Investing in Pre-Construction Condos This 2019: How Can You Succeed with This Venture?
Investing in real estate is known as one of the most foolproof investments out there. The idea is that people will always need real estate space to live in or use for business purposes. For this reason, real estate investments are known to appreciate over time, which gives more value to your investments. But there is one particular form of investment that is becoming rampant today – pre-constructed condos?
The appeal of this type of investment lies in the fact that they are cheaper to acquire than resale condos. You can see the listing to learn about the cost of pre-constructed condos versus existing units. And while all types of investments entail risk, the reward is going to be worth it.
Benefits you can get when investing in pre-sale condos. (Image Source: Unsplash)
Below are some of the reasons why pre-constructed condos are a good investment and how you can optimize that investment.
Today’s Acquisition with a Future Pricing
The main advantage of investing in pre-constructed condos is that you can buy a condo for the future at today’s price. When it comes to real estate appreciation, the value of owning a property (including condos) can increase over time.
If you are keen on investing in a condo, you can grab this chance to purchase the unit for a lower price. This is true compared if you waited a few more years (or opted for an existing unit).
The One-Year Delivery Feature
Choose a pre-constructed condo that has a delivery of 1 year or less. This will give you the chance to be able to rent out your unit at the soonest possible time.
Thus, you are reducing the amount of time you have to shoulder the cost of monthly amortization and other fees. The sooner the unit turnover, the better.
Acquisition Cost
Choose the cheapest unit for the desired model. Not all condo units are priced the same. If you can find the cheapest one available, you will be able to improve your profit margin.
After all, it won’t make much of a difference since the units are in the same building. You will also have access to the same amenities later.
Annual Appreciation Value
Take advantage of the lower price now because condo units are estimated to have an annual appreciation value of 7.1%. Condo prices are only going to rise in the next few years with less space available in the strategic locations.
This is true for places within the city center or the CBD area. If you can secure a real estate property within these strategic locations, you can leverage that to secure competitive rental rates on your condo unit.
Reselling for a Better Price
If you decide to resell the pre-constructed condo unit at the time of its completion. For example, you can sell it for a better price 1 or 2 years after you purchased it. The reason for that is buying pre-sale condos will give you a discounted price on the unit.
By the time you sell it, the cost of the property would have already appreciated the current rates in the market. Be extra careful in choosing which unit to get. Learn the pros and cons of choosing a unit in the lower or upper floors.
Tax Breaks
Look for any tax breaks you can qualify for. Again, this is a simple step you can use to maximize profits for your investment. Any tax break you can get can be added to your profit.
Unit advertisement
Emphasize the fact that this is a brand new unit. This is because renters love that. It is true especially since they expect good quality living conditions.
It is also a good idea to furnish your unit before you rent it out. This will add to the appeal and value of your condo unit so that potential renters no longer have to carry the cost of furnishing it.
Tips to Mitigate Risks of Pre-Constructed Condos
Is it smart to invest in pre-constructed condos? (Image Source: Unsplash)
While pre-constructed condos are a viable investment, it comes with its own set of risks. There are a few factors you need to consider if you want to mitigate the risks of your investment.
Finding a Reputable Builder
The first and most important factor to consider when you invest in pre-sale condos is to find a reputable builder. Since the condo is not built yet by the time of your investment, there are huge risks involved.
First off, the quality of the build might not be up to par from what you were promised by the time of purchase. Finding a developer or builder that you trust is crucial so you can be confident in your investment.
Real Estate Market Research
If you do not know of any developer that would be a good choice, make sure to do your research. Look at the properties that the developer has previously worked on. Use this as an opportunity to get a feel for the quality of their work.
You can also check out the reviews from current owners of the units they developed to see the feedback on their work. Since you do not have a property of your own to check to assess your decision, this is the next best thing.
Verify the Terms of the Contract
Once you have chosen a developer, make sure to read everything in your contract… twice. Ask a lot of questions, too. It is important to get as much information as you can about the development so you can make the right choice. And be prepared for delays.
Most developers will provide you an estimate for the turnover date. This might not always be the case and can be pushed a little farther back.
Finding a Good Location
The next crucial factor to mitigate the risk is to find a good location. It is not just about finding a location that is good now, but you must be able to look ahead into the future. What locations are going to be in demand when the condo building has finished construction? Toronto, for instance, is a prime location with many developments underway. That’s why investing in pre-construction condos located in Toronto is a good move, because this area is going to keep a steady demand in the years to come.
Prepare the Occupancy Fees
Finally, you must be prepared to carry the cost of interim occupancy fees. This is one of the reasons why a lot of investors think twice about buying pre-sale condos. Existing units can be rented out.
This will lower the carrying cost of the unit, the same cannot be said of pre-sale condos. You have to be willing to carry out the fees since your unit hasn’t been built yet, in the hopes of making a profit off it later.
Conclusion
Is a pre-constructed condo a great investment option for you? If you are an independent investor, condos that are for pre-sale are going to stretch the value for your money. As long as you take the risks into account, you can find ways to neutralize them so they can work in your favor.
