new condo projects

How To Make Money Buying Pre-Construction Condos

Posted by neil on February 28, 2017
General / No Comments

 

 

Hi There,

 

I hope you are doing well.

Today I would like to talk to you about:

Renting VS. Buying A Pre-Construction Condo In Toronto.

 

If you are familiar with what is going on with the real estate market in the Greater Toronto Area (GTA), you probably know by now that the market has gone completely Bananas.

There have been massive price increases all over the GTA with all different property types.

Many knowledgable experts say that the real estate market here is changing forever.  In that, Toronto is finally becoming a true international real estate market, similar to London, and Hong Kong.

With the transformation of the Toronto landscape occurring, this is having a ‘ripple effect’ on the housing prices all over the GTA.

If you own real estate in the greater Toronto area, you probably feel like a champ.  The price gains have been great, and life is good for you I am sure.

If you don’t own any real estate, and you are on the ‘outside looking in’, things may seem a lot more depressing for you.

You might be wondering to yourself how you will ever be able to afford anything in a market like Toronto where the prices keep on going up.

 

The Reality

 

The reality my friends is that for the people who sit back and do nothing, life will get a whole lot more depressing because they are going to get priced out of the market…. and priced out FAST.  

The market is moving so fast, it is leaving people behind in the dust.

This may seem like an overly dramatic statement, but let me qualify it.

As a Real Estate Broker who specializes in pre-construction and residential re-sale all over the GTA, I see first hand how prices keep on going up, and how people sitting on the fence are getting priced out and left behind.

If have the capacity and the finances to get into the real estate market, my Goodness man… DO IT!

Here is a quick and basic math exercise to show you the benefits of taking action and not sitting back.

 

Renting Vs. Buying a Pre-Construction Condo in The Greater Toronto Area

 

Let’s pretend that you are a youngster. (If you are not already one)

Or you can think of a youngster that you know  (your child, neighbour’s kid, nephew/niece) that is eager to buy something in the real estate market in the GTA.

A lot of youngster rent.  We know this.

What we also know is that for many new condo projects in the GTA, approximately a 20% downpayment is required by the builder.  

We also know that depending upon when you buy into one of these projects, the completion date can be up to 4 years into the future.  

So now let’s do a little bit of math… shall we?

 

Time For Some Math…

SCENARIO #1

 

In scenario One, the youngster is renting a one bedroom plus den condo somewhere in the GTA.

Let’s assume that he or she is paying $1850/month.  Sounds fair?  I think so.

Depending upon the location of where they are renting, this price will obviously change.

Let’s go with $1850/month.

Without looking at inflation and rent increases, let’s say that they rented for the next 4 years.

The total amount of money that they would have put towards their rent payments over this time would be:

 

$1850 * 12 months = $22,200

Now multiply $22,200 by 4 years = $88,800.

 

Therefore, over 4 years, $88,800 would have gone towards rent.

 

SCENARIO #2

NOW let’s look at a scenario where at the start of those 4 years, the youngster purchases a pre-construction condo in Toronto instead.

Just so we can keep this math simple ( I am NOT a math whiz), let’s assume that the youngster bought a pre-construction condo for $330,000 somewhere in the GTA.  Does that purchase price look fair to you?  I think it does!

 

So the condo at the time of purchase is $330,000.  

 

Let’s also assume that there is a 4 year window for completion.  Since it is February 2017 at the time of writing this, let’s say the occupancy date is Feb 2021.

 

Unless you are always looking for the sky to fall on you, it is an accurate prediction to say that the real estate market is going to continue to rise in the GTA over these next 4 years.

 

Now here is the $1 billion dollar question……

 

How much will the market go up by?

 

Given that the real estate market (detached homes) in Oakville, Ontario went up by 38.4% year over year from November 2015 to November 2016 , would it be a fair assumption to say that the market will go up 5% per year in the condo market in the GTA?

Is that too high?

You think it is?

Okay, fine.  Let’s be super, ultra conservative and say that the market only goes up 2.5% per year.

This figure may seem ridiculously low to those of you who understand what is truly happening with the real estate market in the GTA.

Okay… let’s assume a 2.5% increase in the market, over the next 4 years.

Okay… here we go.

 

Purchase price of in Feb 2017:   $330,000

Price in Feb 2018 – $330,000 * 2.5% = $338,250

Price in Feb 2019 – $338,250 * 2.5% = $346,706

Price in Feb 2020 – $355,374

Price in Feb 2021 – $364,258

 

So as you can see, by using an abnormally low figure for appreciation at 2.5%, this condo that the youngster purchased, will have gone up $34,258 over 4 years.  

Keeping in mind that experts predict that the market is going to rise a lot higher than this.

Even if we take these low numbers and compare them, this is what we find.

 

Comparison

 

If the youngster buys real estate, he or she would have made $34,258 in equity appreciation over these 4 years.

If he or she had been renting over these same 4 years, based on our figures, it would have cost them $88,800 over the same 4 years.

There are of course other variables and factors to consider when running these types of numbers, but from a high level you can see that it pays off financially to buy real estate and get into the market now.

If you are interested to get into the market, and don’t know where to start, here are some options for you:

 

Vita On The Lake By Mattamy – This is my favourite pre-construction project currently.  It is being built on the shoreline of Lake Ontario.

 

Time And Space Condominiums – If you buy early here, you are going to make a lot of dough. The project is in the Downtown Toronto Core.

 

Liberty Central By The Lake – Awesome if you want to live in Liberty Village now.
EMPIRE: Rain And Senses – Amazing furniture package of $10,000.  Limited time offer.

 

To Your Success!

-Neil

ps: I am a Real Estate Broker and a VIP Realtor.  I specialize in pre-construction projects and residential resale in the Greater Toronto Area.  I have access to over 100 new condo projects all over the GTA.  Sign up  to receive special builder DISCOUNTS and INCENTIVES that you cannot get from going direct.  To your success!

 

 

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