Are Pre Construction Condos A Good Investment
Pre construction is an incredible investment opportunity if you:
- Know where to find deals
- Can identify undervalued areas where property prices are due to rise
- Can secure incentives to offset the cost
- Know how to negotiate an Agreement – and can ensure certain things are covered and included
- Know how to navigate the HST rebate or assignment sales, depending on your investment strategy
This article is going to dive into more detail on each of these so, by the end, you can understand exactly what is involved when investing in pre construction, and whether it is the right investment for you.
As our namesake implies, we are in favour of pre construction, both as an investment and for end users. But, we put a lot of emphasis on finding the right projects with reputable developers and that are going to offer great returns.
Not all projects are created equal, so we put a lot of energy and effort into finding the right ones – and we’ll show you how you can too.
Also, from an investment standpoint, we are offering advice here in terms of whether or not new construction is a solid investment choice on its own merits. We’re not going to compare this against other investment vehicles, but solely on whether or not pre construction will offer a great return on your investment.
Knowing Where To Find Deals
Having access to regular updates and news on upcoming projects is incredibly important in the world of pre construction.
Things move incredibly fast – from when a project launches sales to when it sells out can be a matter of weeks, if not days.
And for projects where the unit inventory is moving a little slower, it is still imperative to be able to dig up as much information on a project to ensure it is a sound investment opportunity.
And when it comes to pre construction, it can frankly be challenging to find information.
Every developer is different, but the consensus is that it can pose a challenge to find out project information – from pricing, to floor plans, to other important project details.
But, fortunately there are a number of newsletters and project alerts – including our very own here at Pre Construction Pros – that will keep you in the know and do all of the work and heavy lifting for you – from tracking down project information, to narrowing down only the very best of projects out there.
And since there are so many projects to choose from in the GTA and beyond – and new ones being added all of the time – it can prove to be very effective to have a reliable source of quality projects that offer great return potential.
You can always find an updated list of projects that we are currently working with here: https://preconstructionpros.ca/projects/
Identifying Undervalued Areas
When it comes to investing, being able to know what areas are currently undervalued and why is an incredibly effective way to position yourself to make large gains.
To know what areas are undervalued, it pays to know what investment is planned for the area, what other projects are going in, and whether people and businesses are starting to move into the area and invest in the local community.
Certain areas in Southern Ontario offer greater returns than others.
And, certain neighbourhoods within cities offer better opportunities than others.
It comes down to forecasting based on current investment and perception – and it can net you a lot of money from your investment when done right!
Incentives To Offset Cost
Incentives are a great way to offset the purchase price of your unit.
Things like free or discounted parking, storage, free or low fee assignments, capped charges, cash back, or even money towards upgrades, can save you upwards of $60,000 or more on a project purchase.
Contrary to what some believe, you are better off to use a real estate agent as a means to get more incentives on a project.
The longer a project is in its sales stage, the less the incentives typically are – and the higher the price tends to be. Most projects release units through real estate agents first before moving to the public, so you stand to save more at those stages.
And, even for projects that are further along, you will likely get more from a seasoned specialist than by going directly to the developer – which brings us to:
Negotiating An Agreement
During your 10 day cooling off period, before your purchase is binding and at which time you can walk away, for whatever reason, and reclaim your deposit, there are couple of things that are crucial to negotiate on:
- Fees and caps: now is the time to push back and get the developer to reduce or remove as many fees as possible, and lower any caps. Caps are the maximum amount you would pay for a given charge. Things like development charges – what you pay to have the utility hookups, sidewalks, and other things charge by the municipality – should have a cap (the most you would ever pay upon completion). Lowering these caps can help you save money on closing.
- Assignability: you’re going to want to ensure that you can assign – even if you don’t plan to, it is good to include this as a means to lower your risk should something come up and you not be able to secure a mortgage when construction is done. And, you’re going to want to push back on any fees associated with assigning.
- Renting During Interim Occupancy: interim occupancy is the period between when you move in (i.e. construction on your particular unit is done) and closing (when the whole project is done and you actually own your unit). As an investor, you’re going to want to make sure you can rent out during this period to offset any costs (property tax, interim occupancy fees, etc.).
- Legal Review: having a legal team review your Agreement provides a lot of reassurance to make sure you are protected, as well as understand what is involved in your purchase and know what fees are involved upon closing. A legal team will also push back on the above mentioned points on your behalf.
If you plan on holding your unit, as an investor, you are responsible for paying the HST on your unit.
But, you are entitled to an HST rebate, as provided by a federal rebate program, to reclaim a certain amount of that HST.
There are a couple of things to keep in mind to be able to claim your rebate. We have an article that covers this in more depth here.
So, Is Pre Construction A Good Investment?
The above points are all things to consider when you are investing. But, is pre construction good for your bottom line?
The long and short of it is, if you know what you’re looking for, then absolutely. You can stand to make a lot of money – and many people have – from a pre construction purchase. Returns upwards of 50% or more can be made, but it is so incredibly important to find the right projects to avoid headache and stand to gain.
We have a solid list of vetted projects – which we update continuously – which takes out a lot of the hard work on your end. You can find those here: https://preconstructionpros.ca/projects/
We also have new construction specialists on stand by to help answer any questions, narrow down some choices for you, and put together the deal on your behalf – and all for free! To speak with a specialist, you can book in a time here, hassle free, at: https://preconstructionpros.ca/book.
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