For decades tradition dictated that it made more sense to invest in existing properties as they offered a higher appreciation rate. At the same time, wisdom stated that condominiums and most especially pre-constructed ones were nothing but a money pit for the unwary investor. In fact, quite the opposite tends to be true as putting your money into pre-sale condos already save you on doing maintenance as covered by your monthly association dues, but could end up being the best investment you ever make.
Toronto is the Proof in the Pudding
According to a recent report issued by the Canada Mortgage and Housing Corp. (CMHC), people who live in Toronto are catching on to the trend. In the report, the CMHC, 2015 figures show that approximately half of those who currently own and live in a condo have purchased a second condo as an investment property. Almost 25% owned two investment condos, and 10% own three or more investment properties. Many of these were purchased in the pre-construction phase. But why are so many visiting a site where you can find the latest pre-construction projects to find their next investment and why is this type of investment has become so popular?
Lower Initial Investment Required
Perhaps one of the biggest reasons investors are looking at pre-construction condos is that it typically requires a far less “up-front” money. Take a look at this, the average down payment on resale property is in the neighborhood of 20%. So, if a resale condo is being offered at $450,000, you would need to come up with $90,000 for a down payment. When investing in pre-construction, you are likely to have a significantly lower down payment. At the same time, the developer may allow you to pay off your down payment in installments that can be paid during the construction phase. When you get to break your down payment like this, it can free up more of your working capital for use in other investments.
A Much Higher Return on Your Investment
The only reason to invest your money into any project is to make money on your initial investment. With the popularity of condo living on the rise, investing in pre-construction units instead of resale units makes good sense. The prices of new construction are continuously rising at a faster rate than resale units. If you are on a site where you can find the latest pre-construction projects, be sure you look at the prime locations first and if possible, make your investments as soon as possible. Failure to do so could lead to your missing out on what could prove to be one of the best investments you can make in today’s real estate market. Keep in mind that in most major cities such as Toronto, condominium rents are continually on the rise. Once your first tenant moves in, your costs drop to virtually nothing as the rents typically cover all mortgage costs and more. The hardest part is making sure you do your homework and choose the right project to invest in.