Pre-Construction Condos – Toronto and Vancouver have set the benchmark for impressive real estate in Canada. The former back by ‘Vancouverism’ and incorporating the usage of Leadership in Environmentally Efficient Design (LEED) certified materials to create LEED-certified condos and office buildings on the site of former factories in the city.
Toronto has unique urban planning policies where it mixes apartment buildings in residential plots to curb urban sprawl. However, demand for suburban homes in the city causes urban sprawl to grow. Besides, it is affectionately known as ‘Condo-town’ as its skyline is lush with apartment buildings and condos.
Toronto leads the country’s construction, buying, and selling apartments, lofts, and condos. The city’s shoreline has Condos, especially in Etobicoke, whereas Scarborough and downtown are also blessed with condos and apartments.
Old industrial areas of Toronto now see old factories turned into lofts, which fetch an excellent price. They are spacious, comfortable, and luxurious, perfect for the young and affluent preferring the city lifestyle.
Also, the city is becoming abundant with many preconstruction condos, which have also proven to be good investment opportunities. However, such an investment opportunity can be tricky too.
Let us now read about it:
What can investment in Preconstruction condos be like?
Investors revealed that they started their journey in owning real estate by investing in preconstruction condos. They often cost much less than other properties long ago, especially in the 80s and 90s.
Back in the day, preconstruction condos were available to the public for usually lower prices than today’s prices. One reason could be that they are under-construction properties and catch a higher price once they are complete.
The earlier buyers register for preconstruction projects, the higher their chances of securing the best pricing and possible units. They should contact property management, construction, and real estate firms to book one for themselves.
Other than that, investment in a preconstruction condo must be a little effort from investors and buyers compared to other investments. The initial payment is a down payment followed by the least involvement for around 3 to 4 years, meaning buyers have more time to come up with the down payment before the condo starts getting constructed.
Nevertheless, there are also other essential things to consider that can help buyers along the journey. Among them is avoiding some mistakes when investing in preconstruction condos.
Critical mistakes buyers should avoid when purchasing preconstruction condos:
Investing in a preconstruction condo can be free of hassles at times and can certainly generate a high return on the investment made, provided it does right. Professionals from various top-notch real estate firms in the Greater Toronto Area (GTA) reveal the following mistakes buyers must avoid when buying one:
No preconstruction condo should sale by an inexperienced developer:
As they say, invest in the builder, not in the building. Condo projects often witness and experience delays in Toronto because the process is long and strenuous, and many builders need help finding roadblocks along the way.
When buyers buy a preconstruction condo from an inexperienced property developer, the situation can prove problematic in the long road for the buyer’s investment, putting their hard-earned money in harm’s way.
Buyers should always work with a real estate agent specializing in preconstruction condos as they can help buyers research these condos and ensure that they are buying the right property with the help of an experienced developer with a successful track record of successful projects.
When projects are announced, experienced tech developers reach out to a few top brokers who will offer access to exclusive deals and units with the best investment potential.
Wrongly calculating maintenance fees and mortgage interest:
Maintenance fees differ as per the condominium building’s amenities and size. When people buy preconstruction condos, maintenance fees are often charged on parking and the locker.
They are often flat fees that add on the per-square-foot maintenance cost of the monthly fees. On top of them are the monthly costs of hydro and water. If buyers budget these expenses accordingly, they can manage their cash flow.
Buyers getting distracted by the condo’s amenities:
Nowadays, condos are rich with classy amenities, and preconstruction condos are no less. For investment purposes, no buyer should distract by the amenities present as they offer almost negligible value (Buyers are not buying the amenities but are buying a condo.
Each real estate firm looks for the best price for our investors, which does not necessarily mean the building has the fanciest amenities. A great location with worthwhile pricing is a more critical factor than the building’s amenities, as these two factors ensure the property appreciates even better.
Not involving the lawyer on time:
After purchasing a preconstruction unit, buyers have ten days to change their minds. This period refers to as the ‘cooling-off period colloquially. This time can use to consider whether this investment was the right move after the buy agreement sign.
- Preconstruction buyers should have a lawyer closely analyzing the buy agreement and the surrounding situation. They should also ensure that no wording in the agreement needs amendments.
- Hence, one of the many reasons lawyers should involve in the real estate buying process.
Underestimating closing costs:
- When people buy preconstruction condos, closing costs differ from resale condos’ closing costs.
- Another point to note is that closing costs are often the easiest ones to underestimate, which is why they quickly start adding up.
- The closing fees are often due on the building’s registration date. This includes the land transfer tax, development charges, legal fees, and Harmonized Sales Tax (HST). The HST is usually an issue people need clarification on and is often wrongly translated in the process.
Registration and interim occupancy should remember. Interim occupancy is when the buyer’s final 5 percent deposit is due, and she gets the keys and starts renting their property. Registration is when the title is transferred in the buyer’s name from the builder and when the closing costs are due
Experienced real estate agents will help buyers negotiate a cap on closing costs. When they close and pay their registration fees, they will also need to pay the HST, provided they are an investor. They get a full refund 4 to 6 weeks after registration, provided they have a lease of one year.
The buyers’ lawyers should be able to help them with the tax rebate forms. If they do not rent their condo for at least a year, they will not be eligible for the HST rebate.
Conclusion:
Toronto’s real estate market is now among the most expensive in Canada, North America, and the World. Sellers do enjoy high prices but leave buyers in a lurch. Moreover, with more Torontonians moving to the suburbs, condos are the only affordable option left in the inner city areas, which helps buyers raise their equity and wealth.
Avoiding the abovementioned mistakes in buying preconstruction condos helps buyers save considerable money while enjoying being a homeowner in an excellent old T-Dot.