The Simple Decision That So Many Condo Investors Get Stuck on Before They Even Get Started

Andrew la Fleur:
On today’s episode, we’re going to talk about the decision that so many condo investors get stuck on before they even get started. Stay tuned.

Andrew la Fleur:
Welcome to the True Condos Podcast with Andrew la Fleur, the place to get the truth on the Toronto condo market and condo investing in Toronto.

Andrew la Fleur:
Hi, welcome back to the show. Thanks again for tuning in as always. Once again, make sure that you are receiving my weekly email updates for all things, condo investing in Toronto, and for all the latest and greatest and best condo investments as approved by yours truly. Make sure you’re receiving those emails. Sign up anywhere at TrueCondos.com, with your name and email and you will be sure to receive them from me.

Andrew la Fleur:
Okay. As I said in the outset, I’m going to be talking about this one simple decision that so many condo investors get stuck on and it stops them from even getting started in condo investing. This is primarily for new condo investors, but sometimes even condo investors who’ve done this before fall into this, I call it the decision trap, where you almost get paralyzed in this state and you can’t move forward.

Andrew la Fleur:
What that decision is, is quite simply when you’re looking at making a condo investment or condo purchase, particularly talking about pre-construction condos here, I find this so many times, time and time again talking to hundreds and thousands of investors over the last 12 years, and that is the decision of, is this purchase, is this property you’re buying, is this condo you’re buying, is it for yourself, your own use or is it for an investment? And while that may sound like a simple question at first because it is in fact, what I find that where people get stuck is so many people try to make the condo be both things.

Andrew la Fleur:
So often the answer to that question I find from people, especially first time investors, the answer is, “Well, I’m thinking of it as an investment, but it might be something that I also use for myself. Maybe I’m going to retire in a few years, so I’m thinking about maybe I’ll use it for that, some kind of a retirement residence or downsize sort of situation, or maybe it’s a pied-a-terre in the city that maybe I’m going to use on weekends or something like that in urban cottage situation, or I have a child who maybe is in their teenage years, they’re going to be graduating high school, soon going to university, or maybe they’re in university, they’re going to be graduating university soon and they’re going to be living downtown, they might need a place to stay, or maybe it’s going to be like I’m helping them make their first purchase in sort of getting them off the ground, and maybe this is something that I’m helping them to get into the housing market and they’re going to live in it at some point.

Andrew la Fleur:
People get stuck because they don’t know what it is they’re trying to buy, trying to do, trying to accomplish, so they don’t know what they should buy. Is it this or is it that? Well, you don’t know what you’re looking for, then how are you ever going to find it? Is what happens, and like I said, people get stuck in this sort of feedback loop where, “Well, how about this opportunity here?” And they go through their brain and say, “Would it be something that’s good for investment? Maybe. Would it be something that’s good for myself to retire to? Maybe. Would it be something that’s good for my kid to use down the road?” And so you get stuck because you’re trying to make a property do multiple things at the same time.

Andrew la Fleur:
I give the analogy it’s Kind of like the futon analogy. I call it futon, but you probably know what that is. If you don’t, a futon is a piece of furniture that is, it’s a popular one. Back in my day it was at least with university students where it’s basically a bed that turns into a couch or it’s a couch that turns into a bed, and it’s sort of this dual purpose piece of furniture and I call it the futon analogy because when you’re making this condo decision, is it an investment or is it something that you’re using for yourself or your family? You have that decision tree in front of you, and so many people are trying to make the condo do two things at the same time.

Andrew la Fleur:
They’re trying to find something that’s a great investment, that is also something that is going to be something enjoyable for them to use, and so just like a futon, when you have something that you’re trying to make it do two things at the same time, what ends up happening is it’s not good at either thing. A futon is not a very comfortable couch, and it’s also not a comfortable bed. It’s kind of a useless item but nevertheless, people try to continue to try to make things like that work, and it’s a similar thing in the condo investment world.

Andrew la Fleur:
You’re trying to buy an investment that’s also a good personal use thing that you’re going to enjoy or you’re trying to buy something that you’re going to enjoy and it’s what you want for yourself, but you’re also trying to find a good investment. They’re two different things and they should be seen as two different things. They’re two separate decisions. What you like is not necessarily a good investment and vice versa. Again, my main piece of advice I want to give you if you’re listening to this podcast and especially if you’re a first time investor, is make that first decision first, that primary decision first, and everything else becomes much easier after that.

Andrew la Fleur:
Just it helps you get over that mental block and things will flow much easier and the rest of the process will be much easier on you once you make that first very simple… it almost seems too simple, it almost seems too basic of a piece of advice to give you but trust me, it’s an important one and it’s something where so many people get stuck on. I’ve seen it so many times and if you’re able to just make that one simple distinction in your mind and say, “Okay, am I looking to buy a condo for myself to live in? Am I looking to buy a condo for someone in my family to live in, to use, to enjoy, to reside in, to be their home, to be my home? Or am I really just simply looking for an investment, something to do with my money, something that’s going to give me a good return?”

Andrew la Fleur:
As you can probably guess, 95% of the time, the answer really is it’s an investment. You are trying to make an investment 95% of the time when you’re looking at a pre-construction condo, and so when you’re trying to make an investment, everything becomes much easier because you don’t care about the direction the condo is facing, you don’t care about the color of the cabinets, you don’t care about the sixth floor, or the 10th floor, or the 15th floor, or whatever it is, all you care about are the numbers. Do the numbers make sense? Is this going to be a good investment? Will this give me a good return on my capital? I’m writing some cheques, I’m putting it aside. When time goes by, am I going to get a good return back from this decision that I’m making? All the rest of this stuff, it doesn’t matter. All that stuff fades away into the background and your decision becomes a much easier one.

