Why Assignment Of Contracts Are a Great Deal in 2019

The purchase of Pre-Sale Condos was a very popular (and still is) strategy that many investors were taking part of in the last few years here in the lower mainland. The goal is to lock down a condo or townhouse at today’s market price and during the construction phase sell that contract to a third party or end user prior to the building be completed. When the markets are deep into a Seller’s market we see prices shooting upwards and a large spread made between what the original buyer got the property under contract for, to what the new market price is now at. This gives a really good return for a minimal deposit down on the property.

Example: We had Investors locking down 1 bedrooms units in the Langley area for about $215,000 over a year ago and now the going rate for similar units is about $340,000. That is a profit of $125,000!!! Insane for putting down $21,500 on the property originally. That is a 581% return on their deposit.

When markets shift, however, it becomes a great opportunity for Buyers to get into the market and save money on the buy while getting a brand new property that will yield a better return over the long run. Now I know what you are thinking…” How is it a great deal if the original buyer bought it for a lot less and now I have to pay market price for the property?”

The market has shifted in the latter part of 2018 and continues to be in a more balanced or buyers market in different areas. This means that Buyers have more control in the market and if Sellers absolutely need to sell, they are starting to discount their properties a lot more than they would have in the early part of 2018. This is also the case for many buyers of Pre-Sale properties. They bought the condos with the intention to NOT close and flip the contract for a profit. Now that times have changed there is a bit more motivation to ensure that happens Vs. getting top dollar. There are many reasons why this motivation sets in.

3. It could also just be that they have enough of a spread, they don’t mind taking a lesser profit to ensure the unit sells. Depending on when they bought into the project, they may have seen some incredible growth, that instead of taking a $100K profit they are happy with a $50,000 profit.

Regardless of the reason for dropping the prices, it has created some serious opportunities for Buyers in the market. So instead of looking into a pre-sale at full market value and having to wait for 2–5 years to move in (especially in a buyers market), your better return is to scoop up an assignment at an already reduced price and close on it much sooner. As a home buyer, this is ideal as you won’t have to wait as long (especially if you are currently renting). As an investor, it means you get the property with built in equity and can close and rent it out sooner getting cash flow and equity paydown from your tenants. Win-Win!

If you are thinking about getting into the market and wanting something that is new, I highly recommend considering buying someone else’s contract as a way to save yourself some money at the same time getting into the property a lot sooner!

Cameron Manning — REALTOR(R)-Investment Specialist- Keller Willaims Elite Realty

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