Real estate investment Part 2: condo pre-sales and LPs
Vancouver real estate investor Ralph Case helped his son buy a condominium in central Surrey in the summer of 2016, providing $ 30,000 for a $ 200,000 apartment due for completion in late 2018. In the summer of 2018, months before the project was completed, his son sold the apartment as a contract for $ 330,000. After deducting the deposit, net income was $ 120,000, Case told the Jurock Land Rush conference on March 6th in Vancouver.
In this second part of a four-part Western Investor series on real estate investing, we describe how investing in condominiums before selling, or buying a limited partnership’s share of new condominiums or multi-family rental projects, can allow investors to get started on a property with real estate managers, who they to their first home and beyond.
The benefit of buying condominiums before selling them is that at today’s prices you are investing in a property that will be completed in three years if you expect a higher price. Also, a number of Metro Vancouver condominium developers are currently offering discounts on pre-sale unit relocation.
There is no guarantee, of course, and investors must be selective about what and where to buy. The overall benchmark price for a greater Vancouver condominium is actually 0.4 percent lower than three years ago, but up 4.7 percent in Surrey, 8.7 percent in Maple Ridge, and 18 percent in Mission over the period.
For investors, the concept is not to move into the apartment, but to sell it after completion or even earlier if contracts are allowed, or to place it on the rental market after the building is completed.
Below you will find current examples of pre-sale options that will be created shortly, probably in April 2021, with the support of Ryznar Media Inc.
• Era from Swiss RealGroup Canada is a 20-story apartment tower in Maple Ridge with around 200 units. The developer is offering select one-bedroom pre-sale condos starting at $ 249,900.
• Belvedere, concrete tower with 275 residential units in Central Surrey at a SkyTrain station from Square Nine Developments. One bedroom units start in the high $ 300,000 range. More than 1,000 buyers have registered, although the pre-sale has not yet officially started.
• Telford on the Walk in Burnaby’s Metrotown by Intracorp went on sale in January 2021 and sold 70 percent of the 332 units within three weeks. The studio units are on pre-sale starting at $ 389,900, with completion scheduled for 2024.
There are a number of real estate investment limited partnerships, some of which allow income generating property to be protected in a registered retirement fund. Most of these are for accredited investors with assets of $ 5 million or more (excluding primary residence) and income of $ 200,000 or more.
Nicola Wealth of Vancouver is one of the larger groups with holdings in commercial and private companies as well as three funds, including two that focus on long-term income and one, an equity fund that focuses on buy-hold opportunities. According to the company, a $ 1 million invested in Nicola Wealth in 2000 would now be worth $ 4.08 million. Nicola’s total annual return over the past 20 years has been 6.9 percent.
One of the smaller limited partnerships typical of the genre is the Greater Victoria Property Group (GVPG), which focuses on new multi-family rental apartments.
The latest GVPG offer is a rental building with 22 suites in the Esquimalt region of Victoria, which is being developed as a joint venture with a general partner. The plan is to complete the building, rent the units and sell the project within three years. The minimum investment is $ 50,000. The forecast – not guaranteed – is for net income of $ 2.4 million, of which the limited partners would take a 40 percent stake, or approximately $ 966,958. The simple return on investment is forecast at 48.3% or 16.1% per year over the three-year horizon.
Developers can also partner with condominium investors. One example is Mission Group, Kelowna’s largest property developer, which is pre-selling some new condos to be put into a rental pool. One example is the Bertram building, which has 257 condominiums ranging from studios to two-bedroom suites. Prices start at $ 200,000. It is near the future University of British Columbia campus in Okanagan, which was approved last summer. The Kelowna vacancy rate is 2.7 percent and the monthly rent averages $ 1,345 for a bedroom but is higher for new projects.
Next in the series: Real estate investment fund.