In this episode, we will cover a creative way to invest in real estate, skipping the mortgage qualifying and why you should be paying attention to presale properties.
Ever wondered if there’s a way to sidestep the rigorous bank qualification process when buying a home?
Well, strap in, because you’re about to learn a game-changer!
First, let’s talk about the allure of Presale Properties.
What is Presale?
Presale means you’re purchasing a property before it’s complete – usually before construction starts.
Do you need to complete the mortgage process and qualify for this type of purchase?
The answer is no
But, I would still recommend understanding your options
The strategy we’re going to discuss, is buying a long completion presale, with no intention of completing and doing an assignment sale
What the heck is an assignment sale you might ask?
Well, an assignment sale is, where you are essentially selling the paper.
You purchased a property in the past, and now you have the opportunity to sell it to somebody else without completing.
Be very careful when buying pre-sale to ensure that you have a favourable assignment clause, a presale experienced realtor can help
There’s no benefit to you not using a realtor when buying pre-sale. Actually, quite the opposite.
Some realtors are able to get on the developer VIP lists, which allow them a number of benefits for their clients
First choice of the best unit for selection
Early purchase buyer incentives, cash-backs, etc
More favarouable assignment fees
An assignment fee can be a fixed amount, say $1,000, a percentage, 1-5% of the assigned sale price or event 50 to 100% of any profit made in the assignment sale
Greater Vancouver historically doubles in price roughly every 10 years
The last time is only took 6 years and CMHD predicts the next double to happen in only about 7 years
So, the odds of a presale that completes in six years not going up, is pretty low
Let’s say you purchase a one bedroom presale condo in Vancouver for $1,000,000 that complete in 6 years.
Using historical statistics, that condo will worth $500,000 to $600,000 MORE by the time it completes.
Even if we use ultra conservative numbers here, you are almost guaranteed to be up $250,000 for spending likely less than 4 hours of your time.
You can’t afford 1 million for a condo? Then buy outside of Vancouver at a fraction of the cost
To be clear, I do not recommend purchasing presale Real estate without knowing exactly what you’re getting yourself into
And there are definitely risks associated when buying without an existing mortgage approval
Don’t get me wrong, a mortgage approval means very little for a property that completes in 5 to 6 years
But, it will tell you if you can complete on the purchase, based on todays qualification rules
Another benefit presale is the deposit structure is staggered so instead of reading 20% upfront, it could be stretched over two to four years
Often there are incentives where you only need a 10% total deposit. 5% now and 5% in 12-months!
Let’s talk about the risks associated with buying a pre-sale:
The market can drop and the price of the property declines.
In this case, you must cover the difference.
What if the developer can’t complete the project and is forced to refund your deposit?
Yes, you shouldn’t lose money here but you lose an opportunity
What if I need to complete but don’t qualify?
In more circumstances, private lending in a great option for a short term solution
If you’re curious about these strategies or want to explore presale opportunities, I’m here to guide you.
Dive deeper into these methods, and you’ll see they’re not just for the elite but for anyone determined to navigate the real estate maze smartly.
And if you’re seeking further knowledge, check out my best-selling book, Rockstar Real Estate Investing, on Amazon.
Don’t forget to like this video, subscribe for more golden nuggets on real estate, and share with those looking to dive into the property world.
Till next time, I’m Jessi Johnson, urging you to always Own Your Life and make savvy property decisions!
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