Andrew la Fleur:
When it becomes harder and when everything becomes clouded and when you become stuck, is when you’re trying to make the thing do two things at the same time. Simple way to avoid that as I said is make that one decision. You got to put on your investor hat, take off your end user personal hat, you really got to just think like an investor and forget about what you like, what you might enjoy, what your kid might enjoy, or what might work for them. Reality is that what you like or don’t like or prefer right now, today, it’s probably going to be different five years from now when the condo was built. The average pre-construction condo tower, it’s going to take four to five years to get built on average if you’re buying into a typical 30, 40, 50 story tower, as a pre-construction investment.

Andrew la Fleur:
Whatever you think you like or whatever you think makes sense to you today, life changes. Three, four, five years for anybody is a very long time and your preferences and your needs, your child’s preferences, their needs, their wants, are going to certainly change over any given four or five year period. It’s just very difficult to buy something today. Pre-construction, that is for sure going to be something that you’re going to love four or five years down the road. Once you take on that mentality and you purchase that investment condo and you sort of have been through that process, it helps you. It becomes so much easier the second, the third, the fourth time that you’re doing it to remind yourself to remember, “Oh yeah, even though I’m attracted to this building, I might be attracted to the location. I might be attracted to the floor plans.”

Andrew la Fleur:
From a personal perspective, I might start to dream and think ahead and say, “Hey, this is something I might like, I might want to live in,” you quickly say, “You know what? Nope. This is an investment, I’m thinking of this as an investment, I’m just concerned about the numbers.” Turn that part of your brain off. Think of it purely pragmatically as an investor would, and make your best decision based on that, and rinse and repeat. Just keep doing that over and over again.

Andrew la Fleur:
But you say, “Well, okay Andrew, but what if I actually do want to buy something for myself? What if I am buying something for my family or my child or somebody who’s going to be using it personally and it’s not an investment?” That’s fine. My advice for most people in that situation is actually don’t buy pre-construction. That’s right. I said, don’t buy pre-construction if you’re buying it for yourself. Pre-Construction is where you should be… If you’re an investor, you should always buy pre-construction, you should always buy it with a platinum agent with a great amount of experience, somebody like myself who can give you that unfair advantage that you can’t get in the resale market, who can get you into opportunities where you can quickly make 20, 30, 40, $50,000 in a very short period of time by getting into unique and special and early opportunities in projects that are not available otherwise where you can, again, have that insider advantage where you’re beating the market. That’s where you want to invest in pre-construction when you’re investing.

Andrew la Fleur:
It’s not quite the same when you’re buying it for yourself. When you’re buying it for yourself, I say go to the resale market, and go there when you need to go there. If you’re looking for something and you want something in five year’s time, then just invest for now and when the time comes, five years from now, then go out to the resale market and just buy what you want that already exists. In the resale market you will have more selection of everything, floor plans, buildings, locations, you can obviously walk in, see, touch, feel, the product that you’re purchasing before you’re purchasing it because that’s important. You’re going to be moving into it. You have different… the ages of the buildings are a factor that you don’t have when you’re buying pre-construction.

Andrew la Fleur:
When you’re buying pre-construction, everything is brand new by definition. When you’re buying resale, you can buy a five-year-old building, a 10-year-old building, a 15-year-old building, if you want to. You have those trade-offs between sizes and prices and conditions of the unit and views and conditions of the micro market of the time in that particular building or location or neighborhood or intersection.

Andrew la Fleur:
There’s so many other factors that you can sort of use as part of your negotiating process when you’re buying resale that you can’t when you’re buying pre-construction, and ultimately you can get exactly what you want or exactly what works for you, exactly what you are going to enjoy by buying resale. Also just in general, the resale market is going to be, as a general statement, more affordable than buying something pre-construction, buying something brand new, because you’re not paying that premium for that being brand new. You can buy something that’s five years old, that’s eight years old, that’s 12, 15 years old, if you want to, and that’s going to be obviously significantly cheaper than buying something that’s brand new. That might be an important factor to you.

Andrew la Fleur:
You might not care about it being brand new, if you’re buying it for yourself. There’s just a million factors that go into buying a property for yourself, and you can take advantage of that in the resale market, and you can buy something at the time that you need it. You can take advantage of the mortgage rates that are available at the time that you need it. If you think mortgage rates are going to go up next year, you might say, “Oh, I’ll buy this year instead of next year if they work.” Those are the kind of factors and things that also come into play.

Andrew la Fleur:
Buy resale if you’re buying for yourself, buy pre-construction if you’re buying for investment, and if you are buying pre-construction, again, that first decision is such an important one you’ve got to make and you’ve got to remind yourself, “This is just an investment. I am not buying it for myself.” You might get… It might be something that eventually you do use for yourself or your family uses, but that will just be a spin-off and ciliary benefit of making the decision today of getting something that is a great investment, a decision today that will pay dividends years down the road.

Andrew la Fleur:
Okay, there you have it. I hope you enjoyed this episode, I hope you found it useful. Maybe you are somebody who’s stuck in that position right now, maybe you’ve found yourself thinking about buying pre-construction for a long time but you haven’t done it, and maybe, just maybe, this podcast has sort of pinpointed and diagnosed the reason why you haven’t done it for you. If that’s you, I encourage you to, again, make that decision in your mind that it is just an investment and you can put aside all of the other stuff and that will make things a lot easier for you, or maybe you’re one of the few people who are actually thinking, “You know what? Actually, it really is for myself,” you’ll certainly want to look at the resale market in most cases.

Andrew la Fleur:
Either way, I’d love to hear from you, I’d love to help you on your journey to growing your wealth and growing your portfolio. You can always reach me, Andrew, at TrueCondos.com, or call me 4163712333. Until next time, happy investing, and will talk to you soon.

Andrew la Fleur:
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