Welcome, everybody, on this beautiful Sunday morning and welcome to Condo Investing with Costas. Again, I am Costas Kivelos, Founder of First Access Condo, mentored over 5300 realtors and condo investor himself. Now, why do you tune in to my show? You tune into my show to find out the ins and outs of pre-construction condo buying and investing and that’s whsat we’re going to focus on today. We’re going to tell you, the condo investing with Costas viewer, how buying pre-construction differs from buying resale, the steps of the buying process and we’re going to also talk to you about that gatekeeper of your pre-construction investment, the platinum agent and that’s who we are. We are platinum agents and we’re going to talk to you and explain the difference.
Now, getting into our show, we’re going to recap a resale purchase. The vast majority of people have owned probably one property in their life. So, it’s very common and they bought a resale and how it works, you call up your regular agent and any agent can do this, okay? You, yourself, usually find a property on MLS, you inform your agent, they book an appointment, you go visit the property, you see whether you like it or not and if you do like it, then you put in an offer. That goes back and forth and hopefully you get a great deal and your agent saves you some money and then you have to get your mortgage, you put your 20 percent down or less or more and then you start living in the property or renting it out. Now, when that happens, you have carrying costs, you have expenses, you have to find a renter. That doesn’t happen with pre-con because you’re buying something that will be ready four or five years down the road and another thing that doesn’t happen in pre-con is that you don’t have to put down the 20 percent or whatever in one shot.
Remember, pre-construction deposit structures are spread out and we’ll go into that but the major difference is that when you sit there and you put in this offer and you get a property so quickly, it’s usually done at your own pace. Now, unless it’s being lower priced on purpose to initiate a bidding war, you can usually submit it and take 24 hours or 48 hours to review an offer and so forth. That doesn’t happen in pre-con. Pre-con moves quickly and we’ll talk about the pay shortly but what is the most important thing I touched on? I told you about the gatekeeper to pre-construction; the platinum agent. Well, there’s a system and a hierarchy of how you do things in the pre-construction world and most people don’t understand this. The reality of the matter is the realtor that you use to buy your house, chances are in percentage base, he doesn’t have access to this project. They might tell you they do but I’m going to tell you something and give you some inside information.
We have over 5300 realtors in the greater Toronto area. Out of 5300 realtors, we only really have about 100 and so platinum agents. So, chances are your realtors not one of them. These platinum agents are gatekeepers because they have first access to the pre-construction product. Now, why is that so? Well, let’s put it into perspective. If you were a manufacturer and you had a product, wouldn’t you give your product first to your largest consumers? To the stores that sold the most of your product? Of course you would and any industry is like that. Wal-Mart will get product faster and cheaper than a mom and pop store will based on volume and hence the pre-construction agent. Pre-construction agents are responsible for selling 75 to 80% of a building in a month or less and that’s on average. Now, that might sound like big numbers but they do big numbers and that’s why they have the access and how does someone become a pre-construction agent? They become a pre-construction agent of surpassing expectations and selling phenomenally well for years at a time and it takes a lot of time to get in and a lot of agents won’t be able to get it but that’s how they achieve their goal and that’s how we all made it in the trenches.
Now, what happens is these developers have sales teams. There’s four to five sales teams throughout the whole city that the developers hire to sell their product and these teams know who the platinum agents are. So, what they do is, out of one hundred agents, each project might have anywhere from 10 to 30 platinum’s working it. So, the pool of agents that you can use for a specific project is quite small. Now, how do I find this platinum agent? Well, the way you find this platinum agent is usually by calling for firstaccesscondos.com or emailing us because we’ll tell you what we’re working on but if you choose to use somebody else, that’s fine as well. I want to make sure you’re educated and you do the greatest investment for you, whether you use us or not but what you usually have to do is you need to have to find out about projects. So, how do you find out about projects? Usually what we do is we go on the Internet and we Google and we search for projects and when we search for projects, we see websites come up on Google because the vast majority of our platinums, that’s where we advertise and if you happen on a developer site, never wait for the developer but I’ll go into that shortly on why you shouldn’t.
