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Buying Pre-Construction Property?
What You Need To Know
- It is imperative that you talk to a specialist and define the process of buying a pre-construction property.
- It is the opportunity to be introduced to be right projects that satisfy your needs and criteria for purchasing whether for personal or investment use.
- The professional will assess your situation and motives (who, what, when, why, how, tell me about), in order to match you with the right projects.
- You are the first owner of the unit and you get to select or customize certain things: flooring, appliances, cabinetry, minor alterations, etc.
- You are securing a future value with today’s price.
- You have more time to save up for the deposit as it is done in installments as the project develops. You pay the builder a series of payments as a deposit. The deposit usually adds up to 15 to 20% of the purchase price by the time of occupancy.
- If you purchased a unit as an investment property (intends to lease), renters like buyers want the newest and best in suite features and building amenities.
- If you purchased a unit as an investment for capital gain (intends to sell), you don’t have to manage a tenant.
- You are buying based only on a floor plan without seeing the actual product. (finishes, layout, outside view)
- Be prepared to pay “rent”. You are allowed to occupy the unit when it’s ready, but other parts of the building may still be under construction (hall way, gym, elevators etc.) Until the building is completed and officially registered as a condominium corporation, you will pay the builder phantom rent (property taxes, maintenance, etc.), you can’t start paying mortgage payments at this stage, because you don’t officially own the unit.
- At the time of closing, you will have to pay a number of fees to the builder that can be confusing and expensive.
- Unlike a resale, a pre-construction sale is subject to HST. However, if you are planning to live in the new unit, or have a lease with minimum one year term, you will be eligible for an HST rebate.
The things that appeal to investors are:
- A lower financial burden versus a detached home;
- Less down payment (broken down into instalments paid over the construction period)
- Lower barrier to entry.
- Appreciation for pre construction condos is a major draw for investors, as purchaser pay for today’s price for a future property.
- Real estate is about getting in to a emerging market first in order to maximize the return. Pre-construction allow you to do so. Location is everything principle. (Transit, amenities, schools, jobs. Wealth.)
- Condo prices in the GTA are still growing at a rate of 22% year over year, (2017 stats).