “Prices are, or market is down twenty-thirty percent.” When the headlines start saying, “Market is down two percent, or market is up two percent.” Or something to that effect. It suddenly might change how people are thinking about it and the buyer behavior might change.
So, in terms of going back … all that to say, going back to your question, “Is this a good time to buy? Is it an opportunity time?” It depends on your perspective, it depends on what you’re looking to buy exactly.
Leonardo: Yeah, one thing that I was kind of thinking to protect myself was the way you work, like pre-construction. Like platinum fails. I mean that way at least you’ll buy cheap. I mean that would make sense in my mind.
The other ones would be for the motivated seller. Top-down approach, right? At the end of the day, if you’re buying cheap right now, eventually right before taxes for [inaudible 00:07:14] fall either way, right?
What do you think? Pre-construction’s probably the best option right?
Andrew la Fleur: Well if you’re talking about investing in condos, then yeah. I always recommend investing in pre-construction, it’s the best time to buy a condo. You always want to buy the newest condo when you’re investing in condos. Generally speaking, it’s the safest bet. Condos are a commodity. So people always want, the newest condos are always the most in demand. They always command the highest prices in terms of the resale market.
Leonardo: Mm-hmm (affirmative)-
Andrew la Fleur: In terms of the rental market, people want to obviously live in the newer buildings. So when you’re buying something pre-construction, you’re by definition buying the newest building; ’cause when it’s finished in three, four, five years it’s brand new and everything else around it is older. So yeah, buying pre-construction in general is the way to go when it comes to condos.
Leonardo: Yeah.
Andrew la Fleur: But, obviously you still need to be buying smart. You still need to be buying the right buildings, the right time, and the right units in those buildings. But yeah, in terms of … you’ve already said the sort of key word, platinum. Getting in the platinum, VIP, sort of stage of the project. So it sounds like you’re aware of how that works a little bit, so getting in with somebody like myself who can help you …
Leonardo: Exactly. Exactly.
Andrew la Fleur: … get in early, it’s, that’s gonna be an unfair advantage for you as an investor to be able to buy at those earliest possible stages of a new project.
Leonardo: For instance, the pre-construction that [inaudible 00:08:54], I’ve been following all the [inaudible 00:08:57]. But typically when you pay up to let’s say up to fifteen percent within six months or three months it don’t really matter. [inaudible 00:09:04]
I’d say at that point you’d just pay that amount and then once you have the unit in your hand, let’s say two years down the road, that’s when you seeker the mortgage, right?
Andrew la Fleur: Correct.
Leonardo: Yeah. Now the thing that would, that’s even helpful for me because I mean as of now I moved some investments here to Canada, but it takes a little time for the credit, kind of fall in to place.
Andrew la Fleur: Yeah.
Leonardo: I mean I think I can qualify right now, but still, I mean since I’ve started working in the drop market, at this stage, building a history here would help me more, you know?
Andrew la Fleur: Yeah, I mean you’ve got to have some history in terms of just building up your credit to be able to qualify for mortgages, obviously yeah. That’s part of it.
What type of work are you doing?
Leonardo: Well so I’ve been working in a company called Mark Anthony Investments in downtown.
Andrew la Fleur: Mm-hmm (affirmative)-
Leonardo: Yeah, but more of the corporate side. So, I mean, it’s a great opportunity that I was able to kind of get one of these. And now I’m getting started, right, so.
Andrew la Fleur: Great. And if you were, when are you looking to make an investment? Are you looking to make an investment right now? Or are you just doing your research to get yourself ready to make an investment some time in the future?
Leonardo: No, I’m kind of, if I see the opportunity. I’m kind of ready to move. Let’s say within one to two months. I mean I will talk to the bank this coming weeks. [inaudible 00:10:48]. But the point is more for the pre-construction, it would be even easier for me right now. I mean, so. I don’t see any restriction to move within the next month, ya know. Point more is to get the right opportunity as far as I think. ‘Cause I wanted to build these as my kind of my retirement plan.
Andrew la Fleur: Yeah.
Leonardo: Even if I don’t get the first one exactly right, I’ll probably will keep on going but I would be more motivated to keep these if I get the first one right.
Andrew la Fleur: Yeah. Of course, yeah. (Laughs).
Leonardo: It’s a psychological thing that …
Andrew la Fleur: Yeah. Of course, yeah. You want to get all of them right, of course. But yeah, I mean there’s no guarantees. There’s never a guarantee when you’re buying pre-construction. But if you’re buying smart, if you’re buying, and if you’re following good advice, if you’re working with somebody like me who has a track record and a history of helping people make a lot of money by buying smartly and buying in the right projects at the right time.
Leonardo: Yeah, [crosstalk 00:12:05] that’s why I kind of reached out to you [crosstalk 00:12:07]. Yeah, you’re quite the reference on the condo market for sure. I’ve read a lot about it, so … I’m more [inaudible 00:12:14]
Andrew la Fleur: Great. [crosstalk 00:12:15]
Leonardo: … to work with you.
Andrew la Fleur: Do you have any other specific questions at this time that you have about it?
Leonardo: No, I mean called about less projects that you just sent. I mean I saw the Hamilton one. Both from the land, right, the developer.
Andrew la Fleur: Yep.
