UPDATE: Real estate investment Part 2: condo pre-sales and LPs

In this second part of real estate investing, Western Investor looks at pre-sale condos and limited partnerships in new rental projects

By
Western Investor
March 8, 2021





Central Park House condo tower, Metrotown, Burnaby | Bosa
— Central Park House condo tower, Burnaby, started pre-sales April 9. | Bosa Developments

Note: this report has been updated because some of the pre-sale condo projects mentioned in the orginal March 9 report have sold out and we have received updated information on Nicola Wealth's performance. 

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.

In this second of a four-part Western Investor series on real estate investing, we outline how investments in pre-sale condominiums, or purchasing a share of a limited partnership in new condominium or multi-family rental projects can allow investors to get onto a real estate ladder that could carry them to their first home and beyond.

The advantages 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 will be buy. The overall benchmark price of a condominium apartment in Greater Vancouver is now actually 0.4 per cent lower than it was three years ago, but it increased 4.7 per cent in Surrey, 8.7 per cent in Maple Ridge and by 18 per cent 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 complete.

The following are current examples of pre-sale opportunities that are launching shortly, compiled with the assistance of Ryznar Media Inc.
• Era, by Swiss RealGroup Canada, is a 20-storey condo tower in Maple Ridge with about 200 units. The developer is offering selected pre-sale one-bedroom condos from $249,900.
• Q5 in Central Surrey by Tien Sher Group, plans a one-day sale blitz on May 1 of 141 low-rise condominiums, starting from $259,000.
• Telford on the Walk, in Burnaby’s Metrotown, by Intracorp, launched pre-sales in January 2021 and sold out 70 per cent of the 332 units in three weeks. The studio units pre-sell from $389,900 and the completion is set for 2024.
• Central Park House, a 41-storey, 355-unit condo tower in Metrotown by Bosa Developments, launched pre-sales April 9 with prices starting in the mid-$500,000 range. It completes in 2025.
 
Limited partnerships
 
There are a number of limited partnerships involved in the real estate investment space, some of which allow income-producing property to be sheltered inside of a registered retirement savings fund. Most of these are targeted at accredited investors, who are those holding at least $5 million in assets (not counting a principal residence) and with incomes of $200,000 or more.
Nicola Wealth of Vancouver is one of the larger groups, with holdings in both commercial and residential and with three funds, including two which concentrate on long-term income and one, a capital fund, that focuses on buy-hold opportunities. According to the company, $1 million invested in Nicola Wealth in 2000 would now be worth $4.08 million. Its two long-term income funds have a 15-year annualized return of 9.12 per cent and a 10-year annualized return of 11.21 per cent, respectively.  The capital fund had a 5-year annualized return of 14.52 per cent as of January 31, 2021.
One of the smaller limited partnership, and fairly typical of genre, is the Greater Victoria Property Group (GVPG), which concentrates on new multi-family rental apartments.
The latest GVPG offering is a 22-suite rental building in the Esquimalt area of Victoria, 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 a 40 per cent share, or about $966,958. The simple return on investment is projected at 48.3%, or 16.1 per cent per annum over the three-year horizon.
Developers can also act as partners for condo investors. An example is Mission Group, Kelowna’s largest residential developer, which pre-sells some new condos that are destined to put into a rental pool. An example is the Bertram building, which has 257 condos ranging from studios to two-bedroom suites, with prices starting in the mid-$200,000 range. It is close to the future University of British Columbia Okanagan downtown campus that was approved last summer. The Kelowna rental vacancy rate is 2.7 per cent and monthly rental averages $1,345 for a one-bedroom, but is higher for new projects.
 
 

Next in the series: real estate investment trusts.


Frank O'Brien is the editor of Western Canada's biggest commercial real estate newspaper, Western Investor, as well as a contributing editor at West Coast Condominium, real estate contributor to Business in Vancouver and a regular media commentator on real estate investment.
Copyright © Western Investor

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