Investing In Condos With No Money Down
What if I told you I had a condo investment opportunity that was so good that it could actually generate you a positive return even if you put down $0 of your own money?
I know it sounds like a scam, but it’s not. Let me explain…
One of my tools that I use for evaluating condo investments is something I like to call the “Zero Down Stress Test™”.
What it does is measure what kind of cash flow and return you might get on a property if you put nothing down.
What you’ll find if you use the Zero Down Stress Test™ is that most properties will be cash flow negative with nothing down – even at today’s historically low interest rates.
Actually, many so called investment opportunities that my competitors promote will produce negative cash flow even with 20 or 25% down – but that’s a discussion for a another day.
What I’ve discovered is that the best investment condos will actually produce a positive monthly cash flow – even when you reduce the down payment to $0.
So when I crunched the numbers on Capital Hall using the Zero Down Stress Test I was pleased to discover that every single unit type showed a positive monthly cash flow – even when financing 100% of the purchase price!
The Zero Down Stress Test
Check out the chart below. In this one example I compare an average priced unit at Capital Hall with what I call the “average Toronto condo”. What I mean is for the same price as an average unit at Capital Hall, the kind of unit that you might get, on average, in a new Toronto condo.
As you can see from the chart above, at Capital Hall, you are pulling in around $111/month in positive cash flow, even if you put $0 down!
By comparison, the ‘average Toronto condo’ is running at negative $138/month!
Think about it, the cash flow is so strong at Capital Hall that your rents are covering more than all your expenses even if you finance 100% of the purchase price.
You could actually make money without using any of your own money.
And the bonus is that all the rental rates at Capital Hall are guaranteed for 3 years.
But how can you finance 100% of the purchase price?
Now you’re probably saying that this is all fine and good but in Canada it’s the law that you must have a minimum 20% down payment on any investment property.
This is 100% true.
And I’m certainly not saying that you can buy a unit at Capital Hall without putting down any deposits – you do need to put down 15% in the first year plus 5% at occupancy. (Which increases your monthly cash flow big time – see the full financial analysis in the Investor Package)
But it’s also true that developers don’t ask or care where you get the 20% from. So many investors are utilizing their home equity (HELOC) or other forms of personal credit to pay for the deposits on their rental condos.
So yes, it’s entirely possible to make money without putting any money down on an investment condo, if you know how to employ this strategy and if you know which condos pass the Zero Down Stress Test.
>>Side Note: I’m not necessarily endorsing this strategy, only pointing out that it is possible and frequently used by investors in Canada to increase their leverage and maximize returns. Consult your accountant/mortgage broker to see if this strategy is right for you.<<<
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