I have started my real estate investment career in earnest in 1997 with rental pooled condos as it provides a turn-key operation with little management headaches, ideal for a part-time investor with a busy career or family, as elaborated further in my book “80 Lessons Learned on the Road from $80,000 to $80,000,000”.
A rental pooled condo differs from a normal condo that is rented as follows: the rents of numerous (often several dozen to a hundred or so) condos are pooled and then distributed based on a factor that considers units size and rent levels that may differ between these condos, the so called “notional rent”. So even if your condo, and perhaps 3 others, are vacant you still collect a sizable monthly payment. You don’t even know yours might be vacant. The property manager communicate regularly with you, usually monthly about the rents collected and your share of it, and/or your required additional payments for a new fridge, a new paint job or a new carpet (some firms offer, for an additional fee, to even take care of that occasional cheque you have to write)
Several firms offer them and here are a few guidelines to decide if the specific rental pooled condo is a sound investment strategy for you:
A) It is in a location with some decent & growing economic activity today and in 10 years, and it is not just a retirement town with too many seniors and even over supply (such as PEI or Vancouver Island today).
B) The property has decent upgrades and/or a large enough reserve fund to fund likely future upgrades such as a new roof, new parking lot or new boilers.
C) It is professionally managed, by a third party manager with experience in rental pooled condos and/or mixed strata/rental units.
D) You can hold 10+ years and do not need immediate liquidity.
E) It cash-flows at the current (not projected) rents with 25% down at 25 year amortization (or 20% down with 30 year am), using normal vacancies and realistic expenses (such as property taxes, condo fees, management fees, mortgage payments).
F) You do not buy the ugliest, hardest to sell units such as a basement unit or small 1BRs even though you may get better cash-flow there. Have a look at the exit too, i.e. look for above-ground, large, view, balcony or patio units and ideally, in-suite laundry or 2BR, ideally with 1.5 or 2 bathrooms.
G) You have the required 20-30% downpayment in cash and can qualify for a new mortgage.
Tip: Ask to speak to one of their current investor in a previous project who has had an asset for 3+ years.
I still own two of my rental pooled condos. One I bought in 1998 and one in 2003. Both have gone up in value, and after a re-finance 5 years in I own both with no cash invested with about a break to slightly positive even cash-flow.
You will probably pay a slight premium over a similar, non-rental pooled condo but you will have cash-flow from day one and no headaches. Of course, if you buy the whole building you will pay less per unit and get a better ROI as the rent is the same (on far less invested) and that is why I switched to multi-family in 2000 but then you also need more cash. Buildings are priced a bit like flour or sugar: you pay less per pound if you buy 100 lbs as opposed to only one.
Nevertheless, a single rental pooled condo is a great way to get into the real estate market and become a real estate owner, without management headaches (which was a critical consideration for me then as elaborated further in my book). Or, you can invest with us, of course, with even less headaches and/or less $s required and no mortgage qualification, in a more diversified, sharply acquired and impeccably managed asset pool.
Thomas Beyer, President
Prestigious Properties Group
T: 403-678-3330 or 604-564-7673