Leonardo: And I mean those are the picture less ones that I saw that you sent out on the email. Do you still like, do you think it’s the right ones for me to get started? Like I said, I want to be very confident the first one. So I’m …
Andrew la Fleur: Mm-hmm (affirmative)-
Leonardo: I’m not sure if those are the ones or should I wait a little bit, are more products coming out?
Andrew la Fleur: Well what’s … so is Television City in Hamilton the good one for you to get into as a first investment?
Leonardo: Yeah.
Andrew la Fleur: It could be, depends on a few factors. Number one is what is your budget? How much are you looking to invest?
Leonardo: Well the first one I think would be reasonable to think about, let’s say up to a hundred. I mean, the fifteen percent, right.
Andrew la Fleur: A hundred thousand to put as deposits, yeah.
Leonardo: Yeah.
Andrew la Fleur: So, yeah a hundred thousand gets you, in terms of downtown Toronto, it might get you sort of an entry level unit. A one bedroom around five hundred thousand or so. A hundred thousand in Television City can get you a lot further. You could buy a great unit with fifty thousand. Or even less, forty to fifty thousand in Television City, you can get a very good unit there. That’s, one of the …
Leonardo: I think I can go up maybe a hundred fifty, depending on the opportunity itself. I’m more kind of worried on the opportunity itself I would think. Ahead of Toronto, it’s kind of, I’ve been here just ten months, but I drove by and I know it’s kind of the city’s moving a lot south, looks to me. I mean, because Toronto got so expensive, right.
Andrew la Fleur: Yep.
Leonardo: But on the other hand, I mean, I don’t know I saw like some projects before the [inaudible 00:14:39] if I remember correctly. I think was he took home the right amount, I don’t remember the name right now. But, I mean, it was kind of six fifty, in the five hundred to six hundred thousand range. Right in the Subway. So I don’t know, I mean, I’m more flexible with the initial investment depending on the opportunity, right.
Andrew la Fleur: Yeah, so, I mean Hamilton is an up-and-coming sort of opportunity. It’s very affordable, it’s a great option for people who want to get into the condo market especially, but they just are priced out of Toronto. Hamilton is great. If you have a portfolio of units and a lot of units in Toronto when you’re looking to diversify a little bit outside of Toronto, Hamilton is great. If you’re a first time investor and you’re looking for something cheap and cheerful, Hamilton is great.
Leonardo: [inaudible 00:15:39] Yeah.
Andrew la Fleur: I have no problems recommending it to you and recommending that you get a unit there. But, at the same time you do have the resources to look at getting something downtown Toronto, so. If you’ve got the resources that you have, then certainly you should look at downtown Toronto options as well.
Leonardo: Yeah.
Andrew la Fleur: And we can certainly do that. I mean there’s different opportunities out there right now. One opportunity that I’ll just highlight to you that’s coming up, is gonna be called Empire Maverick. I don’t know if you’ve heard of that one?
Leonardo: No.
Andrew la Fleur: Empire is the name of the building, it’s coming up in the next few weeks and it’s located right on Kings street downtown. Right in the heart of King West. King and basically, King and John. I don’t know if you’re, how familiar you are with that.
Leonardo: Seems like a good area for sure.
Andrew la Fleur: Yeah, so that’s a fantastic location. It’s really a blue chip sort of a location and a building. Super prime, downtown, right in the heart of everything in King West. That one’s coming out in a couple weeks. So, something like that, you know with the resources that you have you should be able to get into something, in a project like that. And anytime you’re buying on prime property, like King West’s young street, subway, waterfront, those kinds of areas, Yorkville, you know, you’re doing well right from the get-go (laughs) if you can get into any of those kind of loc … that’s like blue chip, super prime type properties.
Leonardo: Yeah. Well I mean, so maybe let’s see once these other one comes up,you know, take a look at what you send out. I mean I’m always kind of following your emails. So, I’ll make sure to take a look at that one.
Andrew la Fleur: Yeah.
Leonardo: Yeah and eventually, I’ll get back to you. Let’s keep in touch for sure ’cause that’s something that I want to concentrate on.
Andrew la Fleur: Great. Sure, yeah no. This is a great introductory call. I’m glad we’re able to connect here, Leonardo. Hopefully, answered some of your questions for you. Looking forward to helping you and working with you as you’re building your investment portfolio, as you said for your retirement, for your future. I think you’re gonna do very well. You’ve got the right mindset, you’re approaching it in the right way. You’re asking the right questions, so I think you’re gonna be very successful at this. I look forward to helping you get your first one and get your foot in the door.
Leonardo: That’s great. Appreciate it. Let’s move forward. [crosstalk 00:18:28]
Andrew la Fleur: Okay, great.
Leonardo: Thanks for your time [inaudible 00:18:29].
Andrew la Fleur: Thanks Leonardo, we’ll talk to ya soon.
Leonardo: [inaudible 00:18:32] Bye.
Andrew la Fleur: Bye bye.
Okay, there you have it. That was my conversation with Leonardo, hope you enjoyed that. Once again, if you’d like to be a guest on this show, if you would like to have your questions answered, it’s a free call and you can schedule with me by just going to askandrewpodcast.com. Okay, thanks very much, and until next time have a great week and we’ll talk to you soon.
Thanks for listening to the Ask Andrew Podcast, to get your question answered just go to askandrewpodcast.com and click “ask a question”.
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