If you're thinking about putting your money into a pre-construction project in Canada, you're looking at a smart investment move. These projects allow investors and potential homeowners to purchase a property before it's fully built. With multiple projects introduced almost every week, finding the right one for you has become trickier than ever. It should not only fit your budget but also be easily accessible by public transit and roads, and room for appreciation in the next few years.
Here are 9 things to keep in mind while evaluating a pre-construction development to get the most out of your investment:
1. Understand the Market
Write down the cities or areas you’re interested in. Now, take a good look at the local market and ask yourself these questions - Is the local real estate market growing? Are there future developments that could increase the value of your investment? For example, in cities like Toronto and Vancouver, the demand for housing has consistently driven up property values, making pre-construction investments more valuable.
Look for areas with strong growth potential, good infrastructure, and accessibility. Being close to amenities like schools, parks, and shopping centers will be a huge asset when it’s time to move in.
2. Developer Reputation and Track Record
With new developers popping across the country, getting sidetracked is obvious. A good developer with a strong track record of timely, high-quality projects is more likely to deliver a successful development. Only 5% of projects in the Greater Toronto Area get canceled, so if you’re a first time pre-construction investor, purchase in this area. If you have acquaintances that purchased a past project, ask them for a detailed review.
3. Analyze the Project Plan
Every project is different and whether you’ll be moving in or renting it out, your focus should be on finding a practical floor plan. Look for the layout, design, and the quality of materials being used. If you get early access, book a south facing unit as they are brighter than others.
4. Legal Contracts
After you pay the initial deposit, you have 10 calendar days to review the purchase agreement. Use this time to contact a real estate lawyer and understand what the terms mean. Pay attention to clauses related to construction delays, material changes, and your rights as a buyer. If you feel the terms aren’t in your favour, you can walk away within the time frame and get your deposit back without any penalty.
5. Consider Extra Costs
Check if the development is fully funded and inquire about the financial stability of the developer. Be aware of extra costs, such as development levies, HST, and adjustments that could affect your budget.
6. Future Value and ROI
While these are all predictions you can make, considering factors like market trends, the potential for neighborhood development, and the quality of the construction will help you make a judgment. A good investment should offer a strong return on investment (ROI) over time.
7. Warranty and After-Sales Support
In Canada, new homes often come with a warranty called Tarion Warranty that covers major structural defects, but it’s important to understand the specifics of what’s covered and for how long.
8. Community and Lifestyle
Write down amenities you desire in the new home project. Does the development cater to your lifestyle needs? Are there community amenities like gyms, pools, or communal spaces? Some also offer free shuttle services to the nearest GO or local transit stops, which is a big advantage if you plan to rent out the unit.
Energy-efficient designs, green spaces, and sustainable construction materials are not only good for the environment but can also lead to savings in utility costs. A builder that’s eco-conscious will put more thought into building the units.
Real estate investments can offer significant returns but only if you do your due diligence. Work with a realtor with experience in pre-construction developments to get early access to projects and always ask all your questions.