By Ilan Joseph, Broker, ABR®, e-PRO®, AMP® | © All rights reserved
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“Should I invest in a new condo?” It's a question I get asked often with the person asking expecting a simple yes or no answer.
Preconstruction condos (and homes) have many benefits and risks associated with them. While it's true that many people have made a lot of money investing in preconstruction condos, it’s also very true that many have lost a great deal doing the same.
Investing in preconstruction condos isn't just about putting down 5%-20% and waiting for the developer to hand over the keys. I'd certainly suggest that timing and luck is the most important aspect of making money investing in preconstruction condos, followed closely by having a clear idea of how long you plan to stay committed to your preconstruction investment.
Purchasing a preconstruction condo when it’s first offered during the VIP agent release usually means the project is 3-4 years away from being built. You should consider whether you might need that money you put down as a deposit in the interim? If so, you may get lucky selling your preconstruction condo as an assignment (essentially selling the paperwork to another buyer) before the building is completed and individual units are registered.
For those who have no issues keeping their deposits in place for 3-4 years until their preconstruction condo is built, you must still consider that even after the building has been registered and you're legally allowed to sell your unit, it may not necessarily be wise to do so then.
Imagine for a moment, a marathon. Everyone is waiting at the starting line for the race to start. Bang! The shot rings through the air and everyone starts the race running at the same time. For the first hour or two, the pack remains tight. After a few hours, you can clearly see those who have pulled ahead and others who have fallen behind.
Consider that when your preconstruction condo building is completed, many of the unit owners (many of which are investors) will be looking to immediately sell or rent their units, effectively lining up at the starting line. When these unit owners are given their keys at the same time, they all list their condos for sale and lease at the same time.
Can you imagine what this does to the market?
With the sudden influx of available supply, you can expect prices for units in the building to remain competitive amongst sellers and landlords, keeping prices largely subdued. It’s not until 2-3 years after a condo building is completed that the race amongst sellers and landlords starts to loosen up and prices start to improve more rapidly. With the “investors” out of the way, fewer units are now available which helps to rebalance the relationship between supply and demand. Not only did you just wait 3-4 years for your new condo to get built, but now you must wait 2-3 years for you to see real financial growth on both the sales and leasing side, bringing your commitment time to 5-7 years before you get the most bang for your preconstruction buck. Yes it’s true that you could make money selling your preconstruction condo as an assignment or on the day the keys are handed over to you, but the real money is made by those who are in it for the long haul. Those who understand that the real value of a preconstruction condo is not just on the day they sign the dotted line at the developer's sales office. This brings me back to that question of whether you should buy a new, preconstruction condo. The answer will always be, how much time and money are you able to commit? Learn more about what makes a good preconstruction condo investment. You want to make sure you're getting a great deal, with great terms and as many buyer incentives from the developer as possible.
Working with a preconstruction condo specialist is imperative to your investment success. The Ilan Joseph Team's high volume of sales have awarded us an exclusive relationship with Toronto condo developers in what's known in the industry as the "Platinum VIP" list. This small group of high-performers are invited to exclusive previews for Toronto’s hottest upcoming preconstruction projects and include first access to the most desired floor plans, reduced pricing, as well as added upgrades and other buyer incentives.
Don’t think about buying a preconstruction condo without speaking with us first to ensure you're getting the absolute best deal possible. Call Ilan Joseph at 416-739-7200 or email Ilan now.
Ilan Joseph is a Real Estate Broker with Sutton Group and is co-founder of a 10-person award-winning Toronto, Thornhill and Vaughan real estate team.
You can find him on LinkedIn, Twitter, YouTube and Google+.
For over 13 years, Ilan has provided more than 1700 buyers and sellers valued advice and service, enabling them to reach their real estate goals.
He’s kind of like the Bruce Willis of real estate.