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Pre-construction condos in Toronto

bgjvan

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Sep 26, 2007
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Does anyone have experience with buying pre construction condos in downtown Toronto. I have bought a condo that is not going to be complete till approx. summer 2009. I also bought a pre-construction condo in Halifax that will be ready in 2008.
I am trying to ways the pros and cons of buying pre construction condos vs other forms of RE investing. I understand that I will not get any cash flow until I rent the condo, but the way I look at it, it is a good way for a beginner invester to get started?!? Any comments or suggestions as to what I should do next?
 

NickStewart

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Aug 30, 2007
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QUOTE (bgjvan @ Sep 26 2007, 07:16 PM) Does anyone have experience with buying pre construction condos in downtown Toronto. I have bought a condo that is not going to be complete till approx. summer 2009. I also bought a pre-construction condo in Halifax that will be ready in 2008. I am trying to ways the pros and cons of buying pre construction condos vs other forms of RE investing. I understand that I will not get any cash flow until I rent the condo, but the way I look at it, it is a good way for a beginner invester to get started?!? Any comments or suggestions as to what I should do next?

Welcome aboard and congratulations for taking action.

There are some things to be cautious about when investing in the pre-construction market - with the biggest one probably being whether your unit will be "absorbed" when it is completed. That is to say - will you be able to sell your unit for more than you paid (if you are a flipper) or will you be able to rent it for at least break even cash flow (if you are a holder).

Remember, there are probably lots of people who are doing the same thing you are in those buildings and when the doors open, you will be competing with them either for purchasers or renters.

If the market will absorb the influx of units at completion, great! If not, you could be in for some stressful days and nights.

There`s a great report put out by the Conference Board of Canada, available here http://www.genworth.ca/mi/fre/downloads/Me...ok_Winter07.pdf which has some good stats about absorption in various markets including some future forecasting.

Other concerns about pre-cons are if the builder will actually complete the project (don`t go bankrupt), whether they will try to weasel out of their contract with you because their costs have gone up or they think the market has gone up and want the profit themselves, and finally (one of the big reasons I personally don`t buy pre-con) the fact that until the building is complete, all you own for the money you put in is a piece of paper, your contract - you don`t actually own the "real estate" until it`s all done.

I don`t say this to discourage you
, just so that you are aware of some of the other angles of pre-con.

Now that you have a few pre-cons in your portfolio, I would encourage you to look at buying some already built properties in great markets that will either give really good cashflow, or really good appreciation (or ideally BOTH!). If you follow the ACRE system and do your due-diligence you will be able to find lots of these properties out there.

Good luck with your investing and again congratulations on taking action!!!

Nick
 
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