Why most Toronto condo buyers are doing it wrong: The biggest secret in Toronto real estate investment

It's no secret that Toronto real estate has been booming for the last couple years. The Toronto Real Estate Board reported that the average selling price for condos sold in the GTA was up 6.4% YOY to $541,106. Both of these figures grew at more than twice the rate of inflation due to first time buyers driving demand looking to enter a hot market. There's a lot more you can do beyond purchasing a pre-construction condo and waiting to get huge returns that Toronto buyers don't know about.

What's the secret?

There is a private network of realtors working in pre-construction condo sales with exclusive buying power that you've likely never heard of. The process is referred to as "Platinum buying" and the benefits of being a platinum buyer are massive. When you add up all of the discounts, free upgrades, early access, capped fees, and more - we're talking in the tens of thousands of dollars of returns - on top of what you'd already earn by being a savvy investor in a productive market.

What is platinum buying?

Platinum buying is when certain real estate agents have built up a strong rapport with builders and are given exclusive buying power (basically first access and perks) to projects before any one else. In selling a condo, the the stages are typically 1) Platinum, 2) VIP, 3) All agents, 4) Public sale.

What is different about a platinum purchase than a regular public sale purchase?

In pre-construction condo buying, time is the most important thing. 100% of the time the public sale is more expensive than the day 1 Platinum price. It depends on the market but in 2017 for example, prices for the same unit (even within the platinum stage) were going up $10,000 a week. On top of that, most of the time there is an extended deposit structure, capped development fees (which can be massive considering the city fees tenants typically incur during development), discount assignments if you want to sell before closing, discounted parking prices, discounted lockers, upgraded amenities in the kitchen or bathroom, and generally more inventory.

Do benefits differ between platinum realtors?

No. Every platinum realtor gets the same package of incentives. Being in that group is exclusive enough. The only variance would come week after week if one realtor is actually in the VIP (second) stage vs. a platinum realtor. Sometimes the realtors can get different inventories than each other but it's not always the case.

Why does it exist?

There are tens of thousands of licensed real estate agents in Ontario but a lot of them don't understand how selling pre-construction condos work. There is a longstanding system in place that if you haven't worked in extensively, you just don't get. For instance, the agreement to purchase and sale is 50 pages instead of ten. There are tons of specifics to look for inside the agreements. Prices are not negotiable yet agents still try. There is a ten day cooling off period for buyers with cold feet. You are buying off of floor plans, not showings. Builders have tons of things to manage - purchasing the land, construction, marketing, financing, etc. and sales is just one component. They do not have time for the headaches onboarding the newbies. The easier the better, and as long as the ROI on the sale works for them, they're happy.

How small is this group?

It definitely ranges depending on the developer but the smallest group I've been in is about 30 agents. If you get up to 100 agents, there's a good chance the property is not in Platinum stage anymore - it's in the VIP stage at that point.

Does every builder do it?

Every builder has some form of it but there is variance. The size of the platinum group varies, access to units can vary, etc. Sometimes the realtors are given specific locations in the property and told to sell those. Sometimes the realtors are given everything and allowed to sell whatever they want. Sometimes to get 10 units, the realtor is told "Here sell these 5 first and we'll give you 5 after that." It all depends on the builder's strategy for that property. But everyone does it. Tridel, Menkes, Cresford, CentreCourt, Great Gulf, Pemberton, etc.

How does it work?

The builder doesn't necessarily set the strategy. They hire a brokerage to manage the sales. The are a handful of main brokerages that manage the pre-construction buying process: Milborne, Baker, Cornerstone, In2ition, and International Home Marketing Group (IHMG). Not all builders outsource the sales though; for example, Tridel and Cresford don't use these brokerages.

As a platinum realtor, are you in touch with the brokerage or the developer?

Both. From a working standpoint, I deal with the brokerage. But the developer is monitoring my performance for them and will reach out now and then. Typically, if a project is successful, the same brokerage and same team at that brokerage will manage projects for a given developer, so the relationship grows a lot over time.

Should I be talking to the brokerage or the platinum realtor?

The realtor. Even the brokerage will tell you to talk to a realtor. They don't want to waste time explaining the transaction details to you. They'll literally tell you it's not on sale even when it is and ask you to sign up to the mailing list (which is the public release) because it's such a pain for them. I've literally seen that happen while seeing platinums being signed in the back room.

Does the brokerage or developer choose who is platinum?

The both do. Performing for the brokerage or performing for the developer. Both would be happy to have a strong realtor with great clients in their platinum distribution list.

What's with this 10 day cooling off period?

Buyers of preconstruction condos have ten days after signing the agreement to review the documents that they signed and they can change their mind within those 10 days. Almost all of my clients follow through with the purchase though, because I don't push and I insist on education so people don't get cold feet. Other agents who run high-pressure sales tactics or mislead the buyers usually get this and it's a huge waste of everyone's time. It blocks inventory, has tons of paper work, involves a ton of stakeholders who'd best be served not being involved.

How do I know which ones are currently in platinum?

Talk to your agent, email or call me, or join the Condovo mailing list.

What are the downsides of platinum?

That so many people have missed out on it and bought condos for way more than they needed to.

How do I get on a platinum realtor's list?

You can join mine - Free! Other than your basic contact info, nothing else is required. It really is a "who you know" exclusive.

What's the best way to position yourself for positive returns?

Be ready to buy. Do all your research ahead of time. Know your budget, how many rooms, what your realtor's contact info is, what view you want to face, and be ready to go as early as possible because the earlier you go, the more you save on your purchase vs. the public sale that everyone else will be joining at.