Happy Monday. Here’s an interesting CBC article that kinda makes you scratch your head. Urbancorp, a prominent GTA builder has filed for bankruptcy.
Yet another risk investors usually fail to consider when investing in pre-construction real estate.
What’s really confusing is how this is even possible in light of the screaming hot Toronto real estate market where inventory for new homes, especially low rise is low and demand very high.
From my previous corporate life as a CFO, I suspect that the company management really mucked things up here. Assessing financial stability of a developer is something most pre-construction investors fail to do adequately.
Simply buying in to such projects because the location is great or because the underlying real estate market prices are booming, without doing proper due diligence on the developer may very result in some very expensive lessons learned… after the fact, when it is already to late.
“It’s not clear what the news means for buyers who have bought or paid deposits for developments that have yet to be completed. A voice mail to Saskin from CBC News on Monday was not immediately returned.”
Although Tarion is currently saying that affected buyers would be protected. But who really knows if that will be the case after all the dust settles from this fiasco. Indeed, Tarion had previously advised this company that Tarion coverage may be cut-off.
This is only one of the reasons why I have never been a fan of buying pre-construction condos aor real estate as investments.
There are way better and much less risky real estate investments out there. So why bother and expose yourself to unnecessary unknown risks and speculative returns?
There are pre-construction investment strategies that I am a fan off that usually offer higher returns with lower risk than the most commonly used strategy of buying pre-construction condo units or low rise houses. In fact, these are the very strategies that “big money” investors use to truly build their wealth..
Unfortunately, most real estate agents peddling new construction real estate as investments either are totally unaware of these or choose not educated their clients or would be on these since their is nothing in it for them and selling pre-construction units is easy and very profitable to them, so why would they even bother to do the right thing?
http://www.cbc.ca/news/business/urbancorp-housing-restructuring-1.3551705
