PRE-CONSTRUCTION & NEW BUILD INVESTING
WHAT YOU NEED TO KNOW & DO Ah, the new build and pre-construction investment market! Alternatively known as the “shiny new toy” in your investment property portfolio. Brand new, never lived in before, fresh amenities, why doesn’t everyone just buy these versus something for sale in the resale market? Well, this type of investment may seem like the most appealing option to the masses, but they are arguably one of the most complicated transactions in residential real estate. The Westside Partners of TrilliumWest are going to give you the rundown on what you need to know, and need to do, when considering a new build or pre-construction investment property. ASK YOURSELF THESE QUESTIONS Technically you should be asking yourself a lot of questions with any investment purchase, but we believe that these questions are extremely important, especially with new build investing. •W hy am I attracted to this project? •A m I getting sucked in with the beautiful marketing package? •H ave I ever purchased a new build before? If not, do I have a solid team around me that can help? •D o I fully understand the risks of buying a new build or pre-construction property? •W hat is the current new build market like right now? •W ho is an expert I can work with?
BUILD YOUR TEAM WITH EXPERIENCED PROFESSIONALS Here are the folks who you absolutely must have beside you during the start to finish phase of buying new: REALTOR: One with ample knowledge, experience, and who will bring you an unfiltered + unbiased perspective at all times. REAL ESTATE LAWYER: Your safeguard to ensure the deal you’re getting into, legally makes sense. MORTGAGE PROFESSIONAL: Funding new build deals can be challenging, but not to someone with experience helping buyers finance their new build deals TAXATION PROFESSIONAL: We’ll get into this later and talk about that scary “HST” word!
HOW TO “RUN THE NUMBERS” ON NEW BUILD DEALS We aren’t just talking about potential rental rates, mortgage costs, and property taxes here folks! Time to tweak up that investment proforma and include some very critical factors and calculations in your analysis. Let us elaborate further: • L and Transfer Tax, Lawyer fee, and some adjustments for property taxes on closing are the usual, but are you incorporating occupancy fees, developer closing adjustments, and Tarion Warranty fees? •W hat rental rates are you using to calculate cash flow? Current market rates, or “future rents”? How did you calculate those “future rents”? Are they realistic? •D id you factor in holding a vacant property for 3-6 months? You’re not going to be the only one trying to rent out your property, especially in a condo building with 200 new units. •A re there any extra buffers in your proforma in case the legal fees are higher, you arrange non-conventional financing (lender fee(s)), or you need to buy window coverings, appliances that were not needed until occupancy?
DO YOUR BUILDER & DEVELOPER DUE DILIGENCE This one is EXTREMELY important! Do you have any idea who you are buying from? We have seen countless instances where the “deal” on paper looks fantastic, but the property ends up becoming a complete bust due to either the lack of experience, priority of customer service, or messy management with a builder. You NEED to find the answers to all of these questions: •H ow many projects has the builder/developer completed, not completed, currently have in motion? •W hat is their track record? Lets look at Tarion Warranty Registration website, Google Reviews, resales in those developments (hard to resell?). Any reported cancellations, negative news articles, etc? • I s the builder/developer local, or out-of-town? If out of town, do they have a local team assisting them that knows the drill in the area with new developments? •W hat do their marketing packages look like? Does it look like they have an attention to detail? •H ow fast or slow have their other projects taken to sell and why?
Wanna chat further? 40
Email us at homesplus@westsidepartners.ca
