7 Things to Know About Pre-Construction

Friday Oct 11th, 2019

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7 Things You Need to Know Before Investing in Pre-Construction Condos (The Series)

Are pre-construction condos a good investment? Why buy a condo? Here are the things you need to know before investing. Here is what we consider to be Step #1 in a series of 7 key Steps.

While the sole purpose of a condo is to live in, there are other things one can do with the condo. Condos are vast in number and are fast moving, both regarding purchases and rental.

Most nuclear families opt for condos nowadays because of easy maintenance and social life. Although simply owning a condo does not earn you any money, and in fact, it can become a liability as well.

Are pre-construction condos a good investment? Why buy a condo? Here are the things you need to know before investing.

1. Invest in a Builder before you invest in a Building

invest in the builderThis is a universal truth that I tell all my clients. Investing in Pre-Construction becomes inherently less risky when you invest only into reputable builders who have a solid track record of executing on their development plans in a timely fashion and without too many delays.

You also want to take a look at what happened post-closing with developments that the builder completed successfully in the past.

Keep in mind, this isn’t exactly pre-construction specific, it’s important when investing in resale to consider the builder as well – as that can give you more insight into why the building may or may not be the best investment you can make.

There’s a couple of important factors to take a look at when investing into a builder and their reputation:

A) Did they complete their buildings? How delayed were they?

Yes, but there not on schedule. Delays are inevitable with Pre-Construction, it’s just how it is. Me, personally, I like delays. First off, the more a project delays, the longer you have before you need to close on the condo, all the while you’re leveraging the appreciation of the property market 5 to 1 (assuming you have 20% down, as is the case with most pre-construction developments).

Secondly, if delay notices are handled improperly, which they typically are, you’re likely eligible for up to $7500 as a delayed occupancy rebate, thanks to Tarion.

3 to 8 months of delays from the initially marketed occupancy date is typical, and in my opinion, acceptable – but if a developers past projects continually get delayed a year or more, that may potentially indicate poor financing or other issues.

B) Did their buildings stand the test of time? What about the maintenance fees?

Yes, if you take a look at projects that the developer completed 5+ years ago. These are the projects in good standing financially today. As for the maintenance fees, look for red flags like special assessments or huge increases.

While it may not be entirely the developers fault, and could be the result of poor management; you’re looking for trends here, not outliers. Consistently good quality buildings, with good resale, and stable maintenance fees are all green lights.

Stay tuned for Step #2


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