5 Costly Mistakes That Presale Condo Investors Should Avoid
Have you ever wondered what mistakes Presale Condo Buyers make as Investors that cost them a lot and should be avoided?
Buying a preconstruction condo is a big deal. It’s a big purchase, and it can be a bit intimidating. What if you’re not ready to move in? What if you don’t like the way the building turns out?
At Ipresalecondos.com we have narrowed down the most common mistakes investors make and how you can avoid them:
Mistake#1: Buying from A Rookie Developer
Some customers will go directly to a non reputable builder (one that doesn’t have any experience building pre construction condominiums) and get a bad deal. These deals may include lots of extras that raise your price without increasing your value (like upgrades that are really unnecessary). It is important to do your research on these builders before deciding who you want to buy from.
Failing to buy from an experienced developer may lead to a slew of issues like: construction delays, structural problems or financing delays for example. Search online for reviews on sites like Yelp, Google Reviews or Kijiji — these can be helpful indicators of how well different builders treat their clients and how long their projects take to complete.
Mistake#2: Not Understanding the Closing Costs
Some customers will underestimate the closing cost involved in buying a pre construction condo. It’s important to understand exactly how much it will cost before closing on one of these presale units.
Closing cost might include GST, Property Transfer Taxes (applicable if you’re an investor), Mortgage Fees (depending on the mortgage terms). A lot of presale buyers will also not fully understand the mortgage products that they have opted for and it might come as an uninvited surprise for them while closing on the property.
Ipresalecondos.com always recommends to hire a qualified lawyer and a presale realtor that deal with these types of purchases day in & day out.
Remember: Over $800,000 you”ll have to pay full property transfer tax, irrespective of the fact that you’re buying as an investment or for personal residence
Mistake#3: Failing to come with an Exit Strategy
Another mistake that most presale investors make while buying their pre-construction condo is not having an exit strategy on closing of the property.
The two most common options that presale buyers have is either closing on the property or selling it as an assignment of contract.
Both of these options come have their implication, but the presale buyer has to assess his personal financial situation and come up with an exit plan before or near the closing of the property.
Similar to most investments, a buyer may find out that on closing, if he chooses to assign his purchase the returns could be in red and at that point it is advisable to wait and complete on the property.
As an informed buyer you should understand the nuances involved and having an expert’s assistance can be of tremendous help. Ravi Bhindi has been in the presale condo business for 18+ years and with him on your side you can be rest assured that your transaction will be friction less
Mistake#4: Being Overly Impressed with Amenities
Spas, Cold plunges, wine cellars, Recreation Rooms, Tennis courts are all amazing add-ons for your investment property but don’t forget every amenity has a price tag on it.
Don’t get swept in the developer’s hoopla and smart marketing tactics since you’re paying for the location & property, not just the amenities.
Try and understand that are these add-ons really worth the price tag on the property or are they a cover up?
If your goal is to rent out your investment property, remember that bells & whistles can bring the eyeballs to your property but they might not convert into long term leases
Mistake#5: Over Reliance on Floorplans
Pre-construction is selling of concept. Whenever you sign the dotted line you’re buying a property based on how diagrams are going to look like in the future. One of the most common errors made by new investors is relying too much on floorplans, floorplates & brochures.
Do your own homework with the help of your realtor.
Brainstorm what would be an ideal floorplan for someone planning to rent your unit. Would it be a family? Would they like 2 Bathrooms? Would they prefer north facing or west facing unit? Would they like sunlight? Which floor would they want to be on?
In the contract, a developer has a clause that specifies that designs and features are subject to change anytime. Be mindful of that.
Pre-construction condo investors who purchase units before they are built have a lot to gain, particularly in hot markets. The age-old golden standards of real estate investment, however, remain true: due diligence, statistics over emotions, and research.
Having a presale construction pro on your side while purchasing pre-construction condominiums is a good idea.
It puts a Real Estate Market Specialist on your side who is knowledgeable & experienced with the sale and purchase of preconstruction condos, as well as the developer, in many cases.
This agent can provide you vital information into the developer’s product, previous buildings, and performance, explain the “what” behind the small print, and help you negotiate the important points, sign your contract, and finalize your next pre-construction condo acquisition.