Vancouver real estate investor Ralph Case helped his son buy a pre-sale condominium in central Surrey in the summer of 2016, putting $30,000 down for a $200,000 apartment scheduled for completion in late 2018.
In the summer of 2018, months before the project closed, his son sold the condo as an assignment for $330,000. Minus the down payment, the net profit was $120,0000, Case told the Jurock Land Rush conference March 6 in Vancouver.
The advantage of buying pre-sale condominiums is that you are investing at today’s prices for a property that will complete in three years, when you expect the price to be higher. Also, a number of Metro Vancouver condo developers are currently offering discounts to move pre-sale units.
There is no guarantee, of course, and investors must be selective about what and where they buy.
The overall benchmark price of a condominium apartment in Greater Vancouver is now 0.4% lower than it was three years ago, but it increased 4.7% in Surrey, 8.7% in Maple Ridge and 18% in Mission over the same period.
For investors, the concept is not to move into the condo, but to sell it upon completion or even earlier if assignments are allowed or to place it on the rental market when the building is completed.
Limited partnerships
There are a number of real estate investment limited partnerships, some of which allow income-producing property to be sheltered inside a registered retirement savings fund. Most of these are targeted at accredited investors – those holding at least $5 million in assets (not counting a principal residence) and with annual incomes of $200,000 or more.
Nicola Wealth of Vancouver is one of the larger groups. It has commercial and residential holdings and three funds. Two concentrate on long-term income and one, a capital fund, focuses on buy-sell-hold opportunities. According to the company, $1 million invested in Nicola Wealth in 2000 would now be worth $4.08 million. Nicola’s composite annual return has been 6.9% over the past 20 years.
The Greater Victoria Property Group (GVPG), which is one of the smaller limited partnerships and fairly typical of the genre, concentrates on new multi-family rental apartments.
The latest GVPG offering is a 22-suite rental building in Victoria’s Esquimalt area. It is being developed as a joint venture with a general partner. The plan is to complete the building, rent the units and then sell the project within three years. Minimum investment is $50,000. The projection – not guaranteed – is for a net profit of $2.4 million, of which the limited partners would take 40% share, or about $966,958. The simple return on investment is projected at 48.3%, or 16.1% per annum over the three-year horizon.
Developers can also act as partners for condo investors.
Mission Group, Kelowna’s largest residential developer, pre-sells some new condos that are destined for a rental pool. An example is the Bertram building, which has 257 condos ranging from studios to two-bedroom suites. Prices start in the mid-$200,000 range. The building is close to the future University of British Columbia Okanagan downtown campus that was approved last summer. Kelowna’s rental vacancy rate is 2.7%, and monthly rental averages $1,345 for a one-bedroom, but is higher for new projects. •
