Every day I hear from people who want to get into condo ownership but they just don’t have the money for the typical 15-20% deposit that is required.
Let’s face it, if you are just starting out, scraping together $30-40K or more is hard. It takes a long time!
And the problem is that every year you save condo prices just keep getting higher. Each passing year you are missing out on more and more equity and your net worth is barely moving.
If you are in this situation, or if you are the parent of a child in this situation, I have some great news for you today:
And so it begins…
Selling into the teeth of a slow economy, with condos sprouting around you like zits on a sophomore, it’s getting harder and harder to be a unit-flogger. Anyone who can run a calculator knows that 600-foot cubbyholes selling for $300,000 and renting for $1,400, with $600 a month in fees and taxes, are money pits. The only possible reason for buying one – especially as yet unbuilt – would be for capital appreciation between the day of the deposit and the orgiastic moment of closing.
And this brings us to Eau du Soleil. No, no, this is not another post on those Quebecois separatists (who now insist they will leave Canada but keep the loonie), but the real epitome of Francophone culture, conveniently located on the Toronto waterfront. There two towers, 63 and 49 stories, will arc upward in a joie-de-vivre kinda way, making everyone grinding past on the Gardiner Expressway feel like they’re piloting their Deux Chevaux to a tryst with a coquette named Gisele.
So, here’s the deal.
Buy a $300,000 box with just $2,500 down, and then cough up $500 a month for 47 months, which in French is known as almost four years. Then, in 2018 (when the place is actually built, maybe) another bunch of money to make up 15% of the purchase price. The cost is $26,000 (up to closing), and the developer will give you gifts – a $1,500 transit pass, a $2,500 Caribbean holiday, free parking, free locker and free upgrades.
Smell the desperation yet? It gets worse. Cue the car.
“A lot of young people put buying or leasing a new car as a top priority as soon as they start to earn some money,” says the Eau du Soleil agent Andrew la Fleur (seriously), a man with beaucoup of that certain je-ne-sais-quoi. “But a new car is actually a terrible investment. Let’s compare buying a condo at Eau Du Soleil with leasing a new car (for this example I just used a round figure of $300k for the condo purchase price).”
Yes, and here is the comparison, ‘proving’ that buying a condo is better than puberty.
Now, putting money into a depreciating hunk of metal that will inevitably end up being hip replacements for Boomers is, yes, a horrible investment decision. Cars are tools. They help you get to a job, or cure the mental illness associated with living in six hundred square feet overlooking an expressway.
But the bigger issue here is publishing marketing materials which say, categorically, that a $300,000 condo bought on the installment plan will be worth $381,000 on the day you actually own it. Counting on 3% annual appreciation in the price of a condo in a mega-project like this, with tens of thousands of other units being added every year into a market as bloated as a grain-fed foie gras duck, is incroyable.
But here’s just another example of why real estate is the wild west of investing, where marketers, floggers, agents and developers can say what they wish, and promise unrealistic returns, unregulated. (Try that with a mutual fund or an ETF.) And who are prime targets for this kind of fiscal fantasy? Yep, those real estate-horny Boomer parents.
Who is this perfect for, Andrew asks?
“Parents who want to help their kids get into home ownership: Many parents with kids in the 16-30 age bracket are paying the initial $2500 then the kid pays the $500/month.
“It’s a great way to teach your kids about saving, investing, the importance of home ownership, and really it’s a forced savings plan where you make sure that if your child does have a job they are putting a few hundred away every month into an investment that will grow and that is a place they can actually live in and enjoy in a 4 years’ time. Or, if their life situation changes, they rent it out as a first investment property.”
And guess what they learn about then?