Should You Consider Buying an Assignment Sale in Real Estate? A Comprehensive Guide

Real estate assignment sales, also known as flipping contracts, have become increasingly popular in recent years. In an assignment sale, the original purchaser of a property sells the rights to that purchase contract to a new buyer prior to closing. As a buyer, assignment sales can provide unique opportunities to purchase properties at discounted prices with built-in equity. However, these transactions also come with risks and complex legal considerations. This comprehensive guide examines the ins and outs of buying real estate on assignment to empower you to make informed decisions.

What is a Real Estate Assignment Sale?

In simplest terms, a real estate assignment sale happens when:

So Buyer B assumes Buyer A’s purchase contract and ultimately closes on the property. The key defining aspect of an assignment sale is that the legal title or deed does not transfer until closing with the end buyer.

Assignment sales frequently occur with pre-construction condominium purchases. The original purchaser may choose to “flip” their contract if market prices appreciate or their circumstances change. By selling the contractual rights, they can profit without incurring closing costs.

Why Consider Buying an Assignment Sale?

There are several unique advantages to buying real estate via an assignment sale:

Purchase at Below-Market Value: Assignment contracts are often sold below fair market price, allowing buyers to secure properties for less. Sellers may accept discounts to exit contracts quickly.

Built-in Equity: Any price appreciation or added property value between contract singing and assignment closing goes to the buyer. This provides instant equity.

Customization: Depending on timing, buyers may get to select interior finishes like flooring, countertops, etc. This personal customization is rare with resales.

Faster Closing: Assignment purchases close almost immediately rather than waiting through long pre-construction periods. This improves cash flow timing.

Investment Potential: As marketsrise, assigned contracts can generate excellent returns for investors seeking short-term gains. Properties can be resold again before closing.

For buyers who understand the risks, assignment sales unlock unique real estate investment opportunities unavailable through traditional channels.

How Does the Assignment Sale Process Work?

While rewarding, completing an assignment purchase involves more complex legal and financial steps than typical closings. Here is the basic process:

  1. Original Purchase Agreement: Buyer A contracts with the developer to purchase the property.
  2. Assignment Agreement: Buyer B agrees to purchase the rights & responsibilities per the original purchase agreement from Buyer A.
  3. Developer Approval: The developer reviews and formally approves assigning the purchase contract to Buyer B.
  4. First Closing – Rights Transfer: Buyer B provides payment to Buyer A to assume contractual rights. Funds are held in trust by lawyers.
  5. Second Closing – Property Transfer: Buyer B closes on the property with the developer, finalizing the purchase.

Both buyer and seller retain real estate lawyers during an assignment sale. All agreements should be carefully reviewed before signing to understand rights and tax implications.

Weighing the Pros and Cons of Assignment Purchases

While discounted pricing and equity gains tempt buyers, assignment transactions have risks to consider. Weigh the key pros and cons before proceeding:

Potential Advantages

Potential Disadvantages

As with any real estate purchase, conduct thorough due diligence, review agreements carefully, research market conditions extensively, and consult professionals. While rewarding when done right, assignments have less margin for error than typical closings.

Navigating the Complex Legal Landscape of Assignments

Beyond unfavorable pricing risk also lies legal liability risks for unwary buyers. Assignment sales exist in a gray area legally. While legitimate, they violate most purchase agreements. And complex contract transfers open the door for disputes. Consider a few key legal factors:

Purchase Agreement Restrictions – Most developers prohibit advertising contract assignments in purchase agreements. But silent sales happen despite restrictions. Tread carefully during marketing to avoid contract cancellation.

Tax Implications – Capital gains taxes apply on profits. But tax deferrals or exemptions based on use as a primary residence may ease burdens. Consult accountants to maximize after-tax returns.

Title Liability – Courts may impose legal judgments that create future property liens. Ensure title insurance covers liabilities tied to the assignor that could impact closing.

Deposit Structure – Deposits range from 5% to 20% down payment on assignments. Low deposits postpone payments but reduce quick profits. Expect to mirror original purchaser deposits.

Closing Fees – Legal fees often run higher for assignments. Transfer taxes and developer fees also apply. Model all costs accurately to determine actual investment returns.

Build contingencies into assignment agreements and work with specialized real estate lawyers to shield yourself from unnecessary risks. Respect contract restrictions and understand the developers can rescind illegally marketed deals.

How Market Conditions Impact Assignment Investment Potential

Not all real estate markets hold equal opportunities for contract flipping profits. The risks and returns of assignments shift dramatically based on broader housing market movements. Consider how conditions impact outcomes:

Appreciation Accelerates Gains – Rapid price growth allows assigned contracts to sell far above original purchase values, enabling immense profits.assignments thrive in up-trends.

Declines Spell Danger – Falling prices lead banks to deny financing and panic sellers to offer fire sale pricing. Avoid assigning in downward momentum.

High-Demand Fuels Churn – Low housing inventory and fierce competition incentivize rapid resales sight-unseen. These conditions produce bidding warsideal for profit.

Oversupply Skews Values– Surplus units create uncertainty and incentivize developers to dropprices. Expect below-market sales and limited interest when supply outpaces demand.

Closely follow housing indicators like pricing trends, resale volumes, inventory levels, mortgage rates and construction activity before investing in assignments. Properly reading conditions separates big profits from losses.

8 Insider Tips for Buyers of Assignment Sales

Follow these key tips to tilt the odds of success in your favor while buying real estate assignments:

1. Find Knowledgeable Agents – Seek out brokers specialized in assignments who can accurately assess risks and valuebased on deep market experience.

2. Inspect Properties Yourself – Do not rely solely on assignor representations. Visit personally whenever possible, even for pre-construction units, to verify conditions.

3. Verify Financing Pre-Approval – Confirm lenders will finance the property prior to closing. Also validate terms like rates and income requirements.

4. Examine Title Documents – Require title insurance listing you as the insured. Thoroughly review for past liens or future obligations impacting your rights.

5. Review All Contracts Extensively – Scrutinize original purchase and assignment contracts. Understand all timelines, contingencies, restrictions and fee clauses with no assumptions.

6. Model True Returns – Calculate accurate profits based on fees, taxes and financing costs. Do not rely on assignor estimates alone when negotiating.

7. Build In Exit Strategies – Structure contingent clauses allowing you to reverse the purchase if issues emerge later, like unsuitable inspection findings.

8. Complete Assignments Quickly – When selling rather than occupying, quickly flip assigned contracts again through silent sales before final closing to maximize gains.

Above all, exercise patience and only proceed with expert guidance when criteria align favorably with your investing goals.

Case Study – Leveraging Assignments for Short-Term Profits

Assignment sales offer particular appeal for real estate investors aiming to capitalize on market uptrends. As a case study consider Frank, an individual investor in Toronto, Canada.

Frank identified a pre-construction townhome development projected to complete construction within 12 months. The project had 66% of units pre-sold to individual buyers. Frank estimated 15-20% future appreciation given active homebuyer demand and tight resale inventory in the neighborhood.

He contacted agents to find sellers interested in assigning purchase contracts before closing. After offering 10% finder fees, agents located six investors seeking quick exits to cash in on valuation gains and upgrade units.

Frank negotiated a $92,500 purchase via assignment below the $102,800 prior sale price. Given the $10,300 appreciation and avoiding $7,500 upcoming closing costs, the effective discount totaled $25,600 (20% below true value).

