The condo speculators are back

New generation of investors bets on quick appreciation, but this time developers are setting limits

By the time attorney Ken Lyons closed on his one-bedroom condominium in Bowdoin Place on Boston’s Cambridge Street, the unit had increased about 10 percent in value from the pre-construction price he had paid. Within weeks, he was able to lease it out at a rent higher than his expenses. Lyons’ investment appreciated and is now cash-flow positive.

The two most common ways for speculators to make money are to buy a condo and rent it out or to resell it for a higher price.

In the rental scenario, the rent received needs to be higher than mortgage interest, taxes, condo fees and resale costs in order to net positive cash flow.

An increase in property value over that time also puts money in the investor’s pocket. Speculators seeking to resell a condo quickly will bank on paying a discounted price, usually early in the pre-construction sales cycle, and reselling the unit soon after closing at a much higher price.

The condo speculators are back [Boston Business Journal]