When you go into a site, you register. Now, depending on when you register, in comparison to when the project’s about to launch, you’re going to see X amount of information. The closer to launch, the more information available but the reality is that there’s different avenues available to us, the platinums, than the average realtor. So, we should have information months before a project. Even if we don’t have anything in writing, we should be able to tell you some off the record information. At First Access Condos, months ahead of a project, we know an average price per square foot for a building, we know how many units they’re going to be, we know rough deposit structures, we know a lot of inside information and that’s why you tune in here and that’s why you go to firstaccesscondos.com and register so you can have the information first. Now, we’ve established that the platinum agent is the gatekeeper but what does the platinum agent give you? The platinum agent gives you first access to the project and there’s a reason that we’re called First Access Condos because first access to condos is the key to investment success.
Now, what happens when you get in first in comparison to not getting it first? So, say, that your regular agent tells you they can get into a project. You think he can get you in first, he might or she might even tell you you are but they get you a unit and you’re paying, say, $700,000 for a one bedroom. Five years from now, when it’s ready, you might go to sell your unit and say it’s increased in value to $900,000. So, you go to sell your unit for $900,000 but then the exact same unit below you is selling for $850. So, then you wonder, is this person taking a $50,000 dollar cut? Maybe but chances are that they might have paid $50,000 less than you and they’re actually making the same, if not more than you and you’ll never be able to compete with our price. That is why you want to use a platinum agent because a regular non-platinum won’t be able to get you in at the lowest price and every dollar saved in an investment is a dollar earned. So, the platinum agent we’ve established will get you in lowest price and save you money. They’ll also get you in when the greatest incentives exist. So, you have the greatest incentives, the greatest price point and another thing is the most units are available when? When a project first launches. So, you have most units to choose from, best incentives, lowest price. Those are the three keys to success.
So, we’ve talked about a platinum agent. Let’s talk about something else. When you sit there and you buy a resale property, you may give a 24 hour time frame for the offer to be reviewed, a 48 hour offer, a 12 hour offer review. When it comes to pre-construction, pre-construction sales move quickly. One of my favorite projects of 2020, sold 400 units in eight days. That’s right. Eight days, 400 were assigned. How does that work and how can that be possible? Well, a pre-construction project launches, that’s the day sales technically begin. That’s when the information is released and your agent might call you and tell you “This is the unit I have for you. I need to know right now.” Now, if you sit there and say I need a day to think about it, then you’re probably going to lose that unit and be bumped to the next round and there was a project last July that raised prices $25,000 after three days of sales. So, that time that you take to think about it might cost you money because in the world of pre-construction investing, time is money.
So, how do you make that decision so quick? You make it by being informed and knowledge is power and that’s where First Access Condos comes in. What we do is, we educate you and inform you and give you all the tools to make an educated, wise investment decision in a matter of minutes because you’ve been thinking about this for a matter of weeks or months. So, what happens is when you’re looking for a project, you can go on a competitor site or you can come on ours, First Access Condos and you can register for a project that’s going to be selling in the future. Don’t forget to click the TV link because that’s how you get the extra additional incentives. We have a special for just our show. So, when you register for a project, we send you information on it and if there’s information that I can’t email or write but I can tell you over the phone, off the record, then you’ll be getting a call from me or one of my assistants and we’ll be giving you that information. So, now we’ve talked about the differences of a platinum, non-platinum, we’ve talked about how differs from resale, we’ve talked about the pace of sales, what we’re going to get into now is how you actually buy something.