By offering $2,000 assignments to agents, Frank quickly resold the unit rights six times across four months for between $115,000 and $118,750 per sale as values continued rising. After costs including taxes, Frank walked away with $43,050 profits from an initial investment of just $10,000 over five months for a 334% unleveraged return.

Potential Drawbacks & Risks Buyers Should Consider

Despite major upside, assuming real estate contracts through assignments also harbors downside dangers. As an educated buyer, consider these potential pitfalls:

Fickle Developers – Initial buyers violate resale clauses in purchase contracts. Reassignments depend on developers not exercising cancellation rights. Seek their formal approval.

Market Shifts – Unexpected housing plunges between purchase and closing can trap buyers in losses. Execute quick flips to avoid exposure.

Litigation Risks – Legal disputes between assignors and developers could later impact property. Prioritize title insurance with liability coverage.

Inspection Limitations – Buying unbuilt homes limits full unit inspection. Carefully assess pre-construction sites to gauge overall quality risks.

Financing Issues – Lenders scrutinize assignments more closely and can deny mortgages if risks appear concerning, leaving buyers cash-strapped at closing.

Buying an assignment contract is risky. But for informed buyers who safeguard their investments, leverage knowledgeable professionals, and remain vigilant regarding market conditions, it offers a path to achieve outsized profits unavailable to most real estate investors.

Critical Legal & Regulatory Considerations

Beyond risk factors directly tied to housing valuations also emerge legal and regulatory risks associated with assignments. Consider key legal elements buyers must navigate:

Contract Adherence – Breaching original purchase terms could void contracts. Strictly manage all dates, payments and requirements.

Funding Contingencies – Record escape clauses in case suitable financing gets denied unexpectedly at closing.

Disclosure Forms – Fully complete governing property disclosure paperwork to avoid future liability claims from developers or occupancy buyers.

Title Insurance – Obtain policies that explicitly cover interim liability arising between contract transfer points. Ask for gap coverage between transactions.

Tax Obligations – Declare and pay all taxes owed on profits per local and federal codes. In the US, capital gain taxes often apply on flipped contracts.

Consult real estate attorneys before buying assignments. As a high-risk endeavor for amateurs, legal pros prove instrumental to steering past pitfalls at each transactional milestones.

Key Takeaways – Should You Buy A Real Estate Assignment?

Assignment sales carry an alluring appeal. Discounts up to 20% on properties and equity gains attract buyers and investors eager to leverage real estate without excessive capital outlays. Yet unprepared buyers also risk major losses from complicated transactions.

When weighed carefully against individual risk preferences and guided by knowledgeable professionals, assignments can offer profitable opportunities unmatched by traditional channels. But small missteps compound quickly across the multiple sales required.

Ultimately by educating yourself extensively, thoroughly planning investments, accurately assessing housing markets, and paying for competent legal representation, you can maximize upside potential while minimizing unnecessary risks.

So while assignments merit caution, they can unlock immense wealth for disciplined investors. If you elect to pursue a contract sale, embrace the tips and best practices outlined above as an informed real estate buyer.

Why Pre-Construction Condos Are a Wise Investment in Ontario in 2023

Investing in real estate can be an excellent way to build long-term wealth. One attractive option for investors in Ontario is pre-construction condominiums. Pre-construction condos refer to new condo developments that are in the planning stages and have yet to be constructed. Investors can purchase condo units directly from the developer months or years before the project is completed.

Buying a pre-construction condo comes with many advantages that make it a wise investment choice in Ontario’s real estate market. Below we will explore the key benefits of investing in pre-construction condos and why they present an appealing opportunity.

I. Introduction

A. Definition of Pre-Construction Condos

As mentioned above, pre-construction condos are new condominium developments that are still in the planning and pre-construction phases. Developers sell condo units in advance while the building is still being designed and has not yet been constructed.

Investors can purchase a condo unit based off floor plans and artistic renderings of what the finished building and units will look like. The investor then makes deposit payments over time until the condo is move-in ready, which usually takes 2-4 years.

B. Overview of the Investment Opportunity in Ontario

Ontario remains one of the hottest real estate markets in Canada. Strong demand combined with limited housing inventory has led to steadily rising property values across the province.

The condo market specifically presents an attractive opportunity, especially in Toronto. With its growing population and thriving economy, Toronto is seeing robust demand for condos. Investors stand to benefit from buying pre-construction while prices are still reasonable and then seeing their investment appreciate over the construction period.

Outside of Toronto, other Ontario cities like Ottawa, Mississauga, Hamilton, and Kitchener-Waterloo also offer lucrative prospects for pre-construction condo investing.

C. Purpose of this Article

The aim of this article is to provide an in-depth look at the key advantages and benefits that make pre-construction condominiums a wise real estate investment in Ontario’s market:

Carefully considering these benefits will give investors confidence that pre-construction condos can be a smart and profitable investment strategy.

II. Lower Price Advantage

One of the main appeals of buying pre-construction is the lower purchase price compared to completed units on the resale market.

A. Explanation of Lower Initial Costs

Developers offer incentives like discounted prices and preferential payment plans to attract early buyers during pre-construction sales. Units typically sell for 5-15% less than what completed condos will be worth once the building is finished.

Locking in a lower price early allows investors to maximize their potential returns. As construction progresses and demand rises, the value of the condo will likely climb significantly by the time it’s ready for occupancy.

B. Potential for Higher Future Resale Value

Savvy investors aim to purchase pre-construction units in promising locations where property values are expected to rise. This strategy enables them to buy at a lower cost basis and then potentially sell or rent for much higher prices down the road.

For example, an investor who secures a pre-construction condo in downtown Toronto for $500,000 may be able to sell that same unit for $650,000 or more once the building is complete. That’s a hefty return on their investment.

C. Real-Life Examples of Successful Investments

A recent report by real estate brokerage Re/Max found that the average price of pre-construction condos in Toronto increased by 14% between 2019 and 2021. This real-world data demonstrates how new builds tend to appreciate significantly over the construction period.

Savvy investors who got in early on pre-construction condos in now coveted downtown Toronto locations have done very well. For instance, Icona condos at Yorkville and X2 condos at Jarvis & Queens Quay have seen their values jump thanks to strong demand.

III. 10-Day Cooling-Off Period

Another advantage unique to buying pre-construction condos in Ontario is the 10-day cooling-off period required by law.

A. Legal Requirement for New Condominium Purchases

All new condo purchases in Ontario come with a 10-day cooling-off period after signing the purchase agreement. This gives the buyer time to thoroughly review the purchase and rescind it if desired.

B. Competitive Advantage for Investors

This important 10-day window provides pre-construction condo investors with flexibility not found in resale purchases. There is no cooling-off period when buying a resale condo, townhouse, or detached home.

The cooling-off period allows investors to ensure they have made the right purchase decision and feel fully confident moving forward. If any concerns arise about the investment value or suitability of the condo, they can back out penalty-free within the 10 days.

C. How to Utilize the Cooling-Off Period Effectively

Investors should use the cooling-off period to complete due diligence:

This due diligence will either provide peace of mind about the investment or flag any issues to be addressed. Actively using the cooling-off period helps optimize pre-construction condo investing.

IV. Long-Term Investment Strategy

Forward-thinking real estate investors view pre-construction condos as a long-term wealth building investment.

