Buying Pre-Construction Condos

Last time we spoke about some of the myths surrounding pre-construction condos. I thought it was important because some of these myths stop investors from capitalizing on amazing opportunities. If you’re looking to purchase a Toronto condo as an income property pre-construction condos should be your first choice.

The first step to buying a pre-construction condo is visiting a sales office to purchase one. Once you’ve filled out all the paperwork, applied for a mortgage and put down your first deposit you’re ready to go. The reason I say first deposit because there is a deposit schedule. Let’s take for example that your planning on purchasing a $340 000 condo downtown the schedule would look like this:

1.        5% down on signing                     = $17,000
2.    5% down 90 days after signing      = $17,000
3.      5% down 270 days after signing    = $17,000
4.      5% on occupancy                        =$17,000 

           Total                                             =$68,000

By putting 20% down you will own the property.  By the time the condo is complete it will increase in value which means that you’re already making a return on your investment.

 

Another benefit of buying pre-construction is the developer’s incentives. These usually come in the form of unit upgrades or rebates. Can you buy a pre-existing condo where the sellers say they will put in a new kitchen for free? The answer to that is highly unlikely. Other benefits of buying pre-construction are the wide selection of condos to choose and they are brand new.

The downside to buying pre-construction condos is there might be delays in construction. If we lived in a world where everything happened exactly when it was supposed to happen life would be amazing. Unfortunately,the reality of it all is that there might be some unforeseeable circumstances that may delay construction. If you’re a wise investor you probably did some of your own research about the current developer, architect, designer, and other businesses associated with the development . No one likes surprises especially when money is involved.

You’re probably asking yourself how much will the investment increase before completion. The amount of increase is contingent on many different factors. Speaking conservatively say the condo you bought pre-construction for $340,000 is now selling for $360,000. This means that you just made $20 000 on your $68,000 investment which is a 30% return on your investment. If you just left your money in the bank they will give you a about 2-3% return. I’ll take 30% over 2-3% any day of the week. Wouldn’t you agree?

In summary Toronto pre-construction condos are a great investment opportunity. You will see a return on your investment before it is completed and developers offer upgrades and rebates. On the downside there might be a delay in the completion of your condo.

I briefly touched on the benefits of buying pre-construction condos and I am sure you have some more questions. Please feel free to leave a comment, ask a question or visit my website for more information www.mytorontocondos.ca . Next week we will explore the world of assignments.