A recent report says that nearly half of all condos in Toronto are cash flow negative. Is this cause for concern? Should investors be worried? How important is cash flow when investing and how should investors interpret this data? EPISODE HIGHLIGHTS 1:00 44% of investors with a mortgage possession in 2017 are in a negative [...]
To downsize or not to downsize? That’s the question many baby boomers are asking themselves these days as they approach retirement age. Their motivations vary but often come from the same place: specifically, a single-family home in the suburbs. The boomer generation, comprised of those born just after World War II up until the mid-’60s, […]
On this episode, Andrew la Fleur answers a question from a podcast listener who says their property taxes just doubled and this killed their cash flow, making them go into the negative each month. He wonders if he should sell his property and invest in something else. Listen to hear Andrew’s advice to this condo [...]
Disclaimer: this article is not meant to be considered taxation or legal advice. Always consult your appropriate legal and tax professionals for advice on such matters. One of the reasons why real estate is such a powerful wealth creator is that, unlike other types of investment, it allows for multiple income streams and has some […]
One question that I get asked a lot from condo investors is what is the best condo size to buy for investment? If you talk to 5 different people you will get 5 different answers. Is it best to go with the ever-popular 1 bedroom plus a den? This is the most commonly […]
One question that I have received from new readers a lot of late is, “Can I still make money investing in the Toronto Condo Market in 2014?” The answer is it yes, absolutely- BUT, you have to know when and where to invest. But Andrew, what about all this talk of the condo market slowing […]
This is Maxwell. Maxwell is an entrepreneur and he lives in Oshawa with his wife and family. Maxwell was sick and tired of lackluster returns on his investments in the stock market. His bank was offering him a paltry 1% to keep his hard-earned money sitting with them. Maxwell decided heâ€™d had enough and wanted […]
1. What the heck is a leaseback?!
When we are talking about investing in pre-construction condos, a leaseback agreement is when you buy a condo from a developer and the developer agrees to lease the unit back from when once it is completed for a pre-determined rate and for a pre-determined amount of time. The money is not paid in a lump sum at closing like a cash back, rather, it is paid out slowly each month just like a tenant who pays on the first of the month. The actual tenant pays rent to the developer who in turn pays you (the owner). The tenant may be paying an amount that is more or less than the leaseback amount but the owner always receives the leaseback amount guaranteed (even if the unit is vacant!)
2. Why are leaseback offers becoming so popular?
The pre-construction market is driven primarily by investors. The investors only goal is to make money on their investment. There are traditionally 2 ways to do this: through cash flow and through capital appreciation. Cash flow is when you rent out a property for more than it costs you to own the property. Capital appreciation is when you sell the property for more than what you bought it for. There has been a lot of talk about the current prices of Toronto condos not supporting positive cash flow with the traditional 20% investor down payment in place. These leasebacks are an attempt to lure investors by giving them not just positive cash flow, but in many cases, guaranteed positive cash flow for 1 or 2 years (assuming mortgage rates do not rise dramatically in the next few years).
Investing in Toronto condos used to be a pretty straightforward proposition: buy a property with as little down as possible then rent it out with the income from the rent covering your mortgage, taxes, maintenance on the property etc. For much of 90s and the first half of the 2000s, this was the way it […]