Ontario is bustling with new condo developments. Large, multi-storey structures are going up all across the region. If you’re thinking about investing in one of these new developments, you might be contemplating the purchase of a pre-construction condo. Choosing to buy pre-construction condos in London Ontario can come with numerous benefits. For instance, the opportunity to customize certain features, more time to save for a downpayment and the ability to move into a brand new home. However, it’s important to understand the risks associated with this sort of investment. To give you a better understanding of how a pre-construction condo sale works, we’ve detailed a list of items to keep in mind. Follow along below to learn more!
What is a Pre-Construction Condo and Why Would You Want One?
Pre-construction condos are condo units that have not yet been fully built. This means that they cannot be lived in or rented right away. When you buy a pre-construction condo or house, it means that you are the first buyer of that asset. As such, you’re afforded benefits like buying in at a lower price. This allows you to capitalize on future advantages like the appreciation of your unit and the potential for it to be rented out at higher rates. Buyers who choose to invest in pre-construction condos purchase the unit from the developer. One perk to this is that buyers don’t need to spend time going back and forth with sellers, making offers that might not be accepted.
Lots of buyers choose to invest in a pre-construction condo since it allows them more time to save for a down payment. This is because the closing date of a pre-construction condo typically does not occur until a few years after signing your purchase agreement. This is very different from buying resale where the down payment must be paid within weeks of signing the contract.
Another benefit of pre-construction condos is the option to customize your unit. Many developers will offer buyers some creative freedom with the interior finishings. This is great for those who want to move into a home that reflects their personal style. Generally, buyers will be presented with various options for cabinetry, floors, countertops, and other features.
Moreover, moving into a pre-construction condo will give you the peace of mind that comes with living in a brand-new unit/building. This means less maintenance, reduced bills (thanks to energy-efficient appliances/systems), and the comfort of knowing that everything will be under warranty.
So, what could possibly deter a buyer from wanting to purchase a pre-construction condo?
What are the Risks Associated With Buying Pre-Construction Condos in London Ontario?
As you might suspect, buying a pre-construction condo is not all deals and dollar signs. In fact, there are a few caveats that can make this sort of investment risky. Especially, for the wrong buyer. One of the most obvious disadvantages of buying a pre-construction condo is that you won’t be able to move in right away. While this does afford you more time to save, it’s not ideal for those who need a place to live on a specific timeline. This can be made even worse by inevitable construction delays. Things like permits, supply chain issues, weather and financial loss can all impact the completion date of a pre-construction condo.
The other downside of buying pre-construction is that you have to pay phantom rent. This refers to the period between taking ownership and actually moving in, also known as interim occupancy. Interim occupancy can range from a few weeks to a couple of months. While you won’t need to pay your mortgage during this time, you will need to pay rent. In Canada, the money you pay during your interim occupancy is often called phantom rent.
One risk that buyers usually neglect, is that everything to do with the building is subject to change. This means that even if the developers market your property as having a full-service gym, luxury pool or spa, there’s always the risk that none of it is included in the actual build. The site plan, unit layout and amenities can all undergo significant changes or reductions once the building commences. Builders always put forth their ideal end-product in marketing material. However, it’s important to keep in mind that it may not look exactly how it’s pictured in the advertisements.
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There are lots of factors to consider when buying a pre-construction condo! If you have any questions about what you read, or a property in the area, contact us today. Discover more information on buying and selling in London, when you reach out to one of our trusted team members. Be sure to check out our Instagram page for the latest updates and more. We’d be happy to help you find an awesome property in Ontario. Feel free to reach out to us at any time, we look forward to working with you soon!