Feel like you can’t get into the Toronto real estate market? Sometimes your best bet is to buy something that hasn’t been built yet. You only have to look at Toronto’s ever-rising skyline to see the desire for condominium developments, and getting in on the ground floor by purchasing units in these properties can be a great investment. Here’s what you should know.
Investing in condos before development
Whether you’re a first-time home buyer, or you’re looking for an investment property, purchasing a pre-construction condo can be an easier way to get into the market. The pre-construction unit is often cheaper than what it will sell for once built, plus you get to choose design elements like fixtures, flooring, and finishes—however, there are some things to consider before purchasing:
- Payment and other costs. A benefit of purchasing a pre-construction condo is the staggered deposit structure, meaning that while you need to have a 20% down payment, it’s paid over time. You’re also granted a ‘cooling off period’ (10 days in Ontario) for backing out of the purchase. But you’ll want to account for other costs for when it’s time to close, such as maintenance fees, utility hook-up fees, and reserve fund fees.
- The developer’s track record. Take the time to research the building developer and their history of completing projects. For example, what delays did they have before the completion of previous developments, and how are their other buildings doing financially?
- How occupancy works. Often, you can move into your unit before construction on the whole building is completed—this is called interim occupancy. At this point, you’re not the legal owner, so you have to pay a rental fee to the builder instead of starting mortgage payments. Keep in mind that if your unit is on a lower floor, your interim occupancy will be longer. Once the building is complete, you close on the condo and become the owner.
- Assignment sales. What happens if you decide you no longer want to close on the condo? Depending on the contract you signed, you can sell your buyer’s rights to another ‘assignee’. Assignment sales are often prohibited from being listed or advertised, so it’s important to work with an experienced agent.
Investing in new condos in Toronto
If you don’t want to wait for a condo to be built, you may consider new condo options in Toronto. Here are some factors to think about:
- Familiarize yourself with the market. Take a look at sales in the neighbourhoods you’re interested in to get a feel for the market and what you can afford. The right real estate agent can help you determine the best neighbourhoods and types of properties for investing in a new condo.
- Don’t forget about fees. Unlike houses, condos come with condo or maintenance fees that partially cover utilities, get added to a reserve fund for building repairs, and cover costs for common areas and amenities. The amount depends on a variety of factors, such as the size of the building, age, and amenities offered.