Quote:
Originally Posted by HillStreetBlues
If this guy were selling securities, the OSC would have his license in a heartbeat. I'm not informed enough to make comments about his claims or the quality of his developments, but you can not compare investments with different risk levels, and you can not talk about specific returns over specific (short) periods. You must explain the risk of lower returns or losses. Well, that's true of people who promote stocks, but not real estate. People selling real estate are basically without regulation, and can say whatever they please.
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Right.
Here's the game he's proposing as I understand it:
- Place a 'down payment' of $20k or more on a unit
- I will use this money to build my condo project
- In three years when the project is complete, I will pay you 10% per year for your deposit (+1% for every $10k over and above $20k) and I will flip the condo for a profit
- Or you know, you can keep the condo you put the money down on because you love the building
- PROFIT FOR EVERYONE!
Let's take his hypothetical $100k studio loft as an example.
I give him $20k. Three years from now, a miracle occurs and the project is completed on time, and he gives me my $20k back plus $6600. The loft is now worth...who knows.
In his scenario, the loft is now worth $130k, and he's making $24k more on the sale than he was originally.
Is that a realistic scenario? He's predicting 10% growth on a $100k condo in a softening market for 3 straight years, give or take a percentage point.
What if the condo takes an extra year? He's just given you another $3300. Is he assuming a higher valuation at that point?
What if he doesn't get the growth he expects? An entirely reasonable assumption with a softening market, an unconventional locale for this loft, and to be quite honest, the history of the Stinson School Lofts. Best case scenario, he breaks even. Worst case scenario, he is negative on some lofts, positive on others, maybe makes money, maybe doesn't.
But who cares about him right? If he breaks even, that's on him. As long as you get your $20k back plus interest.
But what if he just goes bankrupt? Then what? I don't have a contract in front of me, but it's not crazy to imagine that the money you expect in interest, all of it, goes poof. And then you're stuck with a down payment on a condo you never wanted to live in to begin with. Assuming it even gets built.
edit- Also, who the hell is only making 1% on their RRSPs???