Pre-construction market for condos in Toronto has been on the rise for the last few years due to lucrative returns on investment. As the market continues to heat up, many real estate investors are now repurposing their investments to pre-construction condos. Since many pre-construction condo projects are coming up in Toronto, it has become a great hurdle for investors to settle on the best project.
In this guide, we are going to look at the factors to consider when investing in Toronto’s pre-construction condos.
a) Builder’s reputation- Since pre-construction condos in Toronto are sold as off-plans, you need to work with a builder who has a good track record. Before you commit, carry out due diligence to find out how long has the builder been in the industry and how they relate with clients. Ask about their past pre-construction condo projects for you to assess the quality of their work.
b) Location- The location where the pre-construction condos will be located in Toronto also matters a lot. Are there good infrastructure projects and efficient transits, social amenities, easy accessibility from other cities, and good security?
c) The deposit- When signing an agreement to buy a pre-construction condo in Toronto, the builder will require an investor to fund the project by contributing a deposit of 20% which is spread out. The deposit is broken down into installments of 5% which are paid out in 30 days, 90 days, and 365 days plus the last 5% on occupancy. The deposit for a pre-construction condo in Toronto is higher compared to what one would pay if it was a purchase of a resale condo.
d) The 10-day closing off period– As per the law, if you purchase a new condo in Ontario, you are given up to 10 calendar days to reexamine your decision. If for any reason you feel like you made a mistake by purchasing the property, you can cancel the sale agreement contract during the 10-day cooling-off window and you will get your deposit back in full without any deductions.
e) Interim occupancy period- Once the condo is finally built and you are handed the keys to move in, there is a period called interim occupancy. At this period, you don’t legally own the property and you have to wait until the property is registered and ownership is transferred from the developer to your name. The interim occupancy period usually lasts for 3 to 9 months and whatever you pay during this period is regarded as a “Fantom mortgage” and it doesn’t go towards clearing your principal mortgage.
f) Understand the assignment clause and right to rent during the occupancy period- The assignment clause gives you the right to sell the contract to another interested buyer before occupancy. Having such an agreement with the developer means that you can never be tied to the property until it closes. If possible, try and ensure that the contractual rights to rent out your condo during the occupancy period.
g) Assess all the closing costs- When buying a pre-construction condo in Toronto, certain key closing costs are inevitable. Engaging a professional real estate attorney will help you unearth all these closing expenses including the ones which are hidden. In most cases, the closing costs for pre-construction condos range from 2-4% of the home value. The most common closing costs are; land development levy, utility connection fees, park levies, and education levies.
If you are planning to invest in pre-construction condos in Toronto and you don’t have a solid idea of where to start, get in touch with Easy Precon .We shall help you identify the most promising Toronto pre-construction condo investment projects that are likely to generate the highest returns.