An investment you can’t resist

How would like to invest $500,000 or more in a private condominium real estate corporation?

A lot of smart people that work in this industry say that it is a very safe investment and the market looks rosy. According to these experts, the market always looks rosy.

There are 40,000 licenced agents in the GTA who can get you into the market for as little as 10% down, sometimes less.

There are high—sometimes extremely high—front-end costs when you buy this investment. There are also expensive back-end costs when you sell.

The corporation's board has five directors that you have never heard of and you probably have never seen. They have no proven track record and they may, or may not, have any skills in accounting, purchasing, human relations, budgeting, inventory control or have any management background what-so-ever. They may have little or no understanding of the property that the corporation owns.

They hire a management company to look after all those details. As an owner, you will have little or no knowledge about that company, its track record or any of its employees.

The directors can be replaced at the corporation's Annual General Meetings by others who may have less knowledge and skills than the incumbents or maybe more. It can be hard to tell.

Once you buy into a condo you will pay monthly fees to cover the bills and maintain the corporation's assets. You will have no direct say in how high those fees will be or what they will be spent on.

There is a possibility that this condo, from time to time, may need extra capital. When this happens, you will have to pay—on short notice—anywhere from a few hundred to a few thousand dollars in special assessments. It's rare, but it can happen, that you will have to kick in more than that.

If you fail to obey all the corporation instruments, policies and rules, you may have to pay all the legal and administration costs that the board spends in getting you to obey. This can run into tens of thousands of dollars in legal fees, sometimes more.

Finally, if the condo corporation runs into serious financial difficulties, or if you cannot pay all of your monthly fees, special assessments, and/or the extra costs that the directors and the corporation's law firm hits you with, you could lose your entire investment plus be driven into personal bankruptcy.

Are you interested? Sounds too risky? You think that no one would buy such a pig in the poke?

Hundreds of thousands of people in Ontario have invested much of their savings in private non-profit condo corporations that are managed by amateur directors that control a cash flow of anywhere from a few thousand to a half-million dollars a month with next to no oversight.

Most owners blindly put their homes, their biggest and sometimes only investment, into the hands of unqualified amateurs—many who can't add up the numbers on their grocery-store tape let alone read their condo's monthly financial statements—and then don't keep an eye on what their directors are doing until it's too late. Then it's too late.

If you plan to jump in, good luck.

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