The Pro’s of Pre-Construction.
February 13, 2022 | Buying
In a time where inventory is moving at a rapid pace, bidding wars are in full effect, and buyers are feeling their dream of home ownership slipping further and further away, many are looking to the option of pre-construction condo projects.
What is a pre-construction condo? When purchasing a pre-con unit, you are purchasing a unit that does not yet exist. The builder’s sell the units ahead of time to help fund the project, and you are reserving your unit for when the building is complete.
Pre construction condos come with many benefits, let’s take a look!
What Makes Pre- Construction Great?
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Price Point
When purchasing a pre- construction condo, you may have to compete for a unit if there is demand, however, you will not have to bid up the price, the way that you would with a competitive resale unit. The condo’s have a fixed price, set by the developer and the price is not subject to the fluctuations of the wild real estate market.
why is this a big deal? Many buyers are fed up with bidding wars and the rapidly changing landscape of the real estate market. With pre construction, you know what you are paying and don’t have to worry about outside influences on that purchase price.
Ultimately, you are purchasing a condo in the future, at todays price, which often leads to great appreciation between the time of purchase and occupancy. For this reason, markets with strong growth ( such as Toronto) see a lot of pre-construction purchases coming from investors, looking to invest their money in a project that they believe in and trust will see price growth over the span of the build.
Finishes + Upgrades
Another benefit to pre-construction is the ability to put your preferences into the build of your unit. Seeing as the condo has not yet been built, the developer will provide finish options that the design team has worked on, and you will get to choose the ones that best suit your personal style. Beyond that, many projects will also provide options to upgrade elements of the unit should you want to customize it even further.
A new condo that comes fully upgraded and with the latest design trends can save you thousands in future renovations when compared to a resale condo that is already a few years old.
Staggered Down Payment via Deposits
We all know that one of the biggest feats for buyers, especially first- time buyers is coming up with a downpayment. Unlike resale that requires a full downpayment on closing ( generally 30-90 days after purchasing ), pre- construction projects spread that downpayment out via deposits to the developer. These deposits are often spread over 3-5 years, making it far more attainable for many buyers to facilitate these payments.
What can a deposit structure look like?
- $5,000 on signing
- Balance to 5% in 30 days
- 2.5% in 120 days
- 2.5% in 240 days
- 5% in 450 days
- 5% on Occupancy (3+ years away)
They are Indeed Brand New
Let’s be honest, theres nothing like walking into a brand new unit, knowing that it is untouched and pristine, just for you. Being the first owner of a newly built condo, you don’t have to worry about the wear and tear of previous owners.
For a lot of people, this is one of the main selling points of a pre- con unit. Everything is fresh and clean. No residual pet hair, kitchen mess, carpet stains etc.
Appreciation and Assignment
Briefly touched on when speaking to price point, one of the greatest benefits to purchasing pre-construction is that you are purchasing a future building at today’s prices.
Considering typical market trends in the GTA, we can safely believe that unless unforeseen events occur, the unit should appreciate in value every year. Pre covid, there was an average year over year condo increase of about 8%. In the current market that number is higher, however the general consensus is that your unit will increase in value from the time that you purchase it until the time that the unit is complete.
This is why pre-construction condo’s have become a strong investment vehicle for those who have lazy money in the bank that they would like to put to work.
In conjunction with the benefit of appreciation, comes the option to assign. An assignment is when the purchaser of a unit ” assigns” their contract to another party. This means that the original buyer is now selling their rights and obligations to the agreement of purchase and sale for that unit, to a new buyer.
Why is assignment amazing? It provides an option for the buyer to exit the deal in a profitable way. Many pre construction investors will assign units prior to closing and walk away with the appreciation that that unit has seen.
For example: If John bought a pre construction unit in 2018 for $550,000, and that project is near completion this January 2022 and the value of the unit is now $750,000. John can assign his contract to that unit, receive the value of his deposits and the $200, 000 worth of appreciation. Of course John would have to pay gains on this money, however, he still made a pretty penny, with minimal work involved.
Have questions about Pre- construction? Looking to purchase a pre-con unit for yourself , reach out to us today!
To check out the pre-construction projects that we are currently selling, visit https://aboderealty.ca/preconstruction-projects/