A. Growing Wealth through Pre-Construction Condos

The lengthy timeline from purchase to completion allows investors’ capital to grow substantially. Instead of buying a completed condo to flip or rent right away, pre-construction investing ties up capital for years.

Over this extended period, factors like appreciation, principal paydown, and rent income (once occupied) steadily increase the investment value. Investors who hold for 5+ years are often rewarded with exponential returns.

B. Creating Passive Income Streams

Many investors also use pre-construction condos to create ongoing passive income. Once their purchased unit is ready for occupancy, they move to rent it out instead of selling.

Top-notch brand-new condos can command high rental rates, especially in Toronto’s tight market. The rental income generated each month pays down the mortgage principal and becomes a form of passive income for the investor.

C. Risks and Rewards of Long-Term Investment

A long investment horizon does come with some risks, like fluctuating market conditions over time. But it also sustains the compounding effects that allow pre-construction investments to realize their full profit potential. Investors need to weigh these factors based on their own risk tolerance and goals.

V. High Appreciation Potential

Rising property values fuel real estate investment returns, and pre-construction condos offer appealing appreciation potential.

A. Exploring the Potential for Property Value Growth

As previously discussed, pre-construction condos typically enjoy significant value gains from when purchased to project completion as demand outpaces supply. But further appreciation can occur over the longer-term holding period as well.

Factors like population growth, infrastructure development, and increased economic activity will push values higher in future years. Investors benefit from this appreciation potential.

B. Factors Contributing to High Appreciation

Certain factors make it more likely for a pre-construction condo to experience strong appreciation:

When these demand drivers are present, a new condo is primed for value growth.

C. Case Studies of High Appreciation Condos

Looking at examples illustrates the strong appreciation possible with pre-construction condos:

The right projects in advantageous locations can deliver major returns through appreciation.

VI. Sensible Purchase Decision

Beyond investment considerations, pre-construction condos also make practical sense as a living space for both owners and renters.

A. Condos as an Attractive Living Option

For many, condos present an appealing and affordable option over high-priced detached homes. Downsizing empty nesters, single professionals, and younger couples all find condos attractive places to live.

B. Investment-Driven Condo Purchases

Investors recognize that practical appeal and buy pre-construction units they know will also be desirable purchase or rental options when completed. They align their investments with real homebuyer demand.

C. Balancing Investment and Lifestyle Goals

Some savvy investors also opt to live in the pre-construction condos themselves. For these owner-occupants, their purchase achieves both investment upside and personal living space. Their lifestyle needs and real estate goals are strategically balanced.

VII. Patience and Profit

Maximizing returns from pre-construction condos requires patience over an extended timeline.

A. Understanding the Investment Timeline

Investors need to grasp the longer time horizons associated with new construction:

B. Profits vs. Cash Flow

Unlike flipping homes, pre-construction condos don’t quickly generate cash. But patient investors are rewarded with exponential profits over the long run.

Trying to rush profits by flipping pre-construction units is extremely difficult. Savvy investors commit for the long haul.

C. Tips for Patience in Pre-Construction Investments

Here are some tips for exercising patience as a pre-construction investor:

Patience and discipline are richly rewarded for those who stick with their pre-construction investment.

VIII. Negotiation and Price Optimization

Unlike buying resale condos, investors can negotiate favorable terms when purchasing pre-construction units directly from the developer.

A. Strategies for Negotiating Pre-Construction Deals

Savvy investors and their agents employ strategies like:

B. Importance of Getting the Best Price

Even small discounts off the purchase price can make a meaningful difference in investment returns. A 1% reduction on a $500,000 condo equates to $5,000 in immediate equity.

C. Legal Considerations in Negotiations

Investors should still have a real estate lawyer review any negotiated pre-construction purchase terms to ensure their interests are fully protected legally.

IX. Conclusion

A. Recap of Key Benefits and Considerations

As outlined in this article, pre-construction condos offer investors many attractive benefits:

However, investors must also carefully weigh factors like:

B. Encouragement for Exploring Pre-Construction Investments

Pre-construction condos present a compelling investment opportunity, especially for investors with longer time horizons and moderate risk tolerance. The potential upsides warrant strong consideration.

C. Final Thoughts on Ontario’s Real Estate Market

With strong demand and housing undersupply forecast for major Ontario cities, pre-construction projects stand to perform well into the future. Investors able to capitalize on new builds today could profit tremendously from both capital growth and rental income over their investment lifespan.

Pre-Construction Condo Buying Guide

Pre-construction condos are an increasingly popular option for homebuyers and investors looking to purchase real estate in Toronto. As Canada’s largest city continues to experience rapid population growth, the demand for housing has driven prices higher across the board. This has made pre-construction condos an attractive option to get into Toronto’s red-hot real estate market.

This comprehensive pre-construction condo buying guide will provide you with everything you need to know about purchasing pre-construction in Toronto. We’ll cover key topics like understanding pre-construction condos, researching developers, financing and budgets, selecting locations, reviewing agreements, risks and rewards, and steps for investment success.

Understanding Pre-Construction Condos

Pre-construction condos refer to units purchased directly from a developer before construction has been completed on a project. As an investor, you are reserving a specific condo unit based on floor plans before it is built.

Here are some of the main benefits and advantages of investing in pre-construction condos:

However, there are also important factors to consider before purchasing:

By understanding the pre-construction condo market in Toronto, you can make informed decisions about investing.

Researching and Selecting a Reputable Developer

Choosing the right developer is key to a successful pre-construction condo purchase. The quality and reputation of the developer will impact everything from construction timelines to the final product.

Here are some tips for researching and evaluating developers:

Vetting developers thoroughly gives you greater peace of mind and helps avoid potential issues down the road.

Determining Your Budget and Financing Options

Pre-construction condos require larger deposits and unique financing considerations. It’s important to assess your financial situation and prepare your budget accordingly.

Adequate financing and budgeting from the start will allow your investment to proceed smoothly through completion.

Choosing the Right Location and Neighborhood

Location is always important in real estate. Pay attention to the neighborhood and amenities around the pre-construction project.

Choosing the right neighborhood can lead to better rental demand, easier resale, and increased enjoyment as an owner.

Reviewing the Agreement and Signing the Contract

Before entering any binding agreement, it’s essential to understand the terms and conditions laid out in a pre-construction purchase contract.

Here are key steps to take:

Having legal representation can help avoid misunderstandings and ensure your rights as a buyer are protected.

Benefits and Considerations of Pre-Construction Condo Investments

Pre-construction condos come with unique benefits and risks to weigh as an investor.

Potential advantages include:

However, you should also consider:

Overall, pre-construction condos can be a worthwhile investment if you enter informed and work with reliable developers.

Financing and Payment Plans for Pre-Construction Condos

Financing a pre-construction condo purchase is different than financing a resale property. It’s key to understand costs throughout the process.

Proper budgeting and financing preparation will allow your pre-construction purchase to proceed as smoothly as possible through completion.

Steps to Successful Pre-Construction Condo Investments

Follow these tips to set your pre-construction condo investment up for success:

With the right preparation and research, pre-construction condo investing can help grow your portfolio.

Frequently Asked Questions

Are pre-construction condos cheaper than resale condos?

Pre-construction condos typically sell at a premium over older resale units in Toronto’s market. However, by purchasing pre-construction you can avoid bidding wars on completed units.

Can I customize a pre-construction condo unit?

In many cases, developers allow buyers to customize finishes like flooring, countertops, and fixtures for an added cost prior to construction. But you are limited to options pre-selected by the builder.

