Four Things To Consider Before Investing In Pre-Construction
Before purchasing a pre-construction condo, you must consider the four significant factors differentiating a good project from an amazing one.
Location, Location, Location
This saying is true even in pre-construction. Choosing the right location is the most critical part of the investment because you can not pick up a building and move it once it’s complete. A good location should have great connectivity, commercial spaces, and a growth plan. Investing in master-planned communities would typically tick all the boxes in terms of location.
Who Is The Developer?
Ensuring you partner with a good developer can make or break your investment. The reason is twofold: firstly, the developer could cancel a project before they deliver your unit; secondly, construction issues could arise in the future that might warrant special assessments to be raised in your condo and hurt resale value in the future. The developer has to have a good track record, good financial backing, and a strong pipeline of units.
Tools that you could use are the Tarion Directory for any Tarion claims about the developer and checking the MLS to see the developer’s quality of construction.
Add Some Incentives
There are four main incentives that you will want as an investor. You will need an assignment clause incentive; if you need to exit before closing, you can sell your unit and pass on the obligation of closing to somebody else. We also want to make sure that you are getting a capped development charges clause; the reason is that we don’t know what the development charges that the city will charge the builder, so we will at least want to know that the builder will cover the cost if the development charges end up going over your cap. Another incentive you will want is the right to lease during occupancy; this incentive will allow you to collect rent while paying your occupancy fee; this period is usually your highest cash-flowing period because you will not be servicing your debt charges. Lastly, we want an extended deposit structure. The more extended the deposit structure is, the more leverage you create for yourself and the higher your return on investment becomes.
Under Or Over Priced
Pre-construction projects will be based on the average price per square foot for the area’s pre-construction market, which is based on the future price per square foot for the area. The project you purchase has to be competitive in the area for its price PSFT.
For example, if the current price PSFT in an area is $1,000 and is projected to be at $1,300-1,500 in the future, its pre-construction market will trade for around that price PSFT. A project trading at $1,200 PSFT is theoretically under-priced and, therefore, is an investment you might want to consider.
One Place For It All
Projects with the four above criteria represent excellent investment opportunities. Finding pre-construction projects, qualifying them, and then getting the best pricing and incentives will be time-consuming. That is why we came up with a centralized page to look at and compare all of the top projects with exclusive pricing and incentives. These projects have been hand-picked and qualified. Click on the link below.
