CONDO
INVESTING HEADING SOUTH
Charles Hanes
February 12, 2008
After almost three decades at doing this, if there is one thing I’ve learned,
it’s that there is ONLY one voice you can truly listen to when it comes to investing
in condos. That voice is the most clear and unquestionable resource out there but
unfortunately it is seldom used. That voice is the cumulative feedback from the market.
You see, as much as we want to suggest that there are many complicated factors is
identifying what’s good and what’s bad, what works and what doesn’t, and
what’s a sound investment and what’s a fool’s folly. The truth is that the
market itself drives the market and the market itself speaks. You just have to know how to
listen!
Way back in 1980 I entered the Toronto condo industry selling the (still) prestigious Queen’s Quay Residences
on the Harbourfront and for almost eight glorious years we sold condos like they were
going out of style. It didn’t take rocket science to see that selling thousands of
new condo units faster than the city was expanding (among other reasons) that there would
soon be a glut of condo units on the market, rents would have to decrease thereby negating
the financial cash flow viability initially anticipated by the investor.
I was one of the first to see the market crashing (my ear to the market was already finely
tuned back then) and readily set out to come up with a new strategy to enable me to
continue to do what I do, sell condos! There is always another market somewhere else in
the world that is active despite what’s going on in your own back yard.
I started studying global markets to find opportunities and found out that in 1997 the
British Colony of Hong Kong would revert to control of the Communist Chinese. The
newspapers had pictures of tanks rolling into Tienanmen Square in Beijing and figured that
these photos would send shudders down the backs of wealthy Hong Kong residents who would
want to get their money and probably families out of Hong Kong. When I read that Canada
was one of the primary countries for emigration I knew that if I could get the inventory
of Toronto condos that were about to go into foreclosure over to them that they would
probably buy condos like ice cream at the beach!
The challenge was how to get the information in front of them. As I visited a friend in
Delray Beach Florida trying to figure out my next entrepreneurial frontier, I saw the
first digital image that I had ever seen on a computer screen and asked him how he put
that picture in there. Now, I know it sounds a little idiotic, but you’ve got to
remember this was 1989 and the PC had just come out! Old 486 SX and DX were the new craze
but they ran only DOS operating systems that comprised of little green letters on a black
(or muted mud like brown) screens. This crystal clear photograph of a pink rose with a dew
drop in mid air highlighted by a sparkle of the sun, stopped me in my tracks and set me on
a course of New Media real estate that has continued to this day with simply condos.com.
Over the past five or six years now the Toronto condo market has been absolutely
“blistering HOT”! Prices per square foot have skyrocketed to multiples of what
they were in 2000 and I see rental incomes falling! Sounds like deja vous to me!
I have been writing recently about a pending softening of the market. Let’s face it,
it’s been booming for six to seven years now and nothing can go up and up for ever
and when you see the escalations in pricing, coupled with the massive inventory of sold
but not finished suites here in Toronto, you have got to be very selective (there are some
solid opportunities left here but at today’s pricing, the calculation of “risk
factor” are certainly elevated. |
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If you are buying to
live in the unit, then relax as fluctuating markets do not affect you the same way.
Assuming the worst happens and the market goes down (doubtful but based on the sub prime
mess in America no-one can say for sure and I do feel an “adjustment” coming)
and you’ve purchased. As long as you weren’t planning on “flipping”
the unit and legitimately were looking for a condo to live in, your equity value may drop
a little but you are not paying rent (huge negative impact financially over the long term)
and you had to live somewhere. As long as you bought right, in the right building, right
suite, etc., you are pretty well insulated.
However, for my investor client base (65% of my registered monthly, weekly, daily visitors
at the site) I would say that it’s time to look south. Actually, this conclusion is
not solely mine as it’s based on months of receiving tons of requests expressing
interest in Florida properties. From Abu Dabai to Brazil, investors all over the world are
catching on to the serious overbuild in key Florida markets with the resulting glut on
condos and spiraling downward prices!
 As an
investor and as an international agent for investors, the Florida market is screaming out
an invitation to you, and as is customary here at simplycondos.com, if you ask for it,
I’ll go and get it for you. I’m heading down to Florida to do some more in depth
research as my instinct tells me that it’s still too early to make the jump but never
too early to do the necessary homework and that takes time, energy and footwork, all of
which as an investor you do not want to absorb. That’s what I do.
About three months ago my radar started tipping me toward Florida as constant
news feeds about the sub-prime debacle announced this opportunity in the making! I do rate
Florida a strong “Buy” but only in select markets and at the proper time. Right
now it’s “Season” or “On Season” which means tons and tons of
vacationers who, by the way, are prime prospects for condo purchases. Investors want to
hold off until the season ends and all the “traffic” (tourists) go home for the
summer. The entire psychology is different!
I believe that the market there still has a ways to fall so we don’t want to be
anxious but we need an intimate feel of the market and that’s my responsibility and
strong suit. I don’t have to be there forever to get the pulse. Fortunately I’m
networked with many top condo sales pros in Florida and, after all, I lived one the Gold
Coast for five years prior during a sabbatical a short while back so I‘m intimately
familiar with most key condo communities. I actually built simplycondos.com as a Florida
web site during a sample semi-retirement while living there prior to coming back to
Toronto and reactivating my career.
I know all of the key communities and many of the developers (a few new ones will have
come along over the past five years but not that many). I’m off next month to
commence my due diligence. I am assembling an Investor Group to bulk buy condo suites in
key Florida buildings starting this summer/fall. If you have been thinking of recreational
or seasonal property or looking strictly to invest, you will want to join our group. With
numbers I can frequently negotiate serious price reductions from their asking price which
is already up to 50% reduced!
My most recent investment in Toronto where we took 20% of a building we enjoyed a 15%
Price Reduction and terms that allowed up to resell our units at any time following
construction start and a host of other beneficial terms and conditions that you could only
dream about based on having a group of individual title buyers ready to save a falling
development. This type of property is on every corner in Florida right now but my position
is that it is still too early. Register
with me today and I’ll keep you informed each step along the way. I’ll send
you a detailed breakdown on how our investor groups work.
That’s it for now. I’m Charles Hanes |
