John in Toronto Real Estate News, Legal
An article in the Globe and Mail this weekend tells the story of a handful of investors who pre-purchased condominium suites at the now defunct Sapphire Tower condo from Toronto developer Harry Stinson.
Twenty investors pre-purchased these condos through Mr. Stinson but instead of putting down a deposit, which is typical in pre-construction condo purchases, the investors paid for the suites in full. They did this because Mr. Stinson made them what appeared to be an irresistible offer.
"If we invested in multiple units, we'd get 50 cents on the going sales rate, meaning if the units were selling for $100,000 we got them for $50,000," explains Mr. Bergart, 57, over a recent lunch at a Chinese restaurant. "I thought it was a terrific deal."
As did 19 others collectively known as the Special Investors Group. A diverse mix of Canadians and foreigners, some from as far away as the Cayman Islands and Florida, they range in age from 30 to retirement age - doctors, lawyers and other professionals, some of whom took out loans or spent their life's savings to get in on Sapphire Tower. And now, they may lose their money.
Though few of us have ever played for stakes this high, I am sure that many of us have been offered that 'once-in-a-lifetime' investment opportunity. Sometimes our desire to make a shrewd real estate investment can cloud our better judgement. In times like these, decisions are largely based on wishful thinking rather than prudent judgement.
One thing I’ve learned as a real estate investor is that a great lawyer can truly be an investor's best friend. A call to my lawyer never amounts to a cheerleading session. Whenever I tell my lawyer about a property I'm interested in, he never tells me why it’s a great investment and he never pats me on the back for finding a great deal. He tells me, in great detail, why my decision to invest is a bad one. He informs me of each and every risk, big or small, which is associated with that particular investment. I never shy away from calling him, though I know that many people avoid those that may rain on their parade when they believe they've stumbled upon something big. My belief is that proper and continued risk assessment, not wishful thinking, will bring me closer to realizing my goals over time.
If you, much like the Sapphire Tower investors, happen to come across a real estate investment that seems too good to be true, find yourself a good lawyer who will tell you why you’re making a bad decision. If you still decide to go ahead with it and the deal does go bad, at least you'll be prepared for the worst.
John is a sales associate at Prudential Properties Plus in Toronto and a founder of Realosophy. Email John