How PRECONSTRUCTION WORKS
How Preconstruction Works for Condo & Townhome Projects In Canada
We will walk you through the typical preconstruction condo process and the steps to go through before the project is completed.
Investing in preconstruction properties might seem like a scary idea for someone that hasn’t gone through it. Paying money for something that hasn’t been built yet can feel odd, so it’s important to work with someone you trust. We can guide you through the entire preconstruction process.
Here at REXIG, our clients are our number 1 priority and our dedicated condo team is experienced with the preconstruction condo process. We will be with you through every step of the way so you feel confident in your purchase.
Step 1 - Know Your Builder
Firstly, when investing we want to understand and educate ourselves about the builder. Investing into preconstruction with a reputable builder makes the investment inherently less risky and therefore giving you piece of mind. This will typically show how the preconstruction condo will unfold and the level of quality of the finished project.
Our team begins by checking out the developer:
– How many projects they have closed on
– If there were any delays
– If any project that ended up being cancelled
The REXIG team has relationships with many large established developers so we always have the inside track on how each builder works.
Although it’s rare for a project to be cancelled, you will always be covered if a project does not end up being built. If a builder does not complete a preconstruction condo for whatever reason you will still get your money back. The money paid is to the developers through a lawyer in trust therefore the builder has no access to this money. They don’t get it until the project gets built and you get your keys after closing.
The problem with a project being cancelled is potentially years have gone by and you would have had a unit that has appreciated. Now instead you only get your money back with minimal interest on that sum. It’s important that you deal with a reputable builder and understand their track record therefore avoiding this situation.
How Preconstruction Works - The Process
Step 2 - Get Early Access For Your Preconstruction Condo
Now you have established that the builder is reputable and the project(s) that they are offering are ones you would like to invest in. You will want to ensure you can get into the project at the correct timing in the process.
You will want a brokerage that can get you in as early as possible. This is before any price increases, appreciation and removal of incentives. Look at the diagram above to understand how the process of preconstruction condo launches work and furthermore where early access occurs.
The first launch opportunity to purchase a unit is the Platinum Launch. This is where we at REXIG can get you access. This is only available to a few select brokerages that have a relationship with the developer and secondly have sold many units.
During the Platinum Launch you get early selection of units, preferred pricing and additional developer incentives. Because you have got into the project early, this is where you can typically see the most appreciation . Getting in at this stage in the preconstruction condo process provides the most potential.
If the project is still not sold out after the platinum launch (because often it can due to popularity in Canada). It then gets released in consecutive launch stages often seeing a 5%-10% price increase for each unit.
Step 3 - Selecting The Right Preconstruction Condo
You found a reputable builder. You found that REXIG is the brokerage that can get you in at the Platinum Launch. Now it is time to choose your preconstruction condo for purchase and go and sign the paperwork.
Here at REXIG we help you choose the correct unit depending on your goals and whether this will be for investment purposes or to move into when its built. There are many things that can go into choosing a unit and therefore it depends on what your goals are with this property.
We will help to make sure you are maximizing the builder incentives for your preconstruction unit and increase the value you’re getting for your dollar. We will even go with you to sign the paperwork making sure you will receive the incentives you were promised.
In Canada, in Ontario there is a mandated 10 day “Cooling-Off” period. We offer all our clients a free lawyer review where they will review the contract again. They will make sure that all promised incentives are in the contract and that the deal is exactly what you selected.
The 10 Day period has no penalties or obligations. If within the 10 days you decide this unit is not for you, you let us know, and any deposits will be returned. There is no obligation on your end. After 10 days pass the contract becomes firm. Congratulations! You are the proud new owner of a preconstruction condo.
Now that you are a proud owner of your preconstruction condo, you have a few options which you can look at to determine how you would like to use it based on your goals:
Step 4 - What To Do With Your New Preconstruction Condo
#1 – You can wait for the unit to appreciate and then sell it on assignment before the building is finished
#2 – Wait until the unit is built, close and sell the unit.
#3 – Sign a lease at interim occupancy and start renting the unit. Bringing in passive income before the building is fully completed
#4 – Move into the unit at interim occupancy, live in the unit and enjoy your new property.
No matter which option you choose, at REXIG we can help you make it happen. We will work to best align with your real estate purchase goals.
Closing On Your New Condo
Development Charges – Development charges are 1 time fees that get assigned to the owners of units in new buildings. They’re charged by municipalities that help pay a portion of the growth related capital infrastructure requirements. If your real estate agent hasn’t negotiated capped development charges you could be charged an extra $20k-$40k at closing. This would come directly out of your own pocket plus typical lawyer fees and land transfer tax. Our REXIG preconstruction condo team makes sure that your development charges are capped by the builder. This means they can not exceed a certain amount. Typically a buyer will pay on average between $2k- $12k. depending on the project and infrastructure requirements.
Taxes On Your New Condo
Taxes – Next, we talk about the taxes. On the closing of any new home in Ontario, Canada for example. The HST (Harmonized Sales Tax) has to be paid either by the builder or by the buyer. If this is your primary residence you will be granted an exemption on these taxes by the government. Alternatively, if you have a 1 year lease signed by a tenant you will also receive the HST back. We can help you navigate these fees and processes even between provinces when you speak to us.
Now, you’re the happy owner of a completed condo or townhouse. You can choose to live in or rent out and you are 1 more property closer to financial freedom.
We would love to get a chance to speak to you more about preconstruction condos. We’re happy to answer any more questions you may have about how preconstruction works.
We would love to understand your goals and there is absolutely zero pressure.
Give us a call at 416.822.7699 or fill out the form below to speak to our expert agents.