As the city of Toronto becomes more dense and the average condo price soars, the question comes to mind: should I buy pre-construction or resale? What are the advantages of buying one versus the other?
Pre-construction condos are ideal for busy professionals who own a pre-existing residence and want to invest in a long term opportunity or, for first time home buyers who want to break into the Toronto real estate market at a favourable price. With the value of Toronto real estate skyrocketing and other investments tanking or streamlining, buying pre-construction may be a good option for a long-term, profitable investment for your future.
The Advantages of Buying Pre-Construction
Extended Payment Plan
When buying a new build condo in Toronto, the deposit or down payment (usually 15%-20%) is typically more spread out. Since the buyer is not required to purchase upfront, you will have more time to save, manage and sort out your finances. In addition, the mortgage payment only comes into effect on closing. The extended payment structure that pre-construction condos offer allows for more time to save and prepare for the purchase while not impacting your debt ratio.
Buy Today for Tomorrow
When purchasing a new build condo, you buy a brand new home at today’s price under the assumption that it will increase value in the future. As of last year in some Toronto neighbourhoods condo prices increased over the course of 2-3 years. You can increase your chances of appreciation by buying a new build in high demand or upcoming neighbourhoods. Although you’re purchasing 2-5 years in advance, areas with future infrastructure and transit plans will be in demand neighbourhoods. Since these neighbourhoods are still developing, you will have a lower purchase point than other, more developed and densely populated areas.
Investing and owning property in Toronto can be very exciting but also very demanding and competitive. While the first 3-5 years of the new build is under construction, the investment is passive. Once the building is complete, you, as an investor, can decide what you want to do with the property. You can either move-in and make it your home or, hire a professional realtor to find a renter and even manage the property for a monthly fee. For the first few years all maintenance fees are under warranty so there is relatively little work and fees involved in managing your property in comparison to move-in ready condos.
Take your Time
If you know anything about the Toronto real estate market you know that homes and condos usually get outbid in very high bidding wars. This can be a very emotional time for the buyer. You must present firm offers with little or no conditions. When buying pre-construction, you have what’s called a “cooling period” where you’re granted 10 days to review the terms and discuss them with your lawyer, realtor, lender and advisors. It is far better process to evaluate and measure a successful real estate investment.
With Canada’s largest, most lucrative housing market soaring, many are leaning towards investing in pre-construction condos. The high demand for condos in Toronto has resulted in inflated rent costs and ownership. More are turning towards pre-construction as a way to obtain a safe, passive and smart investment opportunity.
However, not every opportunity is a good opportunity. This is why having an expert to help you navigate the process is so important. Make sure to source and consult with a real estate agent who’s experienced with new condo developments in Toronto.
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