Pre-Sales – A Closer Look
Pre-Sale Condos and Townhomes are not for everybody. But for many Buyers particularly investors. Pre-Sale Condominiums are a great option because of the advantages of this type of property offers.
What are some of the advantages to Buying a Pre-Sale for investors?
Low hassle investment with Potential for Capital Appreciation Pre- Sales allow investors potential for capital appreciation in a rising market prior to completion without the hassle of tenants, the cost of property taxes and maintenance fees. Pre-Sales can often be Sold prior to completion by the original Buyer for profit (Sometimes not a profit) and is referred to as an assignment of contract.
Warranty Protection: When the property completes the investor gets a property with a Full 2/5/10 Warranty which in most cases means low cost and low hassle ownership during the life of the warranty.
Leverage: An Investor may be able to purchase a Pre-Sale by putting down a deposit of 10% to 25% usually over 18 months depending on the Developer. Should the property increase in value before completion, an Investor could see a significant return on the deposit money invested. Also, in a rising market an Owner/investor may be able to buy a Pre-Sale with a reasonable deposit and rather than have funds sit in a bank their money could see a substantial gain in equity which can have a positive effect on a Mortgage.
Low Cost of Ownership: New Pre-Sales built by good Developer in most cases will not require a lot of costly and time consuming repairs or maintenance on the part of an Owner/investor as compared to an older building for many years.
Popular with Tenants: Newer buildings tend to be popular with tenants for the same reasons they are popular with investors, newness, no need for repairs or troublesome and costly maintenance as well as the modern conveniences that a newer building tend to come with such as Gyms, Saunas, Hot Tubs, Concierge, Swimming Pools etc.
Newer Suites Often Get Higher Rent: Brand New is popular and very often prospective tenants are willing to pay a Premium to rent or lease a newer unit over an older one. Many new developments are built along Bus and Sky Train lines it can save on transportation in many cases as people leave their cars at home.
Who Buys a Pre-Sale and Why?
*** 1st time Buyers may look at Pre-Sales as a Great way to get into the market by planning ahead 2-4 years, they can get themselves into a Brand New Condo in an area they will want to live in. This gives them an opportunity to freeze the purchase price at todays market value with potential to gain some equity in a Hot Condo market and time to save more money to reduce a mortgage or just be prepared without having to race around looking for at older property where completion and demand is strong with potential multiple offers driving up prices.
*** Assignment Sales, 1st Time Buyers, People wanting to stop renting or are looking to upgrade to a newer or bigger condo or Seniors looking to downsize that don’t want to wait up to 4-5 years can look to the Assignment inventory with Condos completing sooner.
*** There are also Buyers that want New Condos that have just completed and they might find what they are looking for but they are buying at the current market values and will be subject to the demands on the current market for competition. One Bonus there is No GST on the resale condo as the 1st registrant paid GST on completion.
*** Jr Seniors and Seniors age 60 years old and up who have savings in the bank earning a low rate, own a detached home and are not quite ready to downsize can use the Pre-Sale opportunities to ease the anxiety of moving, get a better return on idle cash, potential equity gains on the New Condo while at the same time your home equity can continue to grow in value for an extra 2-4 years a Double Win.
7 Advantages of Owner Occupiers
1) Selection for Owner/occupiers, the pre-construction purchase of a Condo or Townhome allows for in many cases a level of variety of floor plans, views and colour and appliance upgrade options not available when looking at the Re-Sale market.
2) Simplicity, An Owner Occupier can put a small deposit down on a Pre-Sale and continue living in their Home until the Pre-Sale is ready for occupation. Any issues with the newly completed property should be covered by the 1 year Developers Warranty.
3) Financial Leverage, Owner Occupiers buying a Pre-Sale in a rising market can also benefit financially. The Buyer may have bought the Pre-Sale at a time when Real Estate prices were lower than when the property completes. This may allow the Buyer who previously was a high ratio borrower become a low ratio borrower thus saving thousands of dollars in Mortgage insurance premiums.
4) Leverage for Non-Canadian Residents, Normally Non-Canadian residents have to put down a 35% nonpayment (please confirm with a Mortgage Broker) when buying an existing property in Vancouver all at the time of purchase. When one buys a Pre-Sale in Vancouver the Deposit usually 20% irrespective of country of residence.
