In an increasingly competitive real estate market like in the GTA, purchasing an investment property can bring both reliable passive income and impressive returns down the line. Choosing to invest in a pre-construction development project has its unique advantages. Along with greater inventory selection, newer properties offer stylish interior finishes, layouts and designs, and their modern amenities and often trendy locations are attractive to renters and end-users of all kinds.
Purchasing a pre-construction property is a smart move and there are a few key factors investors should be aware of – especially if it’s your first time. Here are our top 5 things new investors should know when purchasing a pre-construction property.
Want to learn more about new developments? Check out our blog post on what to know when buying pre-construction here.
1. Access Levels
One of the most significant differences that come with purchasing a pre-construction property compared to an older house or condo is timing. When buying pre-construction, there are different access levels that can impact your purchase. Usually, purchasing a pre-construction unit at an earlier access level means better pricing, preview access, exclusive incentives and other perks. As an investor, being aware of the opportunities that come at each access level can make a significant difference in the success of your investment.
An experienced agent who specializes in pre-construction will be your best resource for navigating a developer’s access levels. Not only can they provide important insights about new and existing projects, but in some cases, they can also provide clients with early or exclusive access to new developments.
2. Understand Your Expenses
Managing your finances and upfront costs plays a big role in ensuring the success of your property. As an investor, it’s important to understand what your regular costs will be, as well as when any occasional or unexpected costs may occur. A typical regular expense you’ll be responsible for is condo fees, which is on top of your existing mortgage costs.
The good news is that condo fees are typically less for new development properties than older buildings, though they are likely to increase over time. Similarly, costs for unexpected repairs are also far less common with new condos. That being said, it’s still important to set some money aside for when these surprise costs arise.
Purchasing an investment property may involve more costs than some buyers realize. Access our home buyer’s calculator here to get started on your financial planning.
3. Delays Can Happen
While the builder will work hard to provide you with unit tenancy on time, delays in construction can occur with new development projects. As an investor, it’s important to recognize this risk, especially if you have a timeline for when you’d like tenants to move in.
In Ontario, buyers are entitled to financial compensation when delays pass a certain threshold. Familiarize yourself with important occupancy deadlines or ask your real estate agent if you have concerns about construction delays.
4. Finding Quality Tenants
When the time comes to finally renting out your property, finding a great tenant is crucial. A responsible, income-stable tenant can not only ensure your unit is financially successful, but it can also make your life a whole lot easier. The key to landing the best tenant starts with a well-organized screening process. There are a lot of resources online for what a strong screening process entails, and you’ll be able to customize your approach based on your unique concerns. Additionally, your agent can advise you on best practices for finding a great tenant.
Looking to buy a pre-construction condo in the Greater Toronto Area? Explore these great resources.
- Danforth Village: A Great Bet For Investors
- Why Celeste Condominiums Should be Your Next Potential Home
- All You Need to Know About Six99 Condos at Bayview Village
5. Landlord Responsibilities
Having great tenants can make all the difference. At the same time, it’s important to understand what it takes to be a great landlord, and what your obligations will be. Like your tenants, you’ll have both rights and responsibilities when it comes to your rental unit.
While being a landlord is not a full-time job, some factors can make your duties more time-consuming. For example, if you live far away from your investment property, it will be harder for you to access the building on short notice. This can bring challenges for you and your tenants. If this is something you have concerns about, you can hire a local property manager to oversee certain responsibilities.
There are countless factors to consider when choosing and operating a pre-construction investment property. Although our tips above are a great start, working alongside an experienced real estate agent who specializes in new development properties is the best way to ensure success.
If you’re ready to explore the pre-construction market, contact us and see how we can help every step of the way.
