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:
- 5% down on signing = $17,000
- 5% down 90 days after signing = $17,000
- 5% down 270 days after signing = $17,000
- 5% on occupancy =$17,000
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.
