an investor – the key to getting the best
value and suite is to buy as early in the
project as you can. There’s still some
risk in this approach, mind you, since
it’s not unheard of for projects to fail
to go ahead due to insufficient sales, or
take longer to complete than planned.
Some of the hottest projects have
been sold at the best prices before the
developer even builds a sales office –
often well before the general public
even knows about it. Investing in real
estate follows the same principal as
any other type of investing – buy low,
sell high – which is why it’s important
to buy early, when suite prices are at
their lowest. In some cases, buyers
who purchase early have already made
10–20%, on paper at least, compared to
the prices when they’re offered to the
general public.
The increase in prices for each
stage of a new development is directly
related to demand and how many
suites have been sold (sometimes it
can change by the hour). Prices don’t
increase across the board. For instance,
if a building’s one-bedroom suites are
proving popular and selling quickly
– say, because the project’s location is
especially appealing to single people –
the developer may increase the price
due to the strong demand. Neither
is there a set average increase at each
phase, but 4–5% is common in a high-
demand building for the initial two or
three phases, then tapering off.
For example, ‘Building X’ (we
can’t mention the specific condo for
competitive reasons, but this is a real,
live project in a major Canadian city)
is being released in several phases.
The average price per square foot is
set at $420, so for a 640-sq-ft unit, the
starting price amounts to $268,800.
Phase 1:
•
Developer’s friends and
family, and VIP agents who have
dealt with the developer and sold
several suites in the past. At this
stage, prices would start at $268,800
Phase 2
•
: VIP agents who have
a known track record of selling
numerous suites. At this stage,
prices would typically increase 4%
to $279,550
Phase 3:
•
Broker event, when all
the realtors are invited to bring
their clients. Prices would typically
increase another 4% to $290,750
Phase 4:
•
Potential buyers who have
pre-registered with the developer
online. Prices increase a further 4%
to $302,000
Phase 5:
•
General public ‘Grand
Opening.’ At this stage, the
prices would typically increase an
additional 1% to about $305,000
It’s important to remember that the
suites that go for $420 per square
foot are the very first ones sold in the
building. Prices go up as the sales
progress, but the choice of the units
diminishes. This means buyers, and
you as an investor, might pay several
thousand dollars more for the exact
same layout on a lower floor which
might have a lower resale value once
the building is completed if, for
example, it doesn’t have as nice a view.
On top of the price advantages
when buying early, there are
often other incentives, such as
rebates of 1% off the purchase price;
reduced assignment fees; and parking
spots at discounted prices. Some
developers even offer their VIP
buyers free vacations.
So, the million-dollar question
remains: who are these VIP agents
who can grant you such access? And,
how do you find them?
‘VIP’ is a term often used loosely
in many industries these days to make
clients feel as if they’re getting special
treatment. In the real estate business,
it’s common for realtors to boast of
‘VIP’ access in their advertising. But
VIP is actually how developers refer to
their list of realtors and clients. So, in
a way, there’s no such thing as a VIP
agent, since every developer has their
own list.
To determine if your prospective
realtor truly has VIP access to a
specific project, instead of asking
‘Are you a VIP agent?’, ask them how
many suites of the building you’re
interested in have sold. Ask how much
the suites have increased in price. And
ask what stage in the launch are they
currently at.
If you can’t get straight answers to
these questions, it’s safe to say that
realtor doesn’t have VIP access.