Is buying new constructions with future close date good investmen

[Sam Hanaa]

I see too many new constructions around GTA, and I was wondering if a good idea to invest in a house that the closing date will be in 2022 or 23, so downpayment can be paid gradually, also inflation rate will do its magic to reduce its price value compared to the market at that time. any comment? 

[David Steinbok]

I worked in construction for almost 20 years, mostly in the condos. There is a paper taped to the window in each unit, it's an upgrade colour chart with the name of every owner. From my experience I'd say about 75% of Toronto condos are owned by people with Asian or Indian names.  

Condos can be good investments. Everything cashflows if you put a larger down payment like 50%. Some people park their money in condos, as canadian real estate is relatively safe, and we have a good banking system compared to other countries. So they buy a new condo and price goes up as its built. You get rent and some appreciation. So as a % return on your money, it's better than buying mutual funds or a g.i.c. 

But if you put the minimum 20% then you cant cash flow, and the carrying costs will eat away at you day job pay cheque. 

I look for cash flowing property. 

Rent>mortgage+tax+ins+$200 is my rule. 

It's a starting point, then you add in maintenance, vacancy, management

And my cash on cash yearly return has to be between 8-10%. Meaning if it costs me $56k to buy the house, then if it cashflows 400$/month I make $4800 a year after expenses witch is about 8%. The mortgage paydown and appreciation is an added bonus but I dont count on it, because even though its raising my net worth, I can use it to buy groceries. 

This is the way I was taught and it's worked for me. There are lots of properties that fit the strategy, you just have to find them. Or in my case, I make the house work by renovating it into 2 apartments