Things You Need to Know Before Investing In Pre-Construction Condos
Are you planning on a presale condo Investment? The good news is that presale condos make a sensible purchase decision whether to live in or for investment.
Most seasoned investors opt for condos in the pre-construction market. Getting in early at the development stage is an exciting prospect, especially as you have a choice over the developer and location.
First Time Investors
Here are tips you need to know to ensure your condo investment is sound.
Invest In A Builder, not a Building
Making a pre-construction condo is less risky when you invest in reputable builders.
Choose a reputable builder with a solid track record of their development plans, of being on time and without excessive delays. The developer’s history is essential when you want to make sure you get the best resale condo value. Remember that you’re purchasing the real estate based on a floor plan in such a real estate market — an utterly bare unit.
Did They Complete Their Buildings? How Delayed Were They?
Construction delays are inevitable with a pre-construction condo unit; it’s just how it is. Delays do give you more time to close on the brand new condo. At the same time, you are leveraging the appreciation of the property market 5 to 1 (assuming you have 5-10% down). Each development will have its deposit structure and amount required. Typically 5-10% is required when writing the contract, and incremental deposits will be required up to 20% (Foreign buyers can be expected to pay up to 30%).
A development may be delayed or not proceed at all. This could be for various reasons (e.g. inadequate sales, delays in obtaining financing or building permits, higher costs for construction materials and an inability to hire skilled construction workers due to labour shortages). Presale contracts should be carefully reviewed to understand the implications for consumers if there is a construction delay or the project does not complete.
If a developer’s past condo projects continually get delayed a year or more, that might indicate other issues. An example is poor financing.
Did Their Buildings Stand The Test Of Time?
What real estate projects did the developer complete 5+ years ago? Are the projects in good standing financially today?
Long-term success inspires confidence compared to a lack of data or experience.
Investors understandably want to put their money in tried and tested ventures.
As for the condo maintenance fees, look for red flags like special assessments or huge increases. You’re looking for trends here, not outliers. Consistently good quality buildings with good Resale and stable maintenance fees are all green lights for your preferred investment property.
Seven-day cooling-off periods for pre-construction sales of multi-unit development properties, like condominiums, are currently in place under the Real Estate Development and Marketing Act.
There are two things to do during your seven-day cooling-off period. Have a lawyer review your Agreement of Purchase and Sale with the builder. Here, the aim is to give you the scoop on closing costs & what the fine-print legal jargon says. Take a look at another similar pre-construction condo project. Compare the prices and incentives to ensure you’re getting a good Vancouver real estate transaction.