When considering an investment in pre-construction real estate, there are many factors that make a condo a very attractive option. Pre-construction investments in the GTA can provide for a very solid return, it is a passive investment that requires you to do almost nothing until the condo is ready.
Basically, you are buying a future asset but paying today’s prices. Your investment will increase in value from the first day you purchase the condo until you decide to sell your unit. In fact, Investors of pre-construction condos have seen exponential growth in condo sales and prices over the past few years, particularly in the GTA. This trend looks to continue for the foreseeable future as the GTA continues to grow and expand.
When buying a pre-construction condo, you not only have the ability to purchase at Day-One pricing but you also are able to customize your investment with more choices. You have the purchasing power to choose building locations and amenities, unit models and finishes, storage lockers and parking, floor heights and exposures. All combine to create more options for the day in which you plan to rent or sell your condo.
Your pre-construction investment will continue to climb in value because of supply and demand. It is a perfect storm for experienced investors and those new to condo ownership because for the next decade at least, demand far outstrips supply by a huge margin. As the GTA is set to receive unprecedented migration/immigration within the next 10 years, our need for housing has never been greater.
We are expecting growth of more than 2 million inhabitants, creating a massive call for infrastructure construction and housing. Currently, we are lagging behind the demand by 20,000 condo units/year. As demand continues to increase, so do condo and rental prices.
As a result, the values of these properties are increasing too as the GTA becomes an even more important economic hub. There is high demand for rental units that are clean and new, located along major transit routes and are close to shopping. In addition, the ability to secure higher rents for these units has been increasing too.
Renters will pay a premium to live in high-quality units with wonderful amenities like gyms, pools, spas, dog wash etc. The rules governing condos make them ideal rental properties. For the experienced investor, the new investor and the end user too, pre-construction is a rewarding “hands-off” investment.
When you invest in pre-construction, you benefit from leverage. Leverage refers to the borrowed capital that is used to pay for your condo unit. In this case, the bank is effectively financing your growing investment and equity. In most investments, the growth of your return is based on your actual investment dollar amount. The beauty of buying a pre-construction condo is that even though you will have only paid 20% on a condo units’ value, the ROI will appreciate to 100% of its worth, at a 5-to-1 ratio.
Therefore, you are making percentage gains on a higher amount than you have actually invested. Added to this is the fact that you are not paying the 20% deposits at once but rather spread out over months or years. In these times, this might be the easiest money you have ever earned!
As an investor of a pre-construction condo in Canada, you can benefit from some unique tax benefits. Many of your expenses like income taxes, mortgage interest payments, property taxes and depreciation can be deducted at tax time, saving you even more money.
Not only is renting out your pre-construction condo a wonderful vehicle to generate a significant income but this income is one that keeps up with inflation. Your rights to increase the rents each year are covered by the Residential Tenancy Act. As an added bonus, once you sell your investment property, only 50% of the capital gains are taxed in Canada.
Pre-construction real estate is considered one of the safest modes of investing in the GTA because it offers an excellent return, a solid asset to own and financial security while in your possession. Owners of a pre-construction unit can enjoy the benefits of a small initial down payment, extended deposit structures, and choices regarding financing options. Investors of pre-construction have three options at their disposal. They can move in and become end-users, sell their units or rent out their units and receive a monthly income.
There are many factors that go into determining which is the best investment for you. When it comes to investing in a pre-construction property, these types of purchases offer an attractive proposition. Once you factor in; location, amenities, limited financial exposure, excellent leverage, tax benefits and return on investment, you will see that this type of investment is simply an instrument to create equity and wealth.
We see the future of housing and real estate in the GTA as a market that will continue to grow and expand in the coming decade. There will be a dedication to the vertical and upward expansion of housing as a common living experience.
Have questions about pre-construction investments? Contact ATeam Condos to help you find the right projects at ateamcondos.com
