Condo Investment Insights

In Toronto’s hot real estate market, pre-construction condominiums have become a very popular form of investing.  In spite of growing concerns regarding market saturation and shifting costs, there is still HUGE demand for the best projects every year and condo sales remain very strong in the GTA.

As realtors specializing in the pre-construction phase, we know that this is the best time for investors to buy a condo. Most people know that if purchased early in the cycle, the home builder generally offers more competitive pricing.  While the lower pricing and greater choice afforded by the pre-construction phase is certainly a big selling point for potential investors, it is really only the tip of the iceberg.  Pre-construction condos offer some of the best returns you can find in an investment and it’s important to know why when trying to weigh the differences between the resale and pre-construction markets. Investing in a pre-construction condo offers many advantages that other types of investments don’t. Below we have recapped some of the most important one’s for you:

ONLY BUY PRE-CONSTRUCTION CONDOS – HERE’S WHY:

Favourable Financing – when purchasing a resale unit, you need a 20% down payment up front. With a pre-construction unit, you only need 10-20% down and that is spread out over multiple payments ranging from 365 to 540 days. During this time your deposits are safe in an interest-bearing trust account.

The Power of Leverage – you don’t need to take out a mortgage until final close, so for the 3 to 5 years before completion of the condo, you are leveraging the developer’s money. In theory, prices will rise significantly during that period, but when it is time to take out a mortgage and close on the property, you are still buying at the original price. This means that you are purchasing the property at a BIG discount. Your deposit has grown into significant equity because of the price appreciation and leverage you received from the developer on the full value of the property.

Rents – Have Your Tenant Pay Your Mortgage for You 

In the past year Toronto condo rents have climbed 11% and we are now the country’s most expensive rental city. How many investments out there allow you to have positive cash flow on day 1. Young professionals who make up most of the rental pool, want the convenience of condo living, while being within close proximity to work and amenities. By renting to the right tenant, in the right location, your tenant will pay off your entire mortgage for you.                                 

 “Mortgages are typically paid off over 25 to 30 years, but with the right property this can be as quick as 15 to 20 years with only 20% down. Let us help you find the right property and tenant”. Ryan Coyle, Co-founder of CONNECT Asset Management

Instant Equity – on account of the price appreciation and leverage from the developer over the 3 to 5 years, you will have SERIOUS EQUITY built into your property when you close. This gives you the opportunity to refinance your condo and take out the new equity to invest it into more property. Refinancing allows you to take equity out of your property tax free. You won’t have to pay taxes on this money until the property is sold, whether that is in 1 year or 100 years. The CONNECT Investment Blueprint can you help you do this.

  “Ask any real estate tycoon how they made their fortune in real estate and they will tell you that they used leverage and refinancing.” Ryan Coyle, Co-founder of CONNECT Asset Management