Will my actual unit differ from the floor plan?

Minor changes to floor plans and layouts are possible during construction. Review your purchase contract closely to understand what changes a developer can make to your plans without penalty.

What happens if I miss a deposit payment?

Missing scheduled deposit payments violates your purchase agreement, which likely gives the developer the option to cancel your contract and relist the unit. Promptly make any missed payments to avoid jeopardizing your investment.

Conclusion

I hope this comprehensive guide provided you with the knowledge needed to make informed decisions about purchasing pre-construction condos in Toronto. With proper preparation and research, investing in a new build condo development can be an excellent way to enter Toronto’s real estate market.

Remember to vet developers thoroughly, understand all financial obligations, choose units and neighborhoods wisely, and work with experienced real estate professionals. If you take the time to educate yourself and enter the process with eyes wide open, pre-construction condos present a valuable investment opportunity.

Pre-Construction vs Resale Buying Guide

If you’re reading this article, let us start off by congratulating you. You’ve saved enough money to make a purchase in the highly competitive Toronto housing market, a milestone not everyone achieves. In Toronto, there’s two options when it comes to real estate purchases; resale condos or pre-construction builds. Not sure what those are? Not to worry, we’ll break it down below and explain the unique differences between the two.

Pre Construction vs Resale Buying Guide

Buying a resale condo is most likely what you thought buying a house would be like as a kid; it’s an existing, furbished house that you walk into and go “I’ll take it!” The current owners likely live in the home and you’re buying the condo directly from them, hence, a “resale” of the home.

In contrast, pre construction real estate are condos that don’t necessarily exist yet. In reality, it’s a development project that has been proposed in which X numbers of condos will be built by Y date. As a buyer, you’re buying a condo in the building before construction has even begun. Typically, units are sold purely through floor plans and digital renderings. Likewise, as the condos are brand new, you’d be buying the condo from the builder, not another homeowner.

Deciding between a resale condo and pre-construction condo can be difficult, because there really is no right answer. The right condo for you depends on your budget and goals. However, there are distinct pros and cons associated with both that can help you with your final decision. For more information on the benefits of resale vs pre-construction homes, contact our real estate team at www.crescendorealty.ca and learn more.

Advantages of Buying Resale Condos

No Surprises

When you buy resale, you’re committing to a home that you can actually walk into and see. You can tour the condo, get a good feel for the vibe and envision your belongings in its layout before you make the purchase. This is why resale is always the safest option. There are just certain things you can’t judge about a condo off of floor plans and 3D renderings.

Not only is the condo already built, but the entire building will be up and running; You can tour the amenities and even check out who your future neighbours are via the Status Certificate. With a resale condo, you can truly have peace of mind with what you’re buying as everything is already established.

Better Timelines

When you buy a resale condo, the move-in timeline is set in stone based on your closing date. Very few things will affect it, making your financial and life planning a lot smoother.

Better Value

Buying resale condos can often net you better bang for your buck. Resale real estate are priced according to today’s market value, while pre-construction units are priced based on projected values 2-3 years down the road. So while resale condos in Toronto may seem pricier at first, they can actually be the better deal in the long run.

Disadvantages of Buying Resale

Fixed Features

The downside of buying resale is that the finishes on the condo may not be to your taste. Previous homeowners may have chosen countertops that you absolutely hate, or changed the condo layout in a way that’s awkward for your needs. While most can live with superficial drawbacks for a short period of time, a forever-home might require renovations. This additional cost to buying resale would need to be budgeted for ahead of your condo purchase.

Limited Options

While resale condos are plentiful across the Toronto real estate market, a unit in the exact building you’re looking for might be few and far between. Typically, only a handful of resale condos are available for purchase from a specific neighbourhood/building, making it difficult to buy the condo of your dreams.

Bidding Wars

With limited supply of resale condos, demand goes up. You should be prepared to face some stiff competition when looking to buy a resale condo, especially if you’re buying a condo in an amazing building located in the heart of Toronto.

Benefits of Pre-Construction Condos

Customizable

Besides being brand new, purchasing a new build condo gives you the opportunity to build your dream home. With a pre-construction condo purchase, you get to choose all the finishing touches, from the cabinet handles to the door frame. Likewise, you’ll be able to pick the exact floor and layout of the condo, a benefit not offered to those buying in the resale market.

Locked Pricing

New homeowners often prefer to purchase pre-construction because it’s cheaper than a resale model, even when the condo price reflects the value 2-3 years down the road. This notion comes from the fact that the price is locked in, with a deposit structure that’s stretched out over the course of many months. Not only does this mean no bidding wars, it also means that buyers don’t have to have the entire deposit amount right away. This allows new homeowners to buy the condo with less money in the bank, with some buyers receiving up to a year to pay the deposit! This fact alone makes pre-construction real estate much more attractive than resale condos in the eyes of many buyers looking to enter the Toronto real estate market.

Home Warranty

After you buy a pre-construction condo, you’ll be required to purchase Tarion warranty. This warranty ensures that you’re reimbursed should anything break or not work properly once you move into the condo.

Downsides of Pre-Construction Real Estate

Long Timeline

Unlike a resale condo purchase, a pre-construction condo’s move-in timeline is not set in stone. Typically, you buy pre-construction condos for their equity gains rather than a quick flip like those who purchase resale, which means you’re in it for the long haul. With that mindset, you should be prepared to wait years before your pre-construction condo is actually completed. To make matters worse, a presale must occur and a certain percentage of the condos in the building must be sold before construction even starts. Even when that’s done and a completion date is provided, the build will most likely be delayed. Legally, builders can go 18 months past the promised completion date before they give your deposit back.

Interim Fees

There’s a period of time when your specific condo unit will be finished while other parts of the condo are not. Regardless, you will be required to pay an Interim Occupancy Fee at this point, as you are legally allowed to move into the building. While this fee will be similar to the cost of your future condo mortgage, it will not go towards it. Instead, it will go to the builder until the condo’s official closing date.

Exclusive Availability

Like everything else in life, it pays to have insider relationships. While pre-construction buildings offer plenty of units to choose from compared to resale, the best ones are often sold by the time the building is open to the average buyer. This is because top agents with relationships with developers give their clients the first pick, leaving the leftovers for the public.

As you can see, there are arguments both for and against resale and pre-construction condos, with neither being the obvious “better” purchase. To make the right purchase choice, it’s up to you to weigh your constraints against your goals. Whatever you choose, at least you’ll know the pros and cons you’re signing up for now!

 

How to Choose the Best Pre-Construction

Pre-contruction condos have become a hot ticket item within the Toronto real estate market, with young buyers and experienced investors all flocking to snap up the newest units on offer. However, it’s a daunting task to buy real estate off just a floor plan and some 3D renderings. So how do all these potential buyers pick the best pre-construction condo to purchase? Unfortunately, there isn’t a simple answer to that question, but we can offer a set of guidelines that help you pick the right pre-construction condo for your unique needs.

#1 Consideration When Buying Pre-Construction Condo Unit

The single most important thing to knowing how to choose the best pre-construction condo for yourself is to understand your end goal. Typically, there are two main outcomes when you buy pre-construction condos; The first option is that you or a direct family member ends up living in the new condo. This means that you, the buyer, are the end user. The second option is that the pre-construction unit is purchased, then rented out. This would make you an investor and would apply even if you plan on selling the condo via an assignment sale later on.

