How to pick the right pre-construction condo – it’s a question I get from every buyer. Let’s be honest – buying a condo off of a floor plan can be overwhelming – what should you look for, and how do you know it’s the right decision?
We’re going to break down some of the fundamentals we educate our clients with and things you should keep in mind even if you’re just starting to think about buying pre-construction.
The first step in picking the right pre-construction condo is to determine what your end goal is. Are you going to be living in the condo? If so, you’re purchasing as an end-user. Are you purchasing this as an investment and planning to rent it out? If so, you’ll be approaching this as an investor.
Even if you’re thinking about this as an investment strategy to sell on Assignment, there are different components that take priority in your decision-making.
How to Pick the Right Pre-Construction Condo: End-User
When picking a pre-construction condo for you to live in, there are a number of factors to consider. After all, you’ll be calling this condo home for many years to come, so you want to be sure it’s a perfect as can be for your long-term enjoyment.
Neighbourhood
The first step in your research should be what neighbourhood you want to live in. With so many new developments coming to the market, most major Toronto neighbourhoods will have new projects to choose from.
This is particularly important if there are certain pockets in the city that you absolutely don’t like. Many end users want a community vibe – somewhere like Liberty Village, Leslieville or even King West appeal to a wide range of buyers.
Builder & Floor Plan
One of the biggest factors you need to be looking at when purchasing a pre-construction condo is who the developer is. This is so critical because your investment depends on them. Are they reliable? Do they have good financial backing? What are their past projects and were they completed on time?
Many times your VIP Broker will have background information on the developer. If you’re working with an agent that says any project is a good one, it’s time to look for a new broker who knows the ins and outs of reliable developers.
Once you’ve settled on a project in your desired neighbourhood, it’s time to think about your floor plan. Do you need a dedicated separate space to work from home? If so, you’ll need to think about a proper 1-bedroom + den. If you need space for guests or future additions to your family, a 2-bedroom should be considered. But you’ll also need to think about the 2-bedroom layout – split layout or are you ok with the bedrooms sharing a wall?
Do you need two full bathrooms? Or ensuite and power room for guests? There is also the outdoor factor to consider – balcony or larger terrace? If you’re an avid BBQer you’ll want to find out if there is a gas hook-up on your balcony. These are hard to come by, but for people that love to cook, it could make or break your condo decision.
Deposit Structure
This one is a big factor in purchasing pre-construction and should be considered with great detail. If you’re working with a VIP Broker, you should have access to exclusive incentives and sometimes that means an advantage with the deposit structure.
Your finances should be in order and you should have an idea of what you’re able to spend when looking at the deposit terms. 15% is pretty typical but we’ve seen some at 10% and some at 20%. There are plenty of opportunities to take advantage of good deposit structures within developments that are already selling, so don’t think that the launch offering is the only option.
Buying Pre-Construction as an Investor
If you’re planning to purchase a pre-construction condo as an investment to hold and rent, there are a number of different factors you need to consider in order to set yourself up for success.
Neighbourhood
The first is again, neighbourhood. But this decision doesn’t come down to where you like spending time, but where there is high demand for rentals. Your VIP Broker should be able to provide you with a summary of where there is high demand in the city, and areas to stay away from that are oversaturated with rental suites.
Builder & Floor Plan
In the past few years, the focus has been on massive buildings, but times are changing and so should your investment strategy. Renters no longer want to be in 60+ floor buildings. Look for mid-rise buildings that appeal to a wider group of renters.
Think about your floor plan and what would be best for renters. Investors historically focused on smaller suites – studio or 1-bedroom condos. But investors are now opening up their criteria to include larger suites that could accommodate two tenants/friends renting together. Even some three-bedroom suites are being taken by investors, as the renter pool only increases as your offering increases. This means bigger rental numbers too.
Deposit Structure & Terms
As an investor, you’ll also need to consider the deposit structure and your cash flow as far as your investment portfolio goes. Planning for the various increments of deposits is one of the biggest factors in managing your pre-construction purchases.
One additional note is to really think about the terms of your purchase. Is there an assignment sale clause? Are there assignment sale fees? If you’re a savvy investor, you’ll know there are plenty of opportunities to sell on assignment, and you don’t want sloppy paperwork to stand in your way.
Now is the Time to Buy!
Learning how to pick the right pre-construction condo is a key first step in setting yourself up for success in the Toronto market. Although there are different considerations to make depending on the purpose of your purchase, being educated and working with a VIP Broker that knows the numbers and the market are critical.
Connect with us today by completing our form to learn more about the pre-construction buying process and how our expertise can help you get ahead of the buying competition.