Pre-construction Condo Investment : the Most Important Tips

Have you ever considered the opportunity to buy a future property with gradually paying for it? Pre-construction condo investment always seems like a good investment, because people always need a place to live or to do their business in.

When you invest in buying a pre-construction condo, you can pay as you go, depending on the deposit structure of each development. Since the price of real estate is increasing over time in the long term, you might make quite a lot of money once your condo is actually completed. (depending on your local real estate market)

Pre-construction condos, Risky investments or Not?

It doesn’t matter if you’re an investor or a first-time buyer, you better accept the fact that buying a pre-construction condo might be risky. But if you proceed the whole purchase process carefully, the reward might be worth it.

You can buy a condo for tomorrow but you can pay for it during a period of 4-5 years time. You better consider some important points before buying a condo which has not been built yet. Let’s review some vital issues for your best benefit.

Things to consider while buying a pre-construction:

The initial pre-sales is the best time for a pre-construction condo investment. Within this time limit, the property is available at the lowest possible price. So take your chance because builders tend to increase the prices after the first sale.

The most interesting advantage for buying a condo before it’s built is that while the home is under construction, its value could be rising. Besides, since you would be the first owner of a home, you can pick the final details and materials or add customized items for lighting, kitchen cabinets and floor texture.

You can also get upgrades and turn it into your dream house. As an early investor, you will be able to choose the premium units with the best views or those which have access to more facilities and amenities.

Another attractive advantage of buying a pre-construction condo is the deposit structure. It means depending on your developer, you may have more options for paying 5% quarterly or every 6 months, rather than paying the full 20% up front. As a result, you will have more money in the bank to receive a return on your investments. This is a very important benefit for first-time investors in particular.

In Toronto, the median price of a condo grew 4.9% year-over-year. Although the appreciation rate is not the same in different cities, history proved that condos in big cities will likely appreciate at a steady rate in the long term ( 5-10 years ).

What to do before buying a pre-construction:

After all, you have to do your own homework. Remember! You should be patient and ready for the extra costs and sometimes delays. Make sure you completely understand the payment plan and any additional costs stipulated in the contract. You can even use the experience of a Top Toronto real estate agent or a lawyer to deal with the developer for you.

Your real estate agent or advisor can inform you about how much extra you have to pay in closing costs. Sometimes extra costs may add 1-3 % or more to the price of your condo. These costs usually include legal fees, provincial warranty program, insurance and taxes.

You can also do some research about the developer and their previous projects. Check the builder’s closing history. In the pre-construction properties projects, delays are quite inevitable. But if you see more than 8 months of delay in builder’s previous projects, it won’t be a good sign. It is better to find another developer.

Sometimes the specified move-in dates may be extended several times and developers can explain it as “unavoidable delay”. Try to find other people who have purchased the previous projects of the same builder. Use their advice before you make your final decision.

There is also a cooling-off period; it is a time frame within which you have the right to cancel your contract and get your deposits back. In Ontario for condo pre-construction developments, it’s 10 calendar days. It depends on the province you live in. This cooling-off period is obligatory and penalty-free. Take full advantage of this opportunity and thoroughly evaluate your final decision.

Finding a reliable and loyal developer is important, but what is even more important is finding an investment condo opportunity in the right location. Try to find some popular developing neighborhoods. And try not to buy parking in a downtown location.

Before you move in :

Two weeks to a month before the move-in date, you can see your condo in its finished form for the first time. It is pre-delivery inspection (PDI) time for you. There would be a representative from the developer company who has a form.

Anything you feel needs to be fixed or changed or those points which have been left out from your agreement must be mentioned in that form. You can also bring another party like a home inspector to help you in the inspection process from designing to mechanical points. There are samples of PDI checklists available online.

It takes 3 months or longer to complete the registration process. Then your condo will be transferred to you. You would be able to move in during the registration, but it will be considered as temporary occupancy. It means you have to pay monthly occupancy fees to the builder.

If your financial circumstances made you sell your pre-construction condo before its closing date, you should only assign your contract between you and the developer to the new buyer. Based on this assignment, the new buyer will take your place (your rights and obligations) according to every detail mentioned in your original contract with the developer.

Another important issue that you should track is the floor plan. Check every square foot of your floor plan. Make sure you get exactly what you agreed and paid for. You can’t fully trust advertisements. Before investing, be sure of the floor plan and consider the use of space. Review the details in the builder’s contract to avoid excessive costs and fees.

The real estate agents can help you through all these steps. When it comes to the condo investment, you can use their extensive knowledge about every single detail that you might overlook. You can even ask them to negotiate on your behalf.