With real estate values starting to gain traction again, property owners, especially those with significant equity, can explore investing in a strategy involving one of the strongest segments in the market - pre-sale condos.
And J.R. Evans, an experienced Realtor® with Sutton Group – West Coast Realty, can help you navigate the potentially profitable process.
As the name implies, investing in a pre-sale condo is essentially buying a condo or a townhouse that has not been built yet and will be completed at a future date.
Sounds straightforward, but it comes with a number of benefits in terms of investing.
“The main benefits are, first, an appreciation in value of the property, because when you are buying a pre-sale condo it is based on a price you expect would be somewhere between today’s price and the anticipated price at completion,” Evans explains. “Plus, since real estate values generally increase over time, there’s a fairly strong expectation the property you are investing in would be worth more than you paid for it at the time the building has been completed.”
It also allows an investor to not have their money tied up in quite the same way as buying a property that already exists.
“The second benefit is that you get 100 per cent of the future value of the property without putting 100 per cent down,” Evans says. “You don’t have to get a mortgage to get that 80 per cent equity in the property for that time. You only put 20 per cent down and get, basically, 100 per cent of the property’s expected increase in value.”
Plus, you don’t have to make mortgage payments, or pay property taxes and strata fees during the lead-up to construction completion.
But, over the course of time between investing and completion of construction, developers do expect buyers to put 20 per cent down on the property.
“Each project is different, but it generally starts at five per cent and increases, usually over three installments in the span of a couple of years,” Evans says.
Investing in pre-sale condos is not for every home buyer, but it is an attractive option that could result in a profitable outcome as the real estate market regains value.
“It’s worked out very well for many people,” Evans says, adding he has the experience and insight to provide due diligence on which pre-sale condo projects would offer the most positive results.
“It’s not a strategy for everyone because you do need to have the funds to put 20 per cent down, and have somewhere to live during the time until construction is completed,” Evans says. “But a lot of property owners don’t realize they can do this.
“For example, they may have a lot of equity in their current home but don’t know how to access it to invest in another property like a pre-sale condo,” he says. “I can help with that and evaluate any investment pre-sale project a client is interested in.”