Trying to figure out if a pre-constuction condo is worth it? You’re in the right place! Read more to learn 6 things you should know before investing your money!
With over 36,000 units sold, 2017 was a record year for condo sales in Toronto.
The prices of Toronto condos are also at a record high. If you’re in the market for a new condo and you’re on a budget, you might be considering purchasing a pre construction condo. Typically, they’re cheaper than a resale.
But if you’re a beginner in pre construction condos, there are a few items to consider beyond price. Before purchasing a condo that hasn’t yet been built, think about these 6 important items and whether they fit your needs.
1. Time Frame for a Pre Construction Condo
One of the biggest factors to consider when purchasing pre construction is your time frame. If you need to be able to move in right away or you have a strict timeline for moving, then a pre construction condo probably isn’t ideal.
While builders provide an approximation of when the building will be finished, they’re rarely accurate. The target date can, legally, be moved and extended more than once. Sometimes, the extensions span over years.
When choosing a pre construction condo, consider whether the building times is suitable for you. And then make sure you have a lot of leeways. It’s more likely that a delay will occur than not.
As a general rule, add at least 1 year to the approximate completion date. You should also understand what the penalties for builder delays are and what you’re legally entitled to.
2. Know the Cooling Off Period
A cooling off period is a period in which you have the right to take back your offer. And you can do so without getting penalized.
Regardless of your reasons, you can change your mind during this period and end your contract. All of your money will be returned to you in full.
The cooling off period in Ontario is 10 days after signing the purchase agreement. During this time, you should have a lawyer review your purchase agreement and advise you on your purchase.
You can also take this time to see if you are pre-approved for a mortgage. If you’re not, you may reconsider whether you can afford the purchase.
Taking some time to research both the condo developer and the neighborhood may also be worth your while. You might also seek opinions from friends and family who have experience buying pre-construction condos.
Don’t waste your cooling-off period. Use it do some serious homework on what you’re buying. A pre construction condo is a big investment, and you’ll want to use this time to prepare yourself.
3. Cost Considerations
It’s true – a pre construction condo costs a lot less than buying a resale condo. But there are other costs you need to consider.
The amount you have to put down for a deposit is likely higher than what you’d pay for a resale. You’ll be looking at spending 15% to 25% as a deposit.
This is usually paid in increments, but the terms vary. Builders usually aren’t flexible on the payments, either. They need that money in order to continue with construction.
Occupancy and Closing
Sometimes, your unit will be completed before others. If you want to move into your condo before the entire project is finished, you’ll have to pay an occupancy fee. Although the fee is usually affordable, you have to remember that you’re only an occupant and not yet an owner.
To become an owner, you have to pay closing costs. These aren’t paid until the entire project is finished and registered.
Once the building has been registered, you enter the closing phase. This is where you’ll be hit with fees. Fees might include a New Home Warranty enrollment fee, fees for hooking up your utilities, lawyers fees, as well as development levies.
On a resale condo, you don’t pay as many taxes as you do with a pre construction condo.
There are HST rebates for people who plan on living the unit as their primary residence. You can check to see if you qualify for this rebate. But if your condo is a rental investment, you won’t qualify for any rebates and the taxes are yours to pay.
4. Condo Fees
Condo fees are attached to every condo. They pay for regular maintenance on the building as well as any future upgrades or emergency repairs. This can be anything from removing snow and landscaping to elevator repair or a new paint job.
Your condo fees will be very low at first. This entices people to buy pre construction. But be prepared for that number to rise.
As a general rule, condo fees go up and never down. This is because they’re initially based on what builders expect it’ll cost to run a building. As the condo gets up and running, they learn what the actual cost is and pass that onto you.
Keep in mind that condo fees can rise as much as 10% in one year. But you can always apply to be part of your Condo Asociation. This will give you some say in where your money is spent.
5. The Developer Matters
If you think of the developer as just the business building your condo, you’d be making a grave mistake. The developer can make or break your purchase. They affect the timelines, quality, and future issues you may face.
Make sure you know the developer of the condo inside and out. Read online reviews about their quality and service. Talk to others who have bought from the developer.
Avoid any developers that don’t have an online presence or any sort of evidence to back up what they claim. Of course, if the reviews are bad, take that into consideration. Lastly, make sure that the developer, as well as any partners, haven’t been sued over their buildings in the past.
6. The Condo Reserve Fund
One more thing about fees – this one is often hidden. And it may come as a surprise you haven’t budgeted for.
Be prepared to contribute 2 months worth of condo fees to the Condo Reserve Fund. It’s an emergency fund and you’ll be required to pay this upon closing.
Looking for a Pre Construction Condo?
Don’t let price be the only factor that determines your purchase of a pre construction condo. Understand the costs involved, the ins and outs of the developer, as well as how pre construction could affect your timeline for moving in.
If you’re looking to purchase a pre construction condo in Toronto or the surrounding area, be sure to check us out.