What should you consider before buying pre-construction homes in Canada?
Buying a pre-construction home is purchasing a condo or townhome before it is complete.
One in every three homes purchased in Canada is a preconstruction home bought directly from the developer or builder. It is either an investment or a family home.
There are many benefits to buying a preconstruction project. The most obvious is that often you’re getting in early before prices go up.
You can also choose your finishes and customize your unit to your taste.
But with so many realtor options available, how do you know which is right for you?
This guide will take you through critical considerations when buying a preconstruction home.
So whether you’re a first-time homebuyer or curious about preconstruction, this guide has everything you need to know
Are preconstruction homes a good investment? Key considerations
There are several key considerations you need to take into account before buying a preconstruction home. Here are the most important ones:
- Get to know financing and maintenance costs
Money is the most critical factor to consider. It would be best if you had a realistic idea of how much you can afford.
The good thing is there are no mortgage payments during the construction period. But it would be best if you got mortgage preapprovals.
The deposit payments are also staggered and in small amounts—mostly 5% of the principal amount.
Additionally, you must find out the maintenance fee and development fees. The maintenance fee is the money you pay to a builder to service shared areas.
- Anticipate possible capital gains.
Consider the resale value of the condo. Condos sell for a premium, depending on the location and upgrades.
Remember, you cannot add upgrades like a walk-in basement to a complete building.
Find out all the amenities as they dictate the future value of a condo. The style and type of condo also determine the subsequent selling price of the apartment.
Ask what the future price will be and find out if condos in the area appreciate or vice versa.
Also, do your due diligence on the demand for housing in your preferred location. The market will always dictate the condo value, and often the site will determine the selling price.
- Find out the interim occupancy date and be patient
Preconstruction can take anywhere from one year to several more, so it’s important to be aware of this upfront.
Know that this is an investment for the long term and make plans around it. For instance, you might move in later than expected.
- Research the developer
Investing in a condo where the developer has a good reputation is a risk mitigation strategy.
Find out previous homes built by the developer and only invest if the builder has a good reputation.
- Read the contract, by-laws, and closing costs terms and conditions
Ensure you understand the contract terms and all fees involved during the ten-day cooling-off period. Some builders need feedback within 24 hours.
Read the by-laws because some may need to be more relaxed to match your lifestyle.
An experienced real estate lawyer should help you understand the by-laws and closing costs in the purchase agreement.
In some instances, developers offer to pay closing costs to entice buyers, which is great.
- Get to know if there are government incentives.
Some locations have tax incentives, and others have a smoother building permit approval process.
Cities like Welland expedite construction preliminaries. That means construction starts earlier than in other places.
The government sometimes offers tax incentives to encourage building in some areas. So, reconstruction condo prices are low, and you save big when buying.
- Observe the architectural designs and material quality
You can preview the master plan and tour the units under construction to help you decide.
Note the quality of the building material and the architectural designs. Contemporary building designs like open living spaces increase the value of a condo if they’re trendy.
Also, determine if the building adheres to location building codes and zoning regulations.
- Final submission
With so many factors to consider, you must do your due diligence and get professional advice.
Research the developer, the location housing market and unique project feature to find the best deal.
You can make the most of your preconstruction investment by arming yourself with information and working with the right professionals.