4 truths to know about the condo assignment
In real estate investment, there are typically 3 strategies to make money:
- Cash-flow or buy and hold, which is for me the best way to accumulate assets since using other people money and the one I use for my own investments.
- Capital gain or buy now and sell in the future, the annual increase price will make all the work for you, but in reality you are still paying every month so not really an investment in we take Robert Kiyosaki’s mindset which I agree.
- Cash or buy, fix and sell which is probably the fastest way to make money considering the time you are doing the operation.
In the pre-construction condo market, there is a hidden way to make money which is called assignment. This is basically when someone buys the condo at the construction phase and sell it at a higher price before the project is completed, ideally tax-free. In other words it is just a way to use the inflation or let’s call it speculation.
For those who are thinking this to make money, here are the 4 things you should be aware when you do an assignment.
- Public advertisement is not allowed. By this I mean that you usually don’t have the right to list your unit in MLS or any public listing website, and the sale should be totally private.
- Price hard to set. If you think you can price your unit at the current resale property nobody , you have to find an end-user because investors will never pay for current market value.
- Closing costs. If you did not negotiate or estimate the capped cost with your developer, it will be really tough to find out how much it is.
- Conditions of sales. Most of developers allow this assignment based on conditions. One of them could be that the project should be at least sold at 90% and the new buyer should be totally mortgage qualified. They will try to make the hardest possible.
End of the day, if you want to do a condo assignment you should be really prepared to sell it when it is allowed. One of the best way to do assignment is to use a knowledgeable Realtor and work with a great assignment-lawyer. If you have any questions about condo assignment you can contact me here.