So, when you register on our site, leading up to launch, about a month, two weeks out, you’ll start getting emails from those that contain a worksheet. Now, what is a worksheet? A worksheet is a piece of paper that you fill out with your information, a picture of your ID and your unit choices. Now, a lot of people have called me that have never bought this before and told me, well, I’m not giving you that information and I tell them it’s no problem. This is not a commitment to buy. What it shows me is that you’re interested and you’re serious and you are really considering this project because remember how I told you 400 units were signed in eight days for a project? Well, imagine how thirty agents are scrambling to get their hands on a piece of that pie in such a short time frame. So, you should be able to respect that and the harder we work, it’s to make you more money and the more efficiently we work, you make more money and the way that happens is if we work as a team. So, that’s why you need to fill out a worksheet. Don’t be scared to send information. It’s not a contract. What it is, is a way that you show us that you’re interested and you’re serious and we know that in the limited amount of time, we have to make our clients the most amount of money.
You want to participate in that and be part of that great investment strategy and the thing is, if you have any questions about that worksheet, call us. We’ll walk you right through it. So, what we’ve established is that when you get the worksheet and you’re interested, don’t hesitate to fill it out, please. It’s not a commitment. No one’s going to hold you to it but what we will do is we’ll give you an opportunity to be part of the first round. So, now that we’ve discussed the worksheet and told you about it, we’re going to discuss what happens once that worksheet is submitted to us. So, at First Access Condos, we get you enough insider information that you can make an educated guess in decision prior to the start of sales because we like having all our ducks in order before everybody else and that’s why we get you the most units at the lowest price. So, if you submit a worksheet to us, a preliminary worksheet, you’ll already have starting prices or an average PSFand we’ll have an estimate and you should have a good idea of the floor plans as well. So, you give your three unit choices and in pre-construction, you need to remember you can’t pick floors, you might be able to pick a range of floors and you might not get your first, you might not get your second but you’ll get your third choice with us.
We always aim to get everybody the first choice but that’s sometimes impossible but if you get one of your three choices, remember, 75 to 80% of all pre-construction purchases are investments and when it’s an investment, you’re not going to be living there. So, the reason I fell in love with pre-construction is because emotion is removed and you focus on the numbers and the most important investment is the one that you make as opposed to the one that you didn’t. You’ll never make money if you didn’t invest and you will make money if you do in pre-construction. So, don’t get hung up on not getting your first choice. Be happy that you got a choice because there’s thousands of people that want to get into every project and there’s only a couple of hundred that do. So, once you submit a worksheet and we get our allocation or get our units from the developer, we call our clients and tell them what unit we have and that’s when you’re going to say “Thank you, you got us one of your three choices. What do I do?” But what you do is, now, during the age of COVID, everything is signed digitally.
Now, our industry sells more condos than any other city in the planet and we were perfectly positioned on the cutting edge of technology to do a quick lateral transition from in-person signings and sales centers to online signings and basically your agent picking up your check and dropping it off to keep everybody safe for those that are scared of COVID and to streamline the process for those that are not and that’s what we did. So, now, what happens is, we get your units, we inform you, you say yes or no. If you say yes, you sign it digitally. Within 24 hours, me or one of my representatives will meet you to pick up your checks. Now, the deposit structure in pre-construction differs from the deposit of a resale. You have a timeline to pay your 20% and why do I want to pay 20%? Because any time a project is saying less than 20%, unless it’s occupancy the final five, prices have gone up and the developers have hit their construction quota, okay? A developer must sell 75 to 80% of their building to get financing to build their project. The developer doesn’t build with your money. Your money goes into a lawyer’s trust. It is safe and insured.
A developer bills with financing and to have their financing released to them, they need to hit that construction quota and that’s why projects don’t go belly up in Toronto or Ontario. We have a safe investment, safe market ripe for investment and that’s why we are the jewel of the world’s crown. Now, we’ve gone over the deposits, how were they broken up? It’s 20%, you have to have some money exchanged hands at signing to make a contract binding. So, whether it’s $5000 or $10,000 then at the 30-day mark, you have the balance to 5%. Then, usually, you have another 5% at six months to nine months, another 5% to a year or just over. That’s 15 percent and usually the final five at a year and a half to two years. That’s 15%. What we saw in the year of COVID was that developers went to their financiers and asked for extended deposit structures. So, what covid did for us was it extended the timelines for your deposits. Now, imagine you were going to put 20% over the course of a year and a half. Now, you have to put 20% down over the course of three or five, four years. What does that mean to you?