Both are great reasons to purchase a pre-construction build, but the two approaches will significantly impact what factors you look at when selecting your condo.

How To Choose The Best Pre-Construction Condos

There are three main factors to consider when selecting the best pre-construction home to buy and we’ll break down each of them below in the perspective of the an end-user and an investor. The main difference between the two lies in what needs to be prioritized in the condo purchase process. As an end user, personal needs and desires are the most important when it comes to choosing the right pre-construction condo. In contrast, an investor should prioritize factors that are likely to increase their rental cash flow.

NEIGHBOURHOOD

End User

Since you will be the one residing in the new condo, you’ll want to thoroughly research the neighbourhood around the building. Luckily, Toronto and areas in the GTA are always growing, so there are almost always new pre-construction projects underway. This means that you aren’t limited by the locations of pre-construction condos, as there are plenty to choose from across the city. With this in mind, you should look into what community you’d like to purchase real estate in and focus your efforts there. Those with families may prefer to purchase condos closer to schools, while those who live for the party scene can consider something closer to the heart of Downtown Toronto. Be honest with what you’re looking for in your day to day life so you can pick the right pre-construction unit for your lifestyle.

Investor

In contrast, an investor should pick a pre-construction build’s neighbourhood based solely on its rental demand. Avoiding vacancy and turnovers is key to generating income on a rental unit, so buying real estate in a popular location where tenants want to live is an easy way to set yourself up for success. We recommend working with your Broker to uncover top areas where a new rental condo could thrive and avoiding places in Toronto that are already saturated with rental suites.

BUILDER

End User

Even if you’re buying pre-construction condos, you’re investing a good chunk of your life’s earnings in one go. With such a big commitment, it’s important that you’re picking a pre-con unit that’s built by a reputable developer. While delays are a commonplace with pre-con builds, quality of development is what an end user should focus on. Speak with your real estate agent to see if they can provide background information on your builder’s latest developments and to notify you of any complaints from past buyers. It’s best to do the upfront work than to move into your new condo to discover that things are poorly constructed.

Investor

On the flip side, as an investor, you should be most concerned with your builders’ timelines. If your new condo is developed by builders who are notorious for project delays, it’ll be a while until you start to see any income generation from your real estate investment. Be sure to work with your Broker to get the scoop on the builder’s past projects and timelines, as any delays will cost you.

FLOOR PLAN

End User

As the tenant of the unit, you should select a pre-con condo suite that suits your current and future needs. A 1-bedroom may be cheaper, but upgrading to a 2 bed+2 bath might be needed if you plan on expanding your family. Likewise, a studio may cut it for now, but a den might be nice if you change to a fully remote job. Homes are reflective of our day to day lives and your condo’s layout will need to fit with what you need, so make sure you have your pre-construction condo’s floor plan in mind before you sign the check.

Investor

As the pre-construction condo purchase will be an investment property that’s rented out, the floor plan will dictate the type of tenant you attract. This in turn, can impact the amount of profit the condo generates. Historically, investors have focused on smaller homes, bringing in bachelors and couples into studios or 1-bedrooms. However, larger condos can attract families who stay for years, making turnover and vacancies less of a problem. As an investor, it’s crucial to think through what floor plan would make the most sense for your specific financial goal.

DEPOSIT STRUCTURE

End User

Working with your broker, you should strive to find a pre-con with the most advantageous deposit structure for your finances. Deposit incentives are often used to attract buyers, so there’s no harm in shopping around if your ideal structure isn’t met. 15% is the standard rate, but it can really be anything between 10%-20%.

Investor

A pre-con’s deposit structure is sure to impact your cash flow as an investor, so it’s important to plan accordingly. Even if your budget works with the condo’s deposit structure, it’s crucial to pay attention to the terms of the purchase. Make note of any hidden clauses, fees or tricky wording that may end up throwing your balance sheet out of order.

Bottom Line to Making the Right Pre-Construction Condo Purchase

While there’s really no good answer as to how one picks the perfect pre-construction condo unit, there are at least some guardrails to help you along the way. Keep those three factors in mind as you shop around and you’re sure to find success in the Toronto market. Best of luck!

Is Hiring A Property Management Company Worth It?

Whether you own one investment property of a slew of them, rental properties tend to come with a host of headache-inducing work that plagues owners. Add on the need to place tenants to avoid vacancy, rental properties never turn out to be a true source of passive income like dividend-paying stocks. So what can be done to alleviate some of the landlord’s work? Well, you might want to consider hiring a property management company.

What Is Property Management and What does a Property Manager do?

Residential property management companies specialize in helping real estate owners deal with everything from rental maintenance to tenant screening. Basically, a property manager will oversee your rental property’s ability to generate cash flow while dealing with all your tenants’ needs. Hiring a property manager can mean as much or as little involvement from you as you’d like. Below are some examples of the duties of a property manager, should you choose to hire one for your personal real estate management needs. Head over to www.cadenzamanagement.ca for more information on how our team can help manage your property!

LEASE OUT EMPTY RENTAL PROPERTIES

Leasing out vacant real estate is the #1 hassle of being a landlord, and taking care of that task is one of the best values a property manager can provide. A property manager will do everything from advertising the unit and screening tenants, to cleaning a unit after a tenant moves out. This service provides landlords the ability to ensure their rental properties are filled without ever lifting a finger.

COMMUNICATE WITH TENANTS

Property managers not only help fill rental properties, they also serve as the first line of communication with tenants; whether that’s collecting monthly rental income, or addressing maintenance issues in the middle of the night, your property manager will be the one to pick up the call.

MANAGE PROPERTY MAINTENANCE AND REPAIRS

While a property management’s fee won’t cover maintenance and repairs, a property manager will oversee the resolution of any issues your tenants are having. They’ll speak with the tenant and reach out to vendors to provide quotes to landlords, helping to coordinate a repair every step of the way.

INSPECT THE RENTAL PROPERTY

An essential part of securing a great value for your rental property is ensuring that it’s kept in tiptop shape. However, it’s hard to ensure that if you can’t always go and check in your tenant. That’s where a property manager can really help. Property managers will go in a landlord’s place to inspect the unit, usually going around twice per year. This way, the property owner can rest assured that their tenant is abiding by the lease and maintaining the place to the standard outlined in the contract.

CONDUCT EVICTIONS

Legal processes, like evictions, are one of the most tedious tasks a landlord can have and we wouldn’t wish it on anyone. However, if you do find yourself embroiled in an ongoing law case, property managers can make your life a whole lot easier. A property manager will not only serve the warning notice, but they’ll also submit all the necessary information to the judge. Once the case is resolved, they’ll show up to at the unit to change the locks and ensure a true clean out of the property.

HELP WITH TAXES

Property managers keep a close eye on all documents related to your properties, so they’re a huge asset when it comes time to submit tax documents. They’ll provide meticulous accounting records for all the real estate they oversee, allowing regular landlords the ability to tackle tax season without the usual stress.

Are Your Rental Properties Worth Hiring a Property Manager For?

Property managers charge a significant amount of money for their services; around 8-12% of the monthly rental value of the property for general upkeep and an additional amount to place a new tenant after turnovers. With rental properties being a channel to build wealth, you don’t necessarily want to waste profits on property manger fees.

So before you jump the gun, here are some things to consider to see if hiring a property manager is the right move for you.

