Toronto and Vancouver have set the benchmark for impressive real estate in Canada. The former back by ‘Vancouverism’ incorporating 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 but has unique urban planning policies where it mixes apartment buildings in residential plots to curb urban sprawl. But, 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.
As a matter of fact, Toronto leads the country construction, buy and sell of apartments, lofts and condos. The shoreline of the city has Condos, especially in the area of Etobicoke whereas Scarborough and downtown are also blessed with condos and apartments.
Old industrial areas of Toronto are now seeing old factories turned into lofts, and they fetch a very good 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 pre-construction condos, which have also proven themselves to be a good investment opportunity. But, such an investment opportunity can be tricky too.
Let us now read about it:
What can investment in Pre-construction condos be like?
Investors revealed that they first started their journey in owning real estate by starting investing in pre-construction condos. They often cost a lot less than other properties a long time ago, especially in the 80s and 90s.
Back in the day, pre-construction condos were available to the public for usually lower prices, in comparison to today’s prices. One reason could be that they are under construction properties and they catch a higher price once they are complete.
The earlier buyers register themselves for pre-construction projects, the higher their chances of securing the best pricing and best possible units. It would be wise for them to contact the property management companies, construction companies, and real estate firms to book one for themselves.
Other than that, investment in a pre-construction condo must not much effort from investors and buyers in comparison to other investments. 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.
Yet, there are also other important things to consider that can help buyers along the journey. Among them is avoiding some mistakes when investing in pre-construction condos.
Key mistakes buyers should avoid when purchasing pre-construction condos:
Investing in a pre-construction 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 pre-construction condo should sale from 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 where many builders find roadblocks along the way.
When buyers buy a pre-construction condo from an inexperienced property developer, the situation can prove to be 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 who specializes in pre-construction condos as they can help buyers in their research about 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 announce, experienced tech developers reach out to a small number of top brokers who will offer access to exclusive deals and units that have the best investment potential.
Wrongly calculating maintenance fees and mortgage interest:
Maintenance fees differ as per condominium building’s amenities as well as their size. When people buy pre-construction condos, there are maintenance fees charged often on the parking and the locker.
They are often flat fees which 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 do not budget these expenses accordingly, they can have trouble managing their cash flow.
Buyers getting distracted by the condo’s amenities:
Nowadays, condos are rich with classy amenities and pre-construction condos are no less. For investment purposes, no buyer should distract by the amenities present as they offer almost negligible value (Buyers aren’t buying the amenities but are buying a condo.
Each real estate firm looks for the best price for our investors and this does not necessarily mean the building having the fanciest amenities. A great location with worthwhile pricing is a more important factor compared to the building’s amenities as these two factors ensure the property appreciates even better.
Not involving the lawyer on time:
After purchasing a pre-construction unit, buyers have a 10-day period to change their mind or until otherwise. 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.
Now, pre-construction 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 buys process.
Underestimating closing costs:
When people buy pre-construction condos, closing costs are different in comparison to resale condos’ closing costs. Working with a real estate agent specializing in preconstruction condos can help guide buyers through the closing expenses completely.
Another point to note is that the closing costs are often the easiest ones to underestimate. This is the reason 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 get confused about and often wrongly translate in the process too.
Registration and interim occupancy should remember. Interim occupancy is when the buyer’s final 5 percent deposit is due, they get the keys, and start renting their property. Registration is the date when the title transfer in the buyer’s name from the builder and it is also 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 lawyers of buyers should be able to help them with the tax rebate forms. If they do not rent out their condo for at least a year, then 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 above-mentioned mistakes in buying pre-construction condos helps buyers save a considerable amount of money whilst being able to enjoy the status of being a homeowner in a good old T-Dot.