The vast majority of us are withdrawing this money from another investment stream or pulling it out on a hillock. Either way, the longer we leave the money in those other streams, the more money they’re making us or the less interest we’re paying. So, the longer we have between deposits, the greater financially it is for us. So, we’re already on the plus before even signing the contract. Now, a lot of people say, “Well, what happens if I change my mind?” Every pre-construction purchase in Ontario has a 10-day cooling off period. It’s called the rescission period and for any reason whatsoever, you’re allowed to back off during the 10-day. This is also the time that you should take it to your lawyer for review but please ask us our opinion on a lawyer and don’t use a lawyer who doesn’t sell condos. A vast majority of times, there’s lawyers that have no clue what they’re doing, they’re going to charge you way too much to review a contract because they don’t know what to look for and they’re going to make ridiculous requests to the developer for changes. These projects have no shortage of buyers. If every buyer was allowed to make 10 changes to the contract, imagine the legal costs of the developer. We’d have to raise the price per square foot.
So, you should find some solace and certainty in knowing that you and 399 or 499 other individuals are signing the same contract. So, it’s important they use a proper lawyer for this. That’s during the 10-day period. We talked about deposits, we talked to both the 10-day. Now, what do you do for the duration of the build? Here’s the beauty of pre-construction investing. You don’t do anything. You sit back and then you call up me and say, “Costas, I heard there’s another project selling in the area. It’s been two years since we signed. What’s the price per square foot?” And you’ll be pleasantly surprised to see that in the next continuous years that we’re going to see fall in the future, prices are going to continue to go up and that’s strictly because of supply and demand fueled by immigration, foreign students and tourism. So, you sit back, you watch your money grow, isn’t that what investment supposed to be like? It’s done really well for me and hundreds of our clients and it’ll do well for you as well. Now, when it’s finally built, we go into a stage called interim occupancy. An interim occupancy is the time frame between when you get your keys to the buildings fully complete and then it registers.
This can be anywhere from three to six to eight to nine months depending on the height of a building. Now, a lot of people are like, “Oh no, I have to pay this thing called the Phantom Mortgage, I’m not paying down my real mortgage.” and they whine and they complain. Think of interim occupancy from a different perspective. Think of it with a different set of goggles. During interim occupancy, you’re not paying your mortgage. What you’re paying is the interest payable on your mortgage but not your principal, okay? And another thing you’re doing is usually the costs are lower than they would when you have title. Take this opportunity to actually build up some extra money because your expenses are lower and you’ve leased it out. All the condos that we present to you have a clause which allows you to lease it out during interim occupancy so take advantage of this and again, there’s a lot of information today and if anybody misses anything, First Access Condos on YouTube has all the episodes within 24 hours. If not, reach out to me [email protected].
So, interim occupancy could be anywhere from three months to a year and it’s not necessarily a bad time. Now, when your condo’s built, you get the keys, you have interim occupancy, you can occupy it, you can rent it, okay? You can leave it vacant if you want but then there will be HST implications and that’s going to be on another episode but if you want to talk HST, you can contact us again about that as well. Now, HST, I’ll hit it in a nutshell, is not payable, the re-bid is enacted if you’re going to owner occupy it. If you rent it out, it’s $24,000 essentially, no matter what the cost of your condo is and then you apply back to the CRA if you’re a landlord and they reimburse the majority, if not all of it. That’s it in a nutshell. I’ll go into further on another episode and if you call me. Now, once you’re supposed to get title and you get your mortgage, there is closing costs. Now, what are closing costs? A $600,000 condo in the city of Toronto, approximately $100,000 of that goes directly to government in development charges and levies and this is a little known fact. So, 20%, almost 20% of your unit, the cost of it goes directly to government. So, you are responsible to pay a small portion of that and I’m not defending developers, they do quite well, it’s a business or they wouldn’t be building but I am going to kind of talk about government and tell them they’re a little bit greedy.
