Last Updated on October 24, 2023 by Neil Sharma
An upcoming webinar will explore why flipping condo assignments is a relatively simple way to invest in real estate: in addition to forgoing the hassle of taking out a mortgage—and of course, dealing with tenants—it’s a pure appreciation play.
“You’re buying real estate in the form of a contract and you get all of the appreciation you’d get from buying real estate, but you haven’t actually bought it,” said Ryan Coyle, co-founder of Connect.ca Realty, which will be hosting the webinar on July 22 from 2-3 PM.
“You put down a deposit for a contract and you get all the leverage of owning a property and all the appreciation without any mortgage payments. When you flip the contract, you make a lot of money because the contract’s appreciated.”
Most developments only require a mortgage preapproval letter, which is much less onerous to obtain than an actual mortgage, and the condo preconstruction segment of the investment market proffers investors the opportunity to purchase multiple properties, the appreciation on all of which they can ride without having to secure financing, like they would on the resale market.
“I’ve used this strategy often,” said Coyle, a seasoned investor. “Condos are coming up for completion almost every year, and because they’re staggered that way, we can sell the assignment and have that extra income every year.”
“By assigning the contract to a buyer, you cross your name off the contract and add the buyer’s name, and they take on all the responsibilities, including closing costs and taking out the mortgage. They also pay you back your deposit plus your profit on closing.”
There are some potential hurdles to flipping assignments, namely tax implications that could be heavy if the assignor doesn’t offload it the right way. Coyle noted that the webinar will teach viewers how to avoid such a tax burden.
“Flipped assignments are treated as sophisticated investments, so it’s a full income tax versus capital gains. An accountant will be on our webinar to explain this and how to make a good business out of assignment flipping. If you do it through a corporation, you pay 12.2% tax, which is lower than capital gains.”
The best time to flip an assignment is right before closing so that no money is left on the table, added Coyle.
“You don’t want to sell it too early; you want to sell it closer to completion otherwise you leave a lot of money on the table, at which point the developer will allow it. Typically, investors will sell their assignment to another investor or to an end-user who really wants to live at the desirable development where you’ve purchased your assignment.”
To register for Buying & Selling Condo Assignments, click here.
Neil Sharma is the Editor-In-Chief of Canadian Real Estate Wealth and Real Estate Professional. As a journalist, he has covered Canada’s housing market for the Toronto Star, Toronto Sun, National Post, and other publications, specializing in everything from market trends to mortgage and investment advice. He can be reached at neil@crewmedia.ca.
