How to Choose Your Pre-Construction Condo Investment

In an ideal scenario a pre-construction condo investment will appreciate in value, build your equity, and if you are lucky even generate positive cashflow (with skyrocketing prices this is really hard/impossible to do in Toronto these days…Although it’s still possible in Montreal for now).

Whatever your objective, it’s going to require a lot of time and effort up front. If you can evaluate investment opportunities and make solid investment decisions it’s worth it. It’s not easy, since Toronto has tons of condo launches to choose from. Here are some ideas that you might want to use…

Good Builder Reputation = Lower Risk

Well known builders reduces the risk that comes with buying pre-construction. You won’t have to worry as much, wondering whether a project gets built on time or not (or at all). Keep in mind that you are buying on plan (ie: a piece of paper). From my own experience, developers (and their pre-construction contracts) have A LOT leeway when it comes to what they advertise versus the actual end product. You cross your fingers that a good developer, will not deviate too much from the paper plans, and offer good customer support after delivery.

It can be difficult to find this information online, because developers have deep pockets and will take action against any negative online reviews. For GTA buyers at least, there are some resources out there to help you find builders with street cred.

• Developer history: This can be seen here on Tarion’s Ontario Builder Directory from the Ontario Ministry of Consumer Services who enforces the Ontario New Home Warranties Plan Act and Regulations.
• Awards: The Building Industry and Land Development Association (BILD) has annual awards recognizing the top developers in the GTA. Looking at present and past winners, gives you some level of comfort and knowledge of who you can trust.
• Word of mouth: Get to know people, friends, colleagues your own experience. Visit condo buildings for resale, visit open houses. You’ll get a sense of a builder’s past projects.

Location is Still #1

This depends on your timelines. If you buying in a mature area then prices will be higher. If you buy in the middle of nowhere, you might have to wait decades for a decent return (if any). The obvious factors:

• Nearby Amenities: Is it close to amenities such as a park, university, hospital, banks etc? The “walk score” of your condo is another way to look at it. Can you walk to a grocery store, shopping mall, restaurant, bars, entertainment etc. Or do you need a car to drive everywhere?
• Transit Score: Similar to the walk score, we have a transit score. Anything near a metro/subway station has a higher value. Period.
• Demographics Who are the potential renters and buyers in the area: young professionals, families, students?
• Future Developments: Neighbourhoods receiving with planned city infrastructure upgrades will obviously benefit from them once completed. The years of construction is a pain though and something to keep in mind.
• Comparables: Look for comparable resale and rental price data in your area. While not every building is the same, having a ballpark idea can only help.

Condo Unit/Building Quality

In a crazy hot market like Toronto, builders can (and often do) cut costs with popcorn ceilings, low height ceilings, and basic finishing. You have to decide whether you can accept such features. But you can decide on the following…

• Layouts/Floor Plans: Look for units that optimize the use of floor space.
• Building Amenities: Renters love amenities such as a pool, gym, or retail space in the building.
• Views: A view often can be an added value to your condo…Builders know this and charge extra for it.

If you need help or want some investment ideas, just send us an email!