Buying a pre-construction condo in Toronto can be a tricky process. Most of the projects are over priced, boring, in not so great locations, or sometimes never even come to fruition. Sure you can walk into any sales center and be wowed by the impressive model suites, artist renderings and smooth talking salespeople, but a little research is definitely recommended.
I have looked at hundreds of projects, and there are very few that I usually recommend to clients. To be worthwhile it has to have a great location, excellent pricing and most importantly a reputable builder.
Here are 7 things you should research before buying any pre-construction condo:
- Research The Builder – Do they have complaints open against them, how many, what for? Do you feel comfortable handing a cheque over to them?
- Visit Some Of Their Past Work – Most builders in this city have done projects here before. Go visit them. How are the finishes? What is the quality like? Is it actually high-end or just made to look high-end?
- Know The Nieghbourhood – What makes the neighbourhood a good investment? Is it close to transit or are there future plans to add transit? What other things are in the planning phase for nearby sites / buildings? Is it safe? Will it command enough rent to carry? Are there already a lot of condos in the area?
- Study The (Rental) Market – If you are buying the condo as an investment, how are rents in the area? How has the market performed over the last few years? Why do you think this area will perform better than others?
- Run The Numbers – While most developers of pre-construction condos will be happy to supply you with “their numbers”, I suggest finding your own. Calculate all of your costs (maintenance, mortgage, hydro (if not being paid by tenant), upkeep, cleaning, repairs, etc., then deduct these from your monthly rent and see if you are making money or going to be spending additional money. Be very conservative with your rents and go slightly higher on the expenses.
- Study The Floorplans – Reading floorplans takes time, and seeing a lot of already built condos. Try to determine if the floorplan makes sense, will be desirable by tenants, have good flow, and have room for the main areas that people look for in a space (somewhere to put the sofa, dining table, bed, etc.).
- Study The Build Site – How will the view from your unit be once it is complete? Are there any neighbouring lots that could be developed in the near future? How far is the closest bus stop? Are there any other things that could impact your view?
If you can get through all of those steps and you are still confident you are making the right decision, you should really make sure pre-construction is actually what you want and need. Ask yourself the following questions:
- If there is a delay in the construction by 1-3 years, am I OK with that?
- If the builder must make a change to the design or ceiling height, will I still want to proceed?
- Am I OK to have this money tied up for 5 or so years? (I bought a pre-construction condo because I actually liked this element. The longer the project takes, if the real estate market continues to appreciate at the same rate, so does my money)
- Do I understand ALL of the risks of what could go wrong?
- Do I understand ALL of the costs involved and potential costs that could arise? (Often pre-construction condos can have lengthy occupancy periods where you are essentially paying rent to the builder on your unit)
- Is there anything better on the resale market right now that I can afford?
- Will I have the money necessary to close the transaction?
Still good? Then it sounds like you’ve made up your mind and a pre-construction condo is likely right for you.
Just remember, most builder will typically pay commission to a realtor and it is included in the price. Therefore, it essentially costs you nothing especially if the builder isn’t willing to negotiate on prices. The commissions on pre-construction are usually much better than resale so the way I handle this is I typically credit my clients back some of the commission that I make to get my clients a better deal than they would get anywhere else. Also I can still negotiate for them if it is not a 1-day VIP sale type scenario.
If you would like some help navigating some of the current projects in Toronto, just send me a message below: