Benefits (and Drawbacks) of Buying Pre-Construction

The thought of buying a brand new condo certainly has an allure to it. Splashy marketing materials, ability to be the first owner and possibly realizing a large appreciation are all draws to buying pre-construction.  However, there are a few things to consider when deciding to buy pre-construction as well.

Benefits:

• Choosing your floor plan & floor– Perhaps the most obvious and one of the best benefits of pre-construction is the ability to choose the floor plan, view and floor you would like to live on.
• Never Lived In – Having your own unit with brand new flooring, appliances and amenities is a huge benefit. Along with being the first to live in your new space, you will also receive a Tarion warranty for structures and equipment in your new home, and your appliances will likely come with a warranty allowing you to live worry-free.
• Deposit – When you purchase pre-construction you put down a deposit, usually every 6 months until occupancy, although deposit structures vary widely by builder. If you don’t have a large lump sum to put down on a property now, pre-construction provides a more flexible opportunity to ownership.
• Appreciation – Buying pre-construction means purchasing before the building is built, usually 2-4 years down the road. In that time, the real estate market will likely increase and you will see appreciation in your unit with only paying the deposits on the property.

Drawbacks:

• Delays – Something to consider when purchasing pre-construction is the expected occupancy date. When purchasing you will receive a “tentative” occupancy period, but it is a good idea to not give notice to your landlord, or sell your current property until you receive a firm occupancy date. Still, construction delays within or outside of the builder’s realm can cause more delays by weeks or even months.
• Sight Unseen – Purchasing pre-construction comes with a few risks, one of which includes buying a home based on the floor plan and renderings provided by the builder. For some visual people, this proves difficult to imagine the actual space and can lead to disappointment with the finished product.
• Development charges – When you close on your pre-construction unit, the developer passes along city and provincial charges such as hook-up fees, education levies and other charges. These typically range from $7,500-$15,000 but can be more or less depending on the unit size you choose and the municipality the property is located in.
• HST – Technically, HST is charged on all new construction units as it is a new product. Resale units are currently not subject to this tax. There are many instances where a purchaser would get all or at least most of the HST back, so it is a good idea to have a team of professionals that know pre-construction on your side. At One Group, we work with the top legal professionals, mortgage brokers and accountants who can help steer you in the right direction and ensure your purchase is a smart, profitable and successful one.

If you are considering investing in pre-construction, having an experienced pre-construction real estate agent will make your experience less stressful and more profitable. Learn more about the latest pre-construction developments by browsing through our Pre-Construction Guides.

Contact us today to to see if buying pre-construction is the right move for you.