Buying a pre-construction condo in Toronto can be quite a lucrative endeavour. Benefits when buying pre-construction include getting access to the lowest pricing and best units to leverage your funds further so that you generate a better return on investment.
Investing during the platinum period of a pre-construction launch is a fantastic chance for investors hoping to receive the most lucrative deal possible. In comparison to other investments, pre-construction condominiums also take relatively little work. The first payment is followed by minimum engagement for 3 to 4 years, giving you additional time to save for the down payment before they begin construction on your brand-new condo.
However, not all pre-construction condos, neighbourhoods, units or contracts are created equal. There are a number of things you will want to consider when buying a pre-construction condo in Toronto to avoid making critical mistakes that will save your sanity – and thousands of dollars!
It may be wiser to invest in a builder rather than a structure. Projects are frequently delayed in Toronto since the construction process is such a long and arduous one, with many builders encountering difficulties along the way. Purchasing from an unskilled developer might be troublesome for your investment and put your money at danger in the long run.
Working with a pre-construction real estate professional may assist you in conducting your research and ensuring that you are purchasing from a reputable developer with a track record of successful projects.
When new developments are revealed, developers contact a select group of elite brokers, including myself, and offer unique discounts. I can assist you in determining which suites offer the highest return on investment.
The cost of maintaining a condominium varies depending on the facilities provided and the size of the unit. When you acquire a pre-construction condominium, you should expect to pay maintenance fees for both the parking and the locker. They are a one-time price that is added to the monthly bills’ per-square-foot maintenance costs. You must be aware of monthly energy and water charges in addition to maintenance fees. Budgeting incorrectly may wreak havoc on your cash flow analysis.
There are many fantastic features available when buying pre-construction condominiums these days. Don’t be sidetracked by the facilities if you’re looking to invest since they may be of little or no worth. We’re searching for the greatest deal for our investors, which doesn’t always imply the most luxurious building. A good location and reasonable price are more crucial than the project’s features, as these two aspects will increase the value of your home.
You have ten days after buying a pre-construction condo to change your mind, often known as the “cooling off” period. After signing the purchase agreement, you may utilize this time to examine if it was the appropriate investment for you. Pre-construction buyers should have a lawyer review the purchase agreement at this time. They should double-check the agreement for any wording that needs to be changed. When you engage with us, our lawyer evaluates all of your agreements and gives you helpful input at no extra charge.
Closing expenses for pre-construction condominiums differ from those for resale condos. Working with a preconstruction real estate professional will assist you in understanding all of the closing costs. Closing costs are easy to overlook and may rapidly accumulate.
Your closing fees are required on the building’s registration date. This includes your Land Transfer Tax, construction expenses, legal fees, and the Harmonized Sales Tax (HST). People frequently become perplexed by or misunderstand the HST procedure.
It’s crucial to keep in mind registration and temporary occupancy. When your final 5% deposit is received, you will be given the keys to your house and you may or may not be able to begin renting it. The day on which the builder transfers the title into your name is known as registration. Registration is also when you must pay your closing charges.
A good real estate broker will assist you in negotiating a closing cost cap. If you are an investor, you will be required to pay HST when you close and pay all of your registration expenses. If you have a one-year lease, you will receive a full refund 4 to 6 weeks after registering. Your attorney will be able to help you fill out refund papers. The HST rebate is not available for investors if they do not rent out their property for a minimum of one year.
When buying a pre-construction condo and you go to see the model suite, it will undoubtedly be stunning with all of the upgrades and have everything you need. As a result, you might fall in love with this version of the suite.
That, of course, is the end goal for every builder. The majority of people fall in love with the model suite, but you have to recognize that everything you see in that is an upgrade. Upgrades account for a significant chunk of a builder’s 10 percent to 20% profit margin.
Upgrades are so beneficial for the builder because the industry practice is to charge twice the sub-trade fee, which is then passed on to the buyer, according to Garrison. That means your builder spent $4,000 on the $8,000 granite countertops you bought. You can understand how builders earn money if you increase it by 250 purchasers.
That isn’t to say you shouldn’t order an upgrade, but you should be clear on what is and isn’t an upgrade—and do some haggling to avoid being taken for a ride. When it comes to new construction, it’s important to work with an agent who has enough leverage that they can get you good incentives.
When purchasing a pre-construction Toronto condo you are actually purchasing from just a floor plan well before the building has begun construction. As this is the case, it is very possible for a builder to modify the condo build. Sometimes this may mean a few less sqft, or if you’re like one of my clients it is possible you purchased a condo with a 100 sqft balcony to walk into your unit on occupancy day to find a MASSIVE 800 sqft terrace! While this is very unlikely to ever happen again, be prepared for things to change.
Small changes are not rare. Balcony or terrace measures are frequently included in total square footage by condo sales personnel. The square footage of a new home will be calculated using measurements of the exterior walls. You can’t depend on their verbal pledges, floor models, sales pitches, or brochures.
Unfortunately, many people base their new home selections exclusively on brochures or artist renderings. The builder, in fact, has the authority to modify a picture, floor plan, or layout, and you have no say.
The purchase agreement when buying a pre-construction condo is the legally binding contract that explains what you’re getting and the terms of the transaction, whether you’re purchasing a new detached home or investing in a condo. It’s full of fine print and legal jargon and signing it without legal assistance puts you at danger of being bound by conditions you don’t understand or desire. More crucially, it eliminates any opportunity of renegotiating the terms of the deal.
If you don’t get legal guidance, you may wind up with an electrical utility box on your front yard that you can’t fix or no side door on your garage, regardless of what the blueprints looked like. You might end up with a variety of substitutes, exclusions, or inclusions that detract from the future value of your house. In the case of pre-construction closing costs it’s important that you are aware of the development charges, typically your lawyer will ask for a development charges cap.
As we mentioned, you have a cooling-off period of up to 10 days when purchasing a condo, depending on your province. This provides you the option of paying $800 to $1,600 for a lawyer to review your contract after it’s been signed. You can pull out of the arrangement if you don’t like what they find.
Unfortunately, there is no such time for freehold homes, and many home builders insist on signing a contract right away to lock in your sale price or lot selection. If you can, try to avoid this predicament, but if you can’t, at the very least insist on a stipulation that makes the purchase conditional on your solicitor’s approval. These days, more and more builders are providing customers a two-day period when they may get legal counsel before the contract becomes enforceable.
Believe it or not, until recently, when buying a pre-construction condo or home if your new home didn’t arrive on schedule, it was entirely your fault. Builders were not compelled to give explanations or to keep their delays to a minimum. But that all changed a number of years ago, when Toronto condo buyer Keith Markey appealed a Tarion judgment.
Now that the law is clear, crucial dates are included in the purchase agreement and contract. If a builder fails to meet these deadlines and requests an extension, a buyer can either accept and seek compensation or just walk away from the contract. Read this article on Forbes about Top Three Pre-Construction Risks.
Now that you have an understanding of the common mistakes that people make when buying a pre-construction condo in Toronto you can approach with caution and armed with education. Knowledge is power and in the Toronto pre-construction market there is nothing more powerful than working with a top Toronto pre-construction agent that is an avid investor themselves and sells during the Platinum VIP First-Access launch phases!
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