How Much Research or “Due Diligence” Did You Invest When You Made That Condo Purchase

Sophisticated investors swear by it but a staggering majority of speculators in Condoland couldn’t even explain to you what it is.

I’m talking about “Due Diligence“.

For decades now condo developers and builders have figuratively had “a licence to steal“.

If you look at all of the propaganda like the Condo Act, Tarion Warranty, Building Code, Ontario Municipal Board, advertising, web sites, brochures, contracts, right down to features and detail sheets, you will discover the most despicable consumer shell game imaginable!

The truly stunning thing is that every aspect of the game (called “The Condo Game” in one CBC documentary that I was asked to participate in) is so conclusively “rigged against the consumer”, who incidentally is the only one that puts up any money betting on the promises and representation of everyone else involved.

To be bluntly honest, the consumer really has to accept as a good portion of the blame for so voluntarily succumbing to the slight-of-hand antics of well healed builders and developers who most refined skill is manipulating existing norms and standards of the building code enabling them to deliver materially flawed and sub-standard end-product condos buildings while grabbing unjustifiably outrageous profits through a lack of regulation.

I’ve blogged enough about how flawed the entire infrastructure underpinning Condoland is.

Now let’s face the blame that each and everyone buying into this shell game must accept.

Don’t get me wrong, I sympathize with each and every buyer of a condo unit in Ontario (as well as all of Canada for that matter, as the game is fundamentally the same everywhere) whether they are a local or international speculator or a legitimate end-use buyer in search for a home, for a number of specific reasons.

I feel bad because you’ve been “socially conditioned” to play the role of “the dupe” in a game of “bait and switch” and voluntarily jump into the game without any lifeboat or mature thought.

No-one could believe the level and depth of dishonesty tolerated by our governments, whom I had always understood as existing expressly to protect the best interests of “the people” (consumers).

A simple question as to why our various levels of government would allow such a flagrantly dishonest approach to selling anything.

Consumers in Ontario have more protection when buying a shirt than they do buying a million dollar condo!

It all makes legitimately no sense whatsoever!

Commercial buildings are built by union workers who have to be formally educated prior to working on site and each step of the way is documented and signed off by a professional.

In Condoland, the residential counterpart does not have to use union contractors!

I’m told that anyone with a pickup truck can actually find work and in a Province where an “Underground Economy” specifically in the construction industry is so prominent, I can guess where a lot of that economy works!

Residential condo developers build their self-proclaimed “mansions in the clouds” on MINIMUM BID CONTRACTS!

That in itself should send shocks down your spine!

The math is quite simple.  With “Toronto boasting more new condo towers being built than any other North American city” despite Canada being just 10% population of America thus American major cities, selling a prices that cannot be cost justified, let me ask you:  “can you hear the tick, tick, tick“?

I stopped endorsing Condo a few years back now, unwilling and frankly unable to face a consumer and misrepresent that this is a good time to invest in Condoland”.

I have continued to help client find condo homes for them to live in and can tell you that I don’t visit the new condo market.

Older buildings (pre 2000) offer superior construction and building science, especially when compared with Window Wall construction that has dominated the market since 2000.

To all those thousands of purchasers over the past three to four years since I announced on simplycondos.com the findings of reports from numerous investor funds and investor groups, that “the math simply no longer works” I extend my respect for you commitment to invest, but also my sympathies for willfullinjg accepting excessive “risk”.

When the scales tipped from being able to buy with 20% – 25% down (no mortgage insurance requirement then) and have the rental income cover the maintenance, taxes and mortgage costs, the “risk factor” multiplies and that tipping point passed years ago in Condoland.

In my professional opinion it always boils down to “the math”.

A decade ago my wife and I were buying condos at approximately $300 per square foot.

Today that number is over $800 per square foot and there are multiples more buildings going up and multiples more coming on stream weekly!

You simply can’t buy today with having to support your costs every month, I guess following the concept of decoupling that “negative cashflow” when selling but that logic is dependent upon equity growth continuing forever or at least well into the future.

I simply do not believe (I have no B.A. or M.A. in finance but common sense math has never been a challenge for me) that anything, not simply real estate or condos  . . . .  but anything, can go up in price forever!

Walking out into one or two sales offices and buying is not doing ‘due diligence’!

Attending a “VIP Sales Event” buying the story that you are getting “advanced selection of suites at preferred prices” is not doing ‘due diligence’!

These events are the way developer rid themselves of their inventories of “dog suites” before there is a building where buyers would see what they were buying!

Think about it for a minute!

Would you if you were a developer give away your best suites at a discount . . . . . ever!?!

The worst case scenario would be that the developer would have their premier suites available for showing AFTER the building was built and get top price for them!

Much better than having that inventory of “dog suites“.

Are you feeling me?

Thinking that you can do your own research is another misnomer as developer buy blank space in various media and product “editorial-looking” propaganda so buyers think that a credible journalist (is there such a thing?) actually wrote the article!

These are but a couple of the snares that await consumers in Condoland.

Checking out a developer’s web site for example should tell you its futile as there is no regulation about what any company can say about itself regardless of how untruthful or misrepresentative.

When someone tells you that they “can get you into one of these events” ask them what qualifies them to gain such beneficial access?   How long they have been in the business and specifically how many similar transactions they’ve made over that time period.

Then ask them to confirm their “agency” with you and explain “fiduciary” with assurances that they are representing your best interests in this transaction.

Then simply, shut up and listen!  If the answers don’t satisfy you, consider working with someone else, but if you are attending these VIP sales Events, you are leaning your ladder to success on the wrong branch.  You are way late!

I won’t even attend these other than for editorial reasons (I sometimes attend them being invited to virtually them all still) yet the remain full to overflowing with attendees even these days.

Condoland is fraught with risk and the past five years or so have taken it beyond fiscal common sense investing.

When you see how flawed the product you are buying or investing in is, you legitimately might want to talk with me or at least read this blog (www.simplycharles.com).

Believe me I’m not looking for business.

The game is rigged and investors willfully just go along with whatever seems to come at them in this industry.

It really is time that condo investors specifically learn how to measure risk and reward in this industry.

I’m Charles

 

 

 

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