Buying an Assignment is risky business. One puts money into someone else’s hands, not to buy the physical real estate, but to buy the commitment to buy real estate. As with all preconstruction, a lot of unknowns remain.
A pre-construction purchase contract is executed between an investor and a developer. An assignment purchase contract is different because it is between the original investor and you, the new investor. My first advice is to investigate whether the Developer allows assignments, if they do, read the terms of it.
In search of an Assignment opportunity in a boutique development for a client of mine who spends roughly 60 nights a year in the Calgary Sheraton Eu Claire, I travelled to Calgary this week. The desired property is the Le Germain.
The Le Germain multiplex is both an architectural landmark and a rare fusion of hotel/office/residential spaces. The background of the property is impressive. It launched in a hot market and experienced initial success – the office space leased, the private residences sold out, and the hotel is sure to book solid as Calgary often has a lack of available accommodation Downtown. Despite initial success the project is over-budget and behind schedule on completion.
The goal this week was to look at the Assignment opportunity for a 1-bedroom, 1100 square foot penthouse. The price tag between the Developer and the original investor is $1,000,050 with a $200,000 down payment. This price will be higher to include whatever profits the Assigner hopes to make as well as a commission to pay the Real Estate Agent.
So when does one know whether to Buy an Assignment or wait for the condo to be completed. There is no easy answer to that question. My advice is to consider how many units there are and how unique the property is. A Building with hundreds of units will have more general opportunity than a boutique offering and a generic property may be less covetable than a highly unique one.
In our case, we are waiting for more information. We want to know the strata a fee as well as how much longer the building is under construction for. During this time it is likely we will learn of other investors who want to sell their units. Competing Sellers is one factor that can drive prices down. So, for now, it looks as though re-sale in this building may provide more options than what’s available as an Assignment.