1. What type of properties do you own and what kinds of tenants will it attract?

If your rental property is relatively new and in great shape, you probably don’t have to worry too much about maintenance and repairs. However, if you invested in fixer-upper real estate, you could consider hiring a property manager to tackle all the impending issues. Likewise, real estate in a yuppie neighbourhood will most likely mean more hands-off tenants than rental property in a college town.

2. How far away do you live?

Being a landlord is much easier when you’re close to your rental property and tenants. How far is too far? Just imagine making the drive over in the middle of a weeknight and you’ll know if you want to hire a property manager.

3. How much free time do you have?

Even if you’re close to your rental unit, do you actually have the free time to deal with tenants and all their needs? If the answer is yes, the next question is whether spending your valuable free time tending to these needs is even worth it.

The Value Of Hiring a Good Property Management Company

If you’ve decided that yes, you are in need of a property management company, then read on!

A good property management company is worth its weight in gold when you think about the amount of work that’s taken off your plate as a landlord. Just check out some of the advantages you get in addition to all the extra help.

It truly is an attractive option if you can afford the fees, just make sure you’re working with a reputable property management company. Not sure where to start? We highly recommend Cadenza Management. They’re a team of property management professionals with years of experience handling residential and commercial real estate, dedicated to helping independent landlords like yourself.

Even if you don’t go with our recommendation, we implore you to do your due diligence when searching for a property manager. While it may seem like an easy task, finding the right property management company and handing over the keys to your real estate comes with a lot trust and potential risks.

While property management isn’t worth the money to some, it may make a lot of sense to others. If you’re someone who owns multiple rental units and truly want a hands off, passive income stream, hiring a property manager is probably worth it. At the end of the day, it will likely be a balance between time and money.

Pre-Construction Closing Costs

First time home buyers in Toronto have heavily gravitated towards new, pre-construction homes over the years, attracted by the promise of lower prices and high potential upside. However, fresh-faced buyers are often baffled by the closing expenses associated with their pre-construction condo purchase. With so many unique closing fees associated with pre-construction condos, we’ve created a simple guide below to help buyers understand just how much their new condo will cost and what potential pitfalls they’ll want to avoid.

Pre-Construction Condo Phases

Closing costs is a catch-all term used to describe any fees over and above the price of a new home, incurred to complete a real estate transaction. With new Toronto construction, closing costs occur in two stages; at the Interim Occupancy Phase and at the Final Closing Phase. If you’re buying a pre-construction condo then you can expect to go through each of these distinct phases.

INTERIM OCCUPANCY PHASE

With pre-construction condos, there is a time in which parts of a condo are built, and livable, while others are not. Your specific interim occupancy phase commences once you are legally allowed to occupy your particular unit, even if other areas of the pre-construction condo are still under construction.

FINAL CLOSING PHASE

Your condo’s builder will notify your lawyer of the date of your condo’s closing. Being given this date means that you’re entering the final phase as the City has done their final inspection on the construction and the condo is officially registered. Once you have this date, you should reach out to your lender to prepare your finances for the impending closing costs.

Your Guide to Interim Occupancy Fees

During this time, you’re required to pay a monthly fee to the builder. Since this stage occurs before you’ve closed on the condo, the fees are paid directly to the builder and does not go toward your ownership of the home. You can expect this cost to be similar to what your monthly condo mortgage will be. This fee will be calculated based on the following factors:

  1. Interest on the unpaid balance of the purchase price of your pre-construction condo
  2. An estimate on the municipal taxes for your condo unit
  3. Condo maintenance fees

This fee will be paid for via post-dated cheques to your developer. Since this stage can last anywhere between a few months to two years, it’s important to budget for these fees before signing a purchase contract.

Similarly, once your occupancy period begins, your Tarion warranty begins. This warranty covers you for 1, 2 or 7 year periods depending on which package you choose. Regardless, buyers across Toronto can expect to pay anywhere between $600-$1000/month on top of an enrollment fee.

Your Guide to Pre-Construction Closing Costs

Closer to your closing date, your lawyer will reach out with a “Statement of Adjustments”, a document that highlights what additional costs are incurred as the condo unit is transferred from the builder to the you, the buyer. Along with this document, you’ll be provided with a “Trust Ledger”, which will outline how much money you will need to bring for the closing process.

Unfortunately, there’s no standard amount for closing costs. Every condo in Toronto will charge something different, with costs ranging across the spectrum. However, there are a number of items that most people buying pre-construction condos can expect to pay at the time of closing:

LAND TRANSFER TAXES

This is often the biggest expense when buying new construction builds. Toronto charges provincial and municipal land transfer taxes for all real estate transactions, so you can expect a rate of >1% for any condo over $350K.

DEVELOPMENT LEVIES

Bad news for all pre-construction condo buyers, the city of Toronto has dramatically increased the cost and number of these charges over the years to supplement small city budgets. Here are just a few charges that may end up on your statement:

Nowadays, you can expect these costs to come out to anywhere between $5-$20K.

LEGAL FEES

You’re required to have a lawyer handle your transaction when buying real estate in Toronto. This will be an additional $1500-$2500.

UTILITY HOOK UPS

Since the home is completely new upon purchase, the condo will have to be connected to utilities (gas, water, hydro) for the first time. And unfortunately, it comes at a cost. Hooking up a pre-construction condo to utilities can cost $500-$2000.

Key Mistakes to Avoid

While this list may seem overwhelming, we do have some tips on how you can minimize the final cost on your pre-construction condo.

1. Cap your developmental fee

Since there is no standard closing cost amount, it’s important that you negotiate a maximum cap into your agreement of purchase and sale with the builder. A hard cap is the max amount the development charge can be. A soft cap is a cap on the increase in development charges between when you sign and when the building closes. Make sure you work with your lawyer to get the best one for your situation.

2. Calculate your costs with HST

Levies and your Tarion Warranty are subject to HST, so remember to pull out the calculator to add 13% on everything. You’ll need to have the exact amount of money ready if you’re hoping to close on your new condo.

3. Take ownership of your legal fees

Finding a lawyer who specializes in pre-construction developments is vital to making your buying process as smooth as possible. However, don’t let their expertise intimidate you and remember to always ask for a complete breakdown of exactly what is and is not included in their fee before signing a contract.

 

Pre-Construction HST Information – How to Avoid Pitfalls

One of the many pitfalls that new home buyers encounter revolves around the need to pay Harmonized Sales Taxes (HST) on their pre-construction condo. HST is a unique tax that’s applied only to new construction, so those who encounter it are often fresh to the housing market and can be frustrated with its calculation. Even experienced home buyers find calculating HST one of the biggest headaches during the purchase process, adding on to the stress of balancing mortgage options and closing fees. Unfortunately, HST is a universal pain point across pre construction condo sales, so we’ve broken it down for you in simpler terms below.

What is Pre-Construction HST?

So you’re thinking of buying a pre-construction condo, but you’re told that you’re going to have to pay some form of a real estate tax on your new home. What exactly is that tax? This tax is known as HST and amounts to 13% of your property’s purchase price, with 5% for GST and 8% going to PST. While there’s no getting out of paying HST, there are different manners in which you can receive a rebate on it once you’ve paid. Head over to www.disiminomazza.com to get in touch with one of our team’s accounting professionals to learn more.

Are You Eligible For An HST Rebate?

Luckily, most people are eligible for a housing HST rebate. How you receive your HST rebate will be dependent on whether you plan on being the end-user of your new pre-construction condo or not.

