Real Estate Pre-sales in the Lower Mainland: Are they a good investment or not?
Pre-sales are a popular way for developers to sell properties before they are built. In the Lower Mainland, pre-sales are a common practice, particularly in the market of condos and townhomes. They are a way for developers to raise capital for their projects while also providing homebuyers with the opportunity to purchase a property at today’s prices, hedging on the market to continue to rise by the time the project is completed.
However, it’s essential to understand that there are certain risks and uncertainties that come with buying a pre-sale property. For example, there is no guarantee that the project will be completed on time or that the market will continue an upward trajectory.
Pre-sales can be a great investment. There are a few ways of investing in pre-sales:
- Purchase to own
Purchasing to own is self-explanatory and has little to no risk involved, as this will end up being your home. Purchasing a pre-sale can be beneficial simply for the fact that it gives you time to continue saving while still being “ In the market “ at today’s pricing while having no mortgage payment to carry. The deposit structure, typically, is staggered. Example: 5% on an accepted file / 5% seven days post accepted file / 5% in 6 months / 5% in 12-18 months.
2. Purchase to rent
When purchasing to rent, the major thing to consider is the ability to close or complete the purchase in the future. You must be confident that you have the ability to qualify for the new mortgage on the pre-sale property along with your personal mortgage or rent.
- Purchase to assign or “flip”
When purchasing to assign the property prior to completing the property, there are a couple of key factors to consider. The first being what is the assignment fee. The majority of developers set an assignment fee in the contract of purchase and sale. These can range from $1,000 to 5% of either the original purchase price or the selling price. The second is your confidence in the market. Will the market continue on an upward trend, and if not, are you able to complete on the property if needed?
So, if you’re considering buying a pre-sale property, it’s important to work with an experienced realtor like Colin Colpitts, who can guide you through the process and help you make informed decisions. He will be able to help you understand the risks, answer any questions you may have and provide you with comprehensive information about the project’s timeline, materials, and amenities.
In conclusion, pre-sales in the Lower Mainland can be an excellent opportunity for homebuyers to purchase a property at today’s pricing and take advantage of the rising market price year after year. However, it’s important to understand the risks and uncertainties involved; and working with an experienced realtor like Colin Colpitts will help to ensure that you purchase the right pre-sale in the right area and choose the right location within the development to make your purchase a success.