Purchasing an investment property is a big decision and an even bigger financial commitment. But, over the years, pre-construction condominiums have become a popular way for investors to get into the real estate market. This is because they can invest with a down payment, and throughout construction, their investment grows in value. So, by the time their building is ready for occupancy, their investment has already increased in value, and they can start making a passive income by renting out their unit to tenants.
Although investing in a pre-construction condo can be a big commitment, it remains a lucrative long-term investment. At GTA-Homes, our team of platinum agents are committed to helping you find an investment property that suits your needs and helps your investment grow.
That’s why we’ve narrowed down 5 important tips to help you make the best possible decision when purchasing a pre-construction condo unit. So, whether you’re a first-time investor or a seasoned investor, you can use these tips to help narrow down your search when looking for your next investment property.
Tip # 1: Investing Near Employment
People want to live where the jobs are, so if you’re looking for a place to invest, remember, tenants will look for homes in an area that has a high employment rate or an area that’s expecting new employment growth.
Looking for a condo project near major employment districts is the main reason why the City of Toronto has such a hot market. Toronto is known to be a high-density area that offers many job opportunities in every field. So it’s no wonder that the demand to live there is so high. However, we know that because of the demand in Toronto, the prices can be increasingly high and may not fit into every investor’s budget.
That’s why we recommend looking at other places to invest outside of Toronto, including Vaughan Metropolitan Centre, Pickering, Waterloo and more! For example, Vaughan Metropolitan Centre or VMC for short, has the largest growth projection out of the 25 Urban Growth Centres across the province. The VMC will have new transit, more development growth and more people moving to this region in the next few years. Soon, the term ‘downtown’ will not just be synonymous with Toronto. In fact, every city across the GTA will have its own downtown core, and for Vaughan, the VMC is just that.
The City of Pickering will also be seeing a lot of growth in the next few years. Based on the City’s official plan, this location expects to see an increase of 8,300 people and 8,700 jobs by 2031 to reach its target of 13,500. These numbers represent substantial growth of approximately 165% per cent in the next 10 years.
Pickering, along with the VMC, are great investment opportunities because the officials here work hard to achieve their projected population growth and employment goals. These two growth centres are just examples of how areas outside of Toronto will incorporate new employment growth. But, all 25 urban growth centres will accommodate new population and employment growth because the land in these areas will be used to create complete communities where people can live, work and play.
Tip # 2: Access to Public Transit
Many tenants now prefer to commute to and from work and run errands using public transit, and that’s why the federal and provincial governments are spending billions of dollars to fund new transit infrastructure within the GTA. Public transit has many advantages. It reduces congestion on the road, gets commuters to their destinations quicker and helps the environment by reducing emissions released into the air. Now is the time for investors to capitalize on this and purchase a condominium that is within walking distance to any form of public transit.
Transit is a major benefit for you because not only will your condo unit be attractive to future tenants, but investing near public transit could allow you to see an appreciation of 30% more than investing in an area that’s not near transit at all.
The different types of public transit to look out for include subway stations, GO Trains and rapid transit networks, including the Eglinton Crosstown LRT. Plus, there are many more transit lines that were recently approved by the Province including the Ontario Line, the Scarborough Subway Extension, the Yonge North Subway Extension and the Eglinton West LRT. By investing in areas around these new transit lines, you are setting yourself up for success because tenants will be more inclined to invest near public transit to help them get around quicker and more conveniently.
Tip # 3: Amenities
Condo amenities are a great way to attract tenants because this is how your tenants will occupy their time. Amenities will also increase the value of your condo unit in the future when you’re ready to sell it.
When you’re looking for a pre-construction condo, it might be tempting to find a building with minimal amenities because they’re often cheaper than modern and unique amenities. But remember, amenities are a crucial part of a condominium, and many tenants will look for condo buildings with amenities that fit their lifestyle. This is why many developers will spend time ensuring that the amenities in their building will suit anyone, no matter their age or lifestyle. Developers will also make sure that the amenities are furnished with modern features and finishes so that they are attractive to buyers. If you feel that the amenities appeal to you as a buyer, you can guarantee they will be attractive to tenants or future buyers.
Tip # 4: Choosing the Right Layout
When looking at pre-construction condominium floor plans, it can get overwhelming, and investors are often left wondering “which layout will work for me and my investment?” Although there is no concrete answer to this, our platinum agents can advise you on your budget and the type of tenant you want to attract.
One-bedroom layouts can make excellent income properties, especially near office buildings where many single professionals are looking to live. However, two or three-bedroom units are great options for growing families. The type of floor plan you choose will determine the type of tenant that will likely want to live in your unit. So, if you’re looking to rent out to families, it is best to choose a floor plan with more than one bedroom. Also, keep in mind the area that you’re investing in. For example, suppose you're investing near a college or university. In that case, you will likely attract students to your residence, or if you're investing in family-friendly areas, you may see more families looking for a place to live. Additionally, if you're investing in an area that's employment driven, then you may attract young professionals.
The final piece of advice we can give is that when you’re looking for a condo unit, make sure to choose a floor plan that not only meets your needs but your budget as well. The more square footage and the more bedrooms you see in a floor plan, the higher the purchase price.
Tip # 5: Rental Rates
When you buy a condo unit, it’s essential to ensure that your investment will bring in a positive cash flow. This is why every investor should look at the current rental rate for condominiums in the area they want to invest in. Rental rates should cover your carrying costs, including your mortgage payments, maintenance fees and property taxes. Looking at current rental rates will not only give you a good idea of what the rent prices look like now but what the rental rates could be in the future. Remember, when you invest in a pre-construction condo, your unit will not be ready for occupancy until three or four years down the line, and the rental rate will likely increase by then. Therefore, it’s also important to look at development growth and other factors that might boost the rental rate in the future, such as employment growth, public transit, retail developments and any new infrastructure.
Now, there could be scenarios that can decrease the rental rates in the future and the COVID-19 pandemic is an example of that. However, as an investor, it’s important to consider that the rental market, similar to the housing market, can fluctuate. Although there was a brief decline in rental rates during the pandemic’s peak, the rental rates are now starting to resemble pre-COVID levels. So, it’s important to always consider that scenarios like this can happen, and it could temporarily affect rental rates, but the market will not stay in this decline for long and will eventually increase back up at a similar rate as they once were or even higher.
Purchasing a pre-construction condo is a great long term investment. But with so many options for condo projects across the GTA, it helps to have a strategy in place. These 5 tips are sure to help you search for the perfect investment. And remember, our platinum agents are also here to help you every step of the way. For more information about what condo projects to invest in, connect with us today!