5) Warranty Protection, Owner Occupiers can rest easy knowing they are covered by the BC Government administered 2-5-10 year warranty program.
6) Newness, Many Buyers enjoy being the 1st owner of a new Condo. Pre-Sales offer Guaranteed newness when purchasing along with all the mechanical, appliances and other systems are at the beginning of their life and should preform as expected and not need repairs or replacement for 15 to 25 years.
7) Low Ownership Costs, Newer properties tend to be more energy efficient than older properties which keeps utility costs low for completed Pre-Sale condos. Furthermore, during the 2-5-10 Warranty period there is a very small chance a Buyer of a completed Pre-Sale Condo will have to pay high maintenance fees or large assessments to repair the building.
Rights and Obligations with Pre-Sale Condos
When buying Pre-construction condos in Vancouver it’s easy to over look the potential negative aspects of this type of purchase or investment especially for 1st time Home Buyers.
Purchasing a Pre-Sale Condo is not an actual physical purchase of a tangible property, it’s actually a contract for the right to receive an obligation to pay for a finished condo at a set point in the future, irrespective of the Market conditions or the Buyers financial situation.
What are the Risks and the Disadvantages of Pre-Sale Condos in Vancouver?
If you are thinking of buying a Pre-Sale condo in Vancouver it is important to be aware of the potential risks and negatives for some people which could include the following GST and PTT is payable on Pre-Sales. Yes GST is payable on all new properties in BC and is due when the Pre-Sale property completes along with the Property Transfer Tax due, remember there are rebates on both the GST and PTT that you may be qualified. (Talk to your Realtor and Lawyer to see if you are eligible)
Buyers Can’t Back Out if the Market Fails. If Real Estate prices in Vancouver and the Value of the Pre-Sale condo at the time of completion is below what was originally paid for it , the Buyer is still required to complete! The Buyer cannot back out! If the Buyer does back out on the purchase of the Pre-Sale very bad things can happen that involves Lawyers, courts, judges and lots of money spent. Make sure if you’re buying a Pre-Sale you are 100% you can complete on it!
No Guarantee of a Mortgage! In most cases it is possible to get a Mortgage on a Pre-Sale property. But there is No Guarantee. Consult your lender, bank or mortgage broker before purchasing a Pre-Sale.
Buyers may Not get Exactly What they Paid for! In the contracts to buy Pre-Sales, which are drafted by the developers and are not the standard Contract of Purchase and Sale, Developers protect themselves in the fine print just in case this happens.
Make sure you Buy from a Reputable Developer and read the contract for the Pre-Sale in Detail! Have your Lawyer review the contract! There is also a 7 Day Rescission Period which allows you time to review all Documents with your Lawyer and you can Cancel the contract for any reason within this time period!!
If you are considering purchasing a Pre-Sale Condo or Townhome or possibly an Assignment sale in a Development or an area you missed out on CALL Richard Bishop Today @ 778-888-7424
Because my passion is to assist clients in reaching their Real Estate goals I look for every advantage to achieve that success and to enhance that goal I work with Stella Price and Associates. Stella and
her daughter Erin along with the rest of her team are one of Vancouver’s leading Pre-Sale Condo and Townhome sales groups showcasing some of the finest properties around the Lower mainland
(see links on this website) and because Stella launches many of these projects we can offer Priority Access with Special terms and benefits to serious Clients and Investors. For Pre-Sales, Assignment sales, Re-Sales and residential Real Estate sales your opportunity to work with a Top Team is now at your finger tips.
Burnaby is an excellent choice with massive growth in the Brentwood Mall, Lougheed Mall and Metrotown and Gilmore areas planned over the next 5-10 years making Now a Great time to invest for the future gains, situated in the centre of Metro Vancouver with Coquitlam and New Westminister to the East and Vancouver to the West. Burnaby has great golfing available at the Riverway Golf Course & Driving range,
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Burnaby’s 4 main areas North & South Burnaby on the west border and Lougheed Mall & Edmonds on the east have some of most attractive green spaces in the Lower mainland including Burnaby
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