So, the amount of money that they charge increases your purchase price and that is one of the reasons why condos are expensive in the city of Toronto. It’s one the government has hands in both pockets, okay? They’re in the cookie jar up to the elbow and a second thing is, they make it extremely difficult to build. So, if you want to know why condo prices are expensive, one is supply and demand, two, is government, okay? So, if you think it’s too expensive to talk to your local counselor, not like that’s going to get anything done but what you should know is and find a little bit of peace in this, you will be responsible to pay a fraction of what the developer pays. So, what do you pay? Well, developer charges used to be a big thing and the city usually increases them twice a year and they can run continuously until construction starts. So, developers put caps on these things. So, every project that you buy through us or look at through us, we have caps on development charges. That means if the charges exceed the cap that we have in place for you, then the developer will pay it and not you and this gives you peace of mind to know what you need to pay.
What we tell our clients is budget four to five percent of purchase price for developer related closing costs. In addition, you will have your land transfer tax and your legals but that is a hard number that you can figure out and the one on the developer side is fluid but we will be able to give you a ballpark and we have many lawyers that we use that are very well versed in condos, we use them for our own purchases and they can further assist you. Now that we talked about closing costs, I’m going to tell you what my favorite thing about pre-construction condos is and of course, it has to do with making money. Actually, it has to do with using your initial purchase to give you more purchases. It is building a real estate condo portfolio for the everyday investor and that’s what we believe here and that’s what we teach other realtors and that’s what we do for our clients. Now, picture this. You buy your condo for $500,000 and one bedroom in the city of Toronto in 2020. By 2024, 25, it has gone up in value to $700,000. Now, 80% of the $500 took you to $400. 80% of the $700 brings you to $560. The delta between the two is $160,000. So, you’ve grown in equity $160,000 that you can tap into. You pull out that money, you buy yourself a second pre-construction condo without any money from pocket.
Let’s talk about that. You’re one person, 2020, in 2025 got you another purchase. So, one purchase five years later made a second purchase, one became two. Your condo just multiplied with never reaching back into your pocket. Now what happened? You just grew and started a portfolio with one investment. That’s kind of what we want to do here. We want to build wealth and we invest for either our future, our children’s future or a better life and if we find an investment stream where with one initial investment, it can keep increasing and growing and growing throughout the years then, kind of, we’ve hit the jackpot. This is the Eldorado of the investment world and that’s why I love pre-construction condos. We hit the city of gold and so what happens? For this to work, of course, immigration needs to come in to the city, our city needs to keep growing but nobody’s really saying now that immigration is going to stop and covid was a speed bump, it wasn’t a roadblock and we’re seeing that now and our real estate market has proven it. So, what we’ve done is we’ve created an ability with leveraging, using equity built up to purchase and expand our portfolio and build and grow our portfolio.
So, let’s put this into perspective. If you have a five-year-old son and you buy a condo with him in mind, by the time he’s 11, you’ll buy a second one. By the time he’s 17, you’ll get a third one. So, by the time he’s in University, the kid will have three condos that you can give to him and say this will be your nest egg for your future and then you can take your money and spend it on your own retirement because life is not getting any cheaper and that’s the way we invest at first access. We take care of you, we take care of your children, we take care of our own futures and we treat them like they’re yours. Thank you.
So, now that we’ve discussed how and why pre-con and who a platinum agent was, let me tell you some numbers because you’re here to know how you’re going to make money and I’m going to tell you how we made hundreds of clients money using an example, over 15 of my clients bought in 2016 and this is the one I keep going to because it’s the one that’s real, tangible, it’s built, you can touch it, feel it, see it. We generated over three hundred percent gross returns in the Yonge and Eglinton area over the course of four years. Four years, three hundred plus percent gross returns, annualized returns of 60%, net returns of 260%. You want to know how? www.firstaccesscondos.com, register, click the TV link. Remember, if you say you’re from our TV show, we have special incentives for you. You’re going to get a callback and make more money, faster money, safer money, easier money than any other investment stream. Thank you. It is great talking to everybody and tune in next week.