Ready to master the art of purchasing pre-construction condos? Let’s take a closer look at the steps involved.
Buying a pre-construction condo isn’t nearly as straight-forward as buying a resale condo.
In my earlier post, I emphasized the importance of knowing whether investing in pre-construction condos was right for you. I cannot stress how important this is – don’t do it because it’s a trend. Really analyze if it’s the right option for you. Remember to stick to the triple constraints.
Pre-construction condos have become a booming market in Toronto. As echo boomers start making lifestyle choices that will involve the real estate market, this will result in a huge need for space in the downtown core.
Let’s explore the steps involved in purchasing a pre-construction condo from an investment perspective.
1. Identify the right project
- Using the triple constraints:Weigh the pros and cons of similar projects
- Evaluate the needs and wants of the prospective tenants’ condo lifestyle
- Determine budget and affordability
- Evaluate the location based on transit-friendliness, walkability (WalkScore) and surrounding amenities
2. Scope out the project
- Learn about the builders and their reputation
- Identify any other current and future developments in the same vicinity
- Compare similar projects with respect to prices and incentives
- Identify the return on investment (ROI) and calculate whether you will have a positive cash flow from your investment
3. The Blueprint
- Review and pick the best floor plans
- Keep in mind the impact of floor level, the view and physical location of the unit on the floor
4. The Decision
- Once all the above steps are complete, you’re ready to make an informed decision
5. Signing the Agreement
- The agreement of purchase and sale will be drafted and the buyer will sign
- The builder will execute the agreement
- Post-dated deposit cheques will be provided
6. The “Cooling off” or rescission period
- Once the agreement is signed by the buyer and the developer, there is a cooling off period of 10 calendar (not business) days to finalize the decision
- During this time, it’s crucial to have the agreement reviewed by a real estate lawyer who is familiar with pre-construction condos. The lawyer should outline:
- The additional costs involved at time of closing
- Suggest changes to the clause, if any
- Recommend putting caps on any fees such as development fees
7. The Firm Deal
- After the 10-day cooling off period, the deal becomes firm and binding
8. Financing & Mortgage
- One of the benefits to buying pre-construction is that a mortgage is not required until closing
- Some developers may ask for mortgage pre-approval
9. Upgrades & Design Selections
- Most builders will have a few design palettes to choose from. Normally, this collection has been picked out by professional designers
- Upgrades are based on availability and they vary from builder to builder
10. Pre-Delivery Inspection or PDI
- The PDI is a walk-through of your condo after it’s completed
- This will be the first opportunity to point out any issues, deficiencies or incomplete items
- The PDI takes place just before the interim occupancy
11. Interim Occupancy
- The unit can now be taken possession of – but the condominium corporation hasn’t been registered (i.e. the buyer does not own the condo unit as of yet)
12. Final Occupancy
- This is the final closing when legal possession of the unit is granted
- A mortgage will be required at this time
- You will need to work with a real estate lawyer for the closing
- Register with Tarion Warranty – a 7-year warranty program for new homes and condos purchased in Ontario
These crucial steps are significant to your condo investment experience and ensuring that the information you need is available to make the process as smooth as possible. Every deal can be structured differently – so having someone guide you through the hype is important. In my next post, I will review the costs involved in purchasing a pre-construction condo.
Feature image courtesy of Homes by Theepan.