The beginners guide to investing in Pre-Construction
Before getting into anything else, Pre-Construction isn't magic. It is, however, a safe way to invest while still receiving large returns. Obviously, we are supporters of Pre-Construction investment, having perfected a formula over decades of investing has allowed us use this lucrative market to our advantage. Backed by the Real Estate market, it's a stronger bet than most other investments because it takes the volatility of companies and people out of the equation. That being said, you can make a lot of mistakes if you try to go into this business blind. Without further ado, here is our checklist for getting started as a Pre-Construction investor.
Have a goal.
This, really, applies to anything you do. Before investing, you have to know what your end game is. Maybe you have a teenager, and want them to move into a brand new condo when it's built. For this you can avoid the hassle of negotiating for contract rights to assign or sell before registration or occupany, etc. Maybe you want to get 4 years of price appreciation as well as a full warranty before even getting your first tenant, resulting in an efficient way to procure a rental property. Maybe you're like us, and want the property to grow in price and sell the brand new condo before even having to commit a mortgage, allowing you to reinvest and purchase 2 more units, effectively doubling your assets every 4 years. There are plenty of different routes you can take, so you need to know what you want your final destination to be.
Analyze the city.
Toronto is growing. Every year we gain thousands of new residents, with seemingly even more jobs becoming available. The Tech industry is steadily but rapidly taking it's stance in our home city. We will very soon be in the same ballpark as California, with many available high paying jobs, and people from not only Canada, but the whole world, flocking to Toronto. That being said, we're seeing a lot of construction. It's not limited to any specific part of the city, it's all over. Now, all of those properties are technically good investments; they'll all grow. However, some places are better than others. The Canary District, for example, is a flourishing example opf good investment choices several years ago. That's because it's in a good location, with good transit, and new developments popping up all over like Sidewalk Labs and East Harbour. You have to look at all the neighbourhoods in the city, not just the ones you 'like'. Identify the future, find areas that will be booming in 10 years, not now.
Find a Platinum Broker.
If a broker has a Platinum relationship with a developer, it means several things: First, they mostly do pre-construction, developing an important relationship with a builder means years of cooperation and good work. If they are Platinum, it means they know what they're doing. Secondly, working with a Platinum agent has a lot of perks. What you might see at a new building launch is a sales office, with hundreds of people inside and a line out the door. These are interested buyers of a hot projects, some coming alone, others with their agents. What you don't know is that the week before the launch, there was a special event for Platinum brokers and their clients. At the Platinum launch, the brokers and their clients get to choose the first floorplans, often discounted prices, discounts on parking, lockers, and much more. If you want to make the most of your money, use a Platinum agent. Be careful not to believe a regular broker just claiming to be Platinum. If you don't receive any special perks, you're not going with the right people.
Beware a greedy builder.
This is really something your broker should be looking out for. If you decide to use a broker outside of our team, make sure to go over the deal yourself, and see if anything seems excessive. We have a blacklist of developers we refuse to sell for because we disagree with certain practices they implement. Most developers sell in accordance to the market, but a select few rely on inexperienced buyers to increase margins and safeguard any shortcomings they may have in the future. We would suggest adding known, experienced builders to your considerations when purchasing pre-construction. We don't mean to scare you or illustrate bad business practice, but there are several developers who do not outline their contracts fairly for buyers.
We understand it can be daunting to buy something that doesn't exist yet. All around the city, you see buildings coming up floor by floor. All those units are likely sold, and someone else is looking at rapid construction, excited at the prospect of receiving the keys and walking into a brand new condo with no history, full warranty, and already a higher price than what you signed for several years ago. The project will go up either with or without you, and when it's fully standing with people moving in, you'll regret the fact that those units are now over 20% more expensive than they were just a few years ago.