I started my journey in Real Estate by investing in pre-construction condos at the age of 18. Today I am a Platinum Broker which means that when you work with us I get the first access to the best projects in Toronto, typically for lower prices than when it opens to the general public. In this article, we’ll take you through mistakes to avoid when investing in pre-construction condos.
The earlier you register for pre-construction projects, you have a better chance of getting the best pricing and securing the best possible units. Getting in during the platinum phase of a pre-construction launch is a great opportunity for investors looking to get the lowest possible price for their investment. As a Platinum Broker with over 14 years of experience, I can help guide you to the projects, and recommend what will be the best investment project for your money. Whether it is analyzing floor plans or location, my expertise has proven to produce great results.
Pre-construction condos require very little effort compared to other investments. Initial money down is followed by minimal involvement for 3 to 4 years which means you have more time to come up with the down payment before they start building your brand new condo. Although there are other important things to consider that can help you along the way.
Here are 5 mistakes to avoid when investing in pre-construction condos:
Buying From an Inexperienced Developer
It can actually be better to invest in a builder, not a building. Projects are often delayed in Toronto because it is such a long strenuous process in which many builders find roadblocks along the way. Buying from an inexperienced developer can prove to be problematic down the road for your investment and put your money at risk.
Working with a Real Estate agent who specializes in pre-construction can help do your research and ensure you are buying with an experienced developer with a history of successful projects.
When projects are announced, developers reach out to a small number of top brokers including myself, and will offer first access to exclusive deals. I can help guide you to which suites have the best investment potential.
Throughout my 14 years of experience, I have developed connections with developers and can guide you to projects that are better suited for you and your current situation. Some developers might be newer and others can have a history of taking longer than expected to complete projects. Whatever the case may be I have a proven track record of successful transactions for my clients and generating a high return on investment.
Miscalculating Maintenance Fees and Mortgage Interest
Maintenance fees vary from different condominium buildings, based on the amenities offered and the size of the condominium. When you buy pre-construction condominiums there are usually maintenance fees on parking and the locker as well. They are a flat fee and get added on to the per square foot maintenance cost of the monthly fees. On top of maintenance fees, you have to be aware of monthly hydro and water costs. Not budgeting accordingly can cause trouble in your cash flow analysis.
Getting Distracted by Amenities
These days, there are many amazing amenities available in pre-construction condominiums. For investment purposes, don’t get distracted by the amenities as they can offer little to no value. We are looking for the best price for our investors and that doesn’t necessarily mean the building with the most amenities. A great location and great pricing are more important than the amenities the project will have, as these two factors will ensure your property will appreciate better.
Involving Your Lawyer Too Late
After purchasing a pre-construction unit you are given 10 days to change your mind, also known as the “cooling off” period. You can use this time to consider whether it was the right investment for you to make after signing the purchase agreement. At this time, pre-construction buyers should have a Lawyer closely analyze the agreement of purchase. They should make sure there is no wording in the agreement that needs to be amended. When you work with us our Lawyer reviews all of the agreements and provides valuable feedback, at no additional cost.
Underestimating Closing Costs
When you buy pre-construction condos, closing costs are different than resale. Working with a Real Estate agent who specializes in preconstruction can help guide you through the closing expenses in full. The closing costs are easy to underestimate and can quickly add up.
Your closing fees are due on the registration date of the building. That includes your Land Transfer Tax, development charges, legal fees, and HST. HST is often an issue that people get confused about or misinterpret the process.
It is important to remember registration and interim occupancy. Interim occupancy is when your final 5% deposit is due, you get the keys and can begin renting your property. Registration is the date when the title is transferred into your name from the builder. Registration is also when your closing costs are due.
A great Real Estate broker will help negotiate a cap on closing costs. When you close and pay all of your registration fees, you will also be mandated to pay HST if you are an investor. You will get a full refund 4 to 6 weeks after registration provided you have a one-year lease. Your Lawyer will be able to assist you with rebate forms. If you do not rent out your property for a minimum of one year you are not eligible for the HST rebate.
Many of our clients have seen huge equity gains on their investment properties from years ago. History tells us that the Toronto Real Estate Market is a safe long-term investment that grows 5% per year, on average. However, to invest in Toronto Real Estate with success you need the proper guidance. My guidance is not only limited to finding the right property; we also provide you with a roadmap on how to make the most money with what you already have. Book a Call with us today if you have questions or you need guidance from a pre-construction expert. If you are interested in investing in pre-construction condos there are several projects currently available in Toronto.