YOU PLAN TO LIVE IN THE UNIT

That’s great, because this is the easiest way for you to claim your HST housing rebate. If you, or any one of your direct relatives, plan to live in the home, then your housing rebate can be baked into your condo purchase price. This means that a builder will include the tax rebate in their pricing, leading to an overall reduced price on your condo.

While this is definitely the easiest HST rebate process, you’ll have to make sure you file the right documents with the Canada Revenue Agency (CRA), in case they ever challenge the rebate. To avoid running into any problems in the future, you should be prepared to prove that you, or your direct relative, is living in the new home – whether that be changing the address on your driver’s license or setting up a bank account that’s linked to the unit.

Likewise, be very careful with co-signers; a co-signer on the lease who is not an immediate family member or spouse can invalidate your HST rebate, and you will not be eligible for one any longer. This could mean upwards of $30,000 lost on your bottom line!

YOU’RE AN INVESTOR

If you’re a real estate investor who purchased the pre-construction condo as a rental property, you won’t qualify for the built-in HST rebate. As such, you’ll need actual cash on hand to pay the HST fee upon closing. For real estate priced under $350,000 (So…not in Toronto), your HST will be 7.8% of the tax at closing. For a house worth over $450,000, you’ll be charged $24,000 in HST at closing. The HST that you pay upfront is also what you’ll receive back in your rebate.

To get your HST rebate quickly, you’ll need to get a housing rebate application started, specifically the New Residential Rental Property Rebate form. To submit, you’ll need to provide a 1 year lease agreement in order to prove that your new home will be rented out to a tenant for at least 12 months. Once you do so, you should receive your rebate within 2-3 months. You will need to do this within 2 years of closing on your new home, as you will no longer be eligible to apply for an HST rebate afterwards.

HST Housing Rebate Application Nuances

Great, you received your housing rebate as planned, and have been enjoying your new pre-construction condo as either a tenant or landlord for some time. Now, you’re thinking about selling the home for a pretty profit, so what happens to the HST rebate if you sell?

IF YOU/DIRECT RELATIVE LIVED IN UNIT

If you or a direct relative lived in the condo for at least 12 months, there’s no issue at all. You can sell it and not worry about repaying your HST rebate back to the government.

IF YOU RENTED UNIT OUT

The same goes if you rented the condo out to a tenant, so long as it was rented out for a minimum of 1 year.

However, if you or your tenant resided in the new home for less than 12 months, you will be required to pay back the HST in full to the CRA.

The timeline of 1 year is a law put in place by the government to minimize condo “flipping”, which has been the main driver for skyrocketing home prices in cities like Toronto and Mississauga over the last decade. By setting up this guardrail, home prices are protected from those looking to make a quick buck off red-hot real-estate waves.

THE BOTTOM LINE

Basically, if you play by the rules and submit your documents in a timely fashion, an HST rebate is pretty much guaranteed. Should your rebate be denied for any reason, you can always work with a team to file a Notice of Objection on your behalf. Likewise, if you’re operating under unique and special circumstances, we always recommend working with an experienced real estate agent to ensure that your housing purchase and rebate process goes as smoothly as possible.

Should I Upgrade My Pre-Construction Condo?

The Toronto housing market has soared over the years, with most condos featuring some of the heftiest price tags in all of Canada. In such precarious economic times, you might be wondering, should I upgrade my pre-construction condo?

Have a pre-construction condo in your name? Consider these upgrades in your real estate investment!

Pre construction properties have been an excellent route for many first-time home buyers to get into the Toronto real estate market as a time where they may already be priced out; from a more flexible down-payment structure to a relatively passive way to make some returns in the first 3-5 years, the advantages of a pre-construction condo are plenty.

Though, another key reason why many people go for pre construction is due to the fact that it’s brand spanking new. With your pre construction condo being built from the ground up, there’s a lot of opportunity to make little tweaks and changes to perfect the house to be the condo of your dreams. Or at least, a new condo with higher resale value down the line if that’s the route you take.

The options available for customizing your condo are pretty extensive, you just need to have a chat with the builder to better understand what can be done to enhance your pre construction unit. While specific options and choices will differ from one condo to the next, here are some upgrades that  you definitely want to consider if you’ve got a pre-construction condo in your name…

PARKING AND STORAGE

Typically, both these items are available as additional purchases when new condos are bought, and it just might be worth your while to tag  them on to your final bill. Even if you don’t have a car and don’t ever plan on owning one, a parking spot is a coveted addition that can benefit you in the long run.

As a condo investor, you could attract more potential renters with the inclusion of a parking space. As an end-user of the condo, you can opt to make use of it yourself, or rent it out to make a nice profit every month. A win-win situation if you ask us. Similarly, with condo square footage shrinking with newer builds, extra space is always welcomed and storage should definitely be considered in your list of pre-construction upgrades.

Whether it’s for extra stuff or a couple of bikes for the summertime, storage lockers are a relatively affordable condo amenity and stand to make a decent ROI when it comes time to sell your Toronto condo.

ELECTRICAL UPGRADES

Save yourself the visit to Ikea for the iconic white floor lamp and install ceiling light fixtures in every room of your newly purchased pre construction unit. A lesser known fact about pre construction homes is that they don’t always come with light fixtures installed, so you have to make sure you opt-in to get the upgrade.

Let your condo builder know early too, as it will be too late to add the electrical components once the concrete has been poured. While not nearly as important as lighting, you should also keep an eye out for sufficient outlets in your unit.

You can always have additional ones added to the condo, but they’re affordable and pre-planning this upgrade can really save you the headache later on when you realize you can’t rearrange furniture in your condo without some unsightly extension cords. It won’t bring much to the resale value of the condo, but having enough in-wall and in-floor electrical systems is truly a major game changer for the home.

COSMETIC CUSTOMIZATIONS FOR YOUR PRE CONSTRUCTION CONDOS

There’s a variety of cosmetic upgrades you can consider for your home on top of the structural and spatial ones we mentioned above. While condo cosmetic changes may not necessarily add more resale value to the unit over the years, it’s nice to consider them in the process as it can determine the type of buyer your home ends up attracting. Of course, options for condo customizations will differ from builder to builder, but generally, real estate trends have focused on the kitchen and bathrooms of pre-construction condos.

FLOORING

Want something that instantly increases the resale value of your real estate investment right off the bat? Invest in some hardwood flooring for your condo. Not only is it an aesthetic that most homeowners desire, removing carpeting and matching existing floors after moving into your condo can actually be quite the challenge.

The existing wood will have turned a different shade after being exposed to the sun, so updates to try and match the coloring ends up being difficult. We can’t forget about the mess you’ll inevitably create in the unit when ripping out carpet and replacing the original floors if you change your mind later on – not exactly the “home sweet home” you’d want to live in. Make life easier and invest in the gold standard of home floors before it’s too late! Just make sure to maintain it throughout the years to keep the condo’s resale value.

BATHROOM FEATURES AND FINISHES

Hotel inspired amenities are what dreams are made of, so it’s no surprise that upgraded cosmetic features in the bathroom are a must on our list of pre-construction upgrades. Treat yourself to luxury and experience a fancy walk-in shower or deep soaker tub to take your condo bathroom to the next level. Ask your condo builder to finish it off with brushed metal faucets, soft close cabinets and large-format tilework to really leave a lasting impression on anyone who steps foot into the bathroom.

