Difference Between A Pre-Construction and a Resale Condo

With the country experiencing a housing crisis, it might be a difficult time for anyone trying to purchase a home. The average price of a home has risen in the previous ten years, and Canadians are concerned about their ability to buy a home one day. However, real estate investing has always been one of the most secure investments you can make.

When looking to buy a condominium, every buyer and investor must make the difficult decision between a pre-construction condo and a resale condo. Although we choose for you, we can provide you with information on the advantages and disadvantages of each. That way, when the time comes to buy a condo, you’ll be well prepared and confident in your final decision.

Purchasing a condo is a fantastic financial opportunity for both novice and experienced investors. There are several benefits to purchasing a condo, and you can be sure that real estate trends will always point upward. It’s normal for the real estate market to experience ups and downs, but you have complete control over this. 

When the market is down, which it inevitably will be, you should invest or hang onto your property. When the market is at its highest, however, you should sell to maximize your return on investment (ROI). The best thing about real estate investing is that it is tangible, you hold it, and you decide when to sell or buy it.

What differentiates resale from pre-construction?

There is no single answer, but we have collated and summarized the key differences between the two.

Key Differences

  • Difference by Definition
  • Closing Dates
  • Renting Options
  • Location Matters
  • Fees

Difference by Definition

Understanding the differences between pre-construction and resale is important when picking between the two options.

Pre-construction, by definition, indicates that the condo has not yet been built; it is not a physical asset that is ready to be occupied or rented out right away. Pre-construction also indicates that you are the first buyer, purchasing at the lowest price and earning the first and biggest profit. When you invest in pre-construction, you are planning for the future, which includes thinking about future growth, future rental income, and future appreciation. 

Additionally, you purchase the unit from the developer when you buy pre-construction. Investors can avoid visiting individual resale condominiums in person and engaging in time-consuming back-and-forth negotiations by purchasing new pre-construction.

On the other hand, when you buy a condo that has already been sold, you do it directly from the owner. This condo has already been occupied, and the original owner, who purchased it during the pre-construction phase, has already received the best return on their investment. A qualified real estate agent must represent you in the transaction when purchasing a resale condo, and a thorough property inspection is necessary. You may also expect to negotiate or participate in bidding battles with resale.

When comparing the two, new versus used for everything is always more valuable because customers prefer brand-new things over old ones. Consequently, when you purchase pre-construction on assignment, you not only get a brand-new unit but also the best deal, the highest rent, and the largest return on your investment.

The Closing Date

The part of the buying process known as the Closing Date is when you receive ownership and the title to your new apartment. The closing dates are the same whether you buy a pre-construction or a resale condo; the only difference is when.

Your closing date for a pre-construction condominium is years away and is divided into two phases: the interim occupancy period and the final closing phase. These phases actually occur a few years after you sign your Agreement of Purchase and Sale, giving you time to accumulate savings and apply for a mortgage, which is necessary once you reach the Final Closing Phase.

When you purchase a resale property, you must pay the down payment right away and can reach your closing date in as little as a few weeks. Additionally, you must immediately obtain a mortgage, which might be challenging for people who are not financially prepared.

Pre-construction instead of a resale may be preferred by investors who require more time to get a down payment and a mortgage. An extended deposit arrangement that permits the down payment to be paid over a number of years may also be offered by developers as an incentive. The down payment for a condo unit purchased during the pre-construction stage is normally 15 to 18 months after the purchase agreement is signed, with the remaining 5 percent due upon occupancy. 

This gives you more time to make financial preparations. Developers will, however, extend your payment schedule in the case of extended deposit structures so you can pay off your deposit within 18 to 24 months of the agreement’s signing. As a result, you have more time to put money aside and gradually pay back your investment.

As with any investment, there are dangers involved; during pre-con, there may be delays or cancellations, which can lead to lost time. The good news is that you may avoid these opponents by doing your research and hiring a reputable developer. Working with a Platinum Agent that specializes in pre-construction will also provide you the peace of mind that they will assist you in locating the ideal apartment from a reputable developer.

Renting Options 

For many homebuyers, the goal of real estate investing is to generate a passive income. However, pre-construction and resale condos have different rental policies.

As previously stated, you cannot begin renting out your property until the Interim Occupancy stage. Prior to that, you are unable to rent your property because it is neither a tangible asset nor is it considered secure by the local government. As long as the developer grants permission and you have the “Right to Lease During Occupancy” language in your Agreement of Purchase and Sale, you may, nonetheless, lease your property once you achieve Interim Occupancy before Final Closing.

In pre-construction, you pay today’s purchase market price, but you repay it with future rental market prices. Rental rates have increased at an average yearly rate of 4% over the last ten years, and we expect this trend to continue. You must predict your rental income several years in advance for pre-construction homes. The advantage is that your condo will increase in value during the construction time.

After the Purchase and Sale Agreement is signed, the apartment may be made accessible to the investor through resale in only a few months. Resale property buyers, unlike those who purchase pre-con, can choose their prices based on the going rental rates in their area. Investors that are ready to begin renting and making money should consider this option.


Location Matters

The location of your property is critical in many aspects. Whether you are thinking of pre-construction or resale, it is crucial to do your research on the location. But once more, there are big differences between the two choices.

A pre-construction condo purchase necessitates much more research. In general, new construction is located in developing or completely developed areas that will continue to expand in the future. Choosing a position in a developing neighborhood allows you to purchase your