Skycraper Dreams

I may be the best property speculator in the world, or I’m about to loose my shirt. Only time will tell now.

I recently signed the paperwork to purchase a 1,375 square foot 2 bedroom (plus den) condo in the King’s Wharf development in Dartmouth, NS.  The unit I bought is a corner unit on the water side of the Keelson building, which will be built in the first phase of this massive development.  The floor plan on my unit is below.

Phase 1 includes The Keelson, and a high end apartment building, both with commercial/retail space available on the ground level.  Phase 2 is expected to include a 33 story tower that practically sits out in the harbour.  Quite stunning indeed.  Over the next 10 years this development is going to significantly change the landscape of downtown Dartmouth, which is what should make this a good investment.

So, how much did this lovely condo cost?  A whopping $419,000!  This would definitely be out of my price range if I were to live there and manage the mortgage payment.  But I’m into this for an investment.  At the moment I’m only required to put a $5,000 deposit on the condo with a further $5,000 due once the condo bylaws are approved (likely in January 2010).  The plan is to sell the condo just before the completion of construction so I do not have to actually assume the mortgage.  Hopefully I can realize a 10% – 15% capital gain on the value of the unit over the next 2.5 years when construction is scheduled to be completed.  After real estate fees, that leaves me with a net return of 5% – 10% or $20,950 – $41,900.  My cash on cash return for my $10,000 down-payment would be anywhere from 109% – 319%.  No bad huh?

When selecting my unit, my biggest concern was balancing the  price vs the size/location of the unit.  I wanted limit my exposure to being stuck with a large mortgage, but also ensure I bought a unit was easy to sell.  In the end I opted to choose the ‘best’ suite over cheaper, and smaller units that were also available.  The way I see it, it’s like following the first 3 rules of real estate: Location, Location, Location.   Hopefully its the location that will sell it, not the price.

Of course, there’s lots of things that can happen which could prevent me from making any money at all:

• Other investors might be planning on doing the same thing and there’s a possibility that there’s a glut of other condos on the market at the same time, forcing sale prices downward.
• Potential buyers may be more interested in other units available in other parts of the develop (the tower in particular) which could affect demand for this unit.
• The economic picture in the region can change and the development may not be completed to its full potential.  It’s entirely conceivable the only the first phase of the project is completed and I’m left with a lovely condo on an industrial site.

I’ll be sure to keep you posted on developments as the building gets under construction and the development takes shape.  Fingers crossed.

Steve Condos, Speculating capital gains, Condo, King's Wharf