COUNTERTOPS

Wood and laminate countertops are typical standards in most buildings, but you’ll want to take a look at upgrading them as they’re usually the most used areas in the home. Stone is a great way to increase longevity while giving the space a custom look and feel. Granite is a great option for those worried about staining, with its dense grain, consistent color and texture, and wide range of colors.

For those who want something a little more elevated to up the resale value, Marble and Quartz are popular favourites. Marble is known for its iconic, deep veining and is truly one of the most beautiful natural stones.

However, its porous nature makes it easily stained and is best suited for bathrooms. Quartz, on the other hand, is stain resistant, just like Granite, and provides another option for those looking to spruce up their kitchen counters. Just make sure to avoid excessive direct heat, which can cause damage to the stone. These are all great points to bring up with your builder if this upgrade is something you want in your condo!

PAINT & CABINETS

Pair your new condo countertops with some high end cabinets and complimentary paint. Work with your developer to see what they recommend, but also ask to see if you can opt for high-quality finishes to ensure that your customizations last through the test of time.

The Takeaway

While our list covers the main considerations you should have when thinking of your pre-construction condo upgrades, it’s certainly not exhaustive and it’s worth chatting with real estate agents to help determine which options will fit your long term goals best. Once you have a game plan, and you have a couple of years before your pre-construction condo is actually ready, you can work with professional builders to nail down the specifics to truly make it the condo of your dreams!

The Ins and Outs of Condo Assignment Sales

Pre-construction condos in Toronto are selling faster than the city can build them, and for good reason. Not only do these condos offer more mortgage flexibility and customization options, you can also purchase a pre-con under an “Assignment Sale”. Does the term sound familiar? It’s probably because MLS listings have been full of condos being offered via assignment sales over the last few years. This type of sale has skyrocketed in popularity and you definitely don’t want to miss out.

With the increase in pre-construction condo assignment sales, it’s important for condo buyers to understand what an assignment sale entails.

What Is A Pre-Construction Condo Sale?

A pre-construction condo is a new condominium development that has yet to be built. In the early days of a condo’s construction, a developer will sell the legal paperwork associated with the ownership of the condo to a buyer or investor. Once the condo is built and permits from the city of Toronto are acquired, the condo is ready for move in. While the buyer has technically purchased the condo unit, they do not “own” it yet. At this stage, Toronto’s land registry has yet to provide the land title. This means that a bank or mortgage lender cannot lend money to the buyer yet. As such, the buyer is only inhabiting it for the time being and for a fee that roughly equates to a monthly mortgage payment.

The buyer only receives the legal title once city officials do their final inspections and the condo is registered with its legal title. Once this happens, the bank will release funds to the developer to complete the condo closing, allowing the buyer to purchase the condo officially. Dependent on the condo, this interim period between a buyer moving in and the construction’s closing date can vary; for Toronto condos, it can be anywhere between a few weeks to a couple of years. Ready to sell your condo on assignment? Head over to our real estate team at www.crescendorealty.ca to get in touch with one of our real estate professionals.

What Is A Condo Assignment Sale?

Now that you understand the process behind a pre-construction condo sale in Toronto, we can talk about how a pre-construction assignment sale and purchase comes into play. Assignment sales happen when buyers decide to put their pre-construction condo paperwork up for sale before closing. “Before closing” just means before the buyer has possession of the title to the condo. Simply, they’re selling the contract that gives them the right to purchase the condo or condos.

There are a number of reasons why original buyers may choose to put their condos’ “right to purchase” paperwork up for sale via an assignment – lifestyle changes, other financial obligations, or an investor just decides they’d like to move onto the next big thing to invest in. Either way, there are pros and cons for both the Assignor (the one selling) and the Assignee (the one buying) in this type of sale, which we’ll review below.

Pros for the Assignor and Assignee

What Is A Assignor For Assignment Sales?

In an assignment, the assignor is the original buyer of the condo/condos. They benefit through selling via assignment because they will not have to close on their condo purchase. This means they can realize the condo’s value appreciation without needing to shell out additional financing to “own” the condo in the end.

Likewise, depending on the timing of the sale and the assignment occupancy date, an assignor can also avoid occupancy fees. Through the sale, the Assignee takes over the responsibility to pay those fees. Though, this is something that requires consultation with a real estate lawyer to establish. We recommend finding a good one to help you understand all the T&Cs in your original purchase agreement.

What Is A Assignee For Assignment Sales?

In an assignment sale, the assignee is the party that is purchasing the right to buy the condo. In purchasing via an assignment, you get a pricing benefit while still getting the bonus of living in a new suite. With Toronto real estate as pricey as they are, this is one of the top benefits of purchasing a condo through an assignment sale.

Likewise, an assignee who moves forward with an assignment transaction has the potential to take advantage of a much shorter closing period. This is especially true if the new buyer goes through with an assignment at a later stage in the construction process. With a closer move-in date, this allows them to avoid the occupancy fees typically involved in a purchase agreement.

Lastly, the assignee will have to reimburse the assignor all the deposits that have already been paid. However, the assignee only has to pay back the original purchase price and not the costs at today’s market value.

Assignment Sale Closing Considerations

ASSIGNOR

A risk for the original buyer is that the they are responsible for any fees charged by the Builder should the new Assignee be unable to close on the home and the assignment falls through. If that happens, the Builder is in their right to request that the original purchaser pay per the terms of the original contract.

Even if everything goes well with the assignment, the assignor will risk being left out of the loop once the sales contract is executed. This is because the builder typically works directly with the new buyer once the sale is finalized. While not an outright issue, it will make it difficult for the assignor to receive important updates during the build. As such, it’s vital that a lawyer is involved to keep everyone updated.

The last con for consideration as an assignor is the potential risk of losing out on future gains of the construction by selling early. With downtown Toronto condos reaching sky-high prices, holding out and waiting to resell later on may allow for additional appreciation gains in the long term. This potential benefit is something they’re opting out of by going through with an assignment transaction.

ASSIGNEE

As the new buyer on a pre-construction unit, you will have to sign the same contract as the original buyer. This means that you may end up taking on risks that the original buyer missed in the agreement. To avoid this, we highly recommend hiring a lawyer well-versed in assignment transactions to ensure that you understand the terms ahead of time.

With anything that requires legal involvement, there will be fees. Legal handling of the closing on an assignment is much more complicated than a resale condo closing. This means that you might end up forking over any savings from the condo’s price towards the additional complexity that comes with an assignment sale.

Likewise, with purchases of new homes in Toronto, there will be a land transfer tax. This is true even for assignment sales. As the one closing on the home, the assignee will end up owing Toronto and Ontario land transfer taxes.

Another chunk of your savings may also unexpectedly go towards the down payment of this new home. While the price of condos sold through assignment are cheaper than your typical Toronto home, assignment sales have a unique caveat when it comes to down payments; An assignee is required to match the down payment made by the original buyer. Depending on the type of assignment, this could end up being as much as 25% to the developer. Whatever it ends up being, it’s a far cry from the standard 5-10% seen in normal Toronto transactions.

Bottom Line

Clearly, assignment sales can be great for both assignee and assignor alike, bringing value to both parties involved. However, there are a number of complexities that come with condo assignments and they should be considered before closing on your dream pre-construction home. As such, it’s imperative to discuss any potential risks with a trained real estate agent and lawyer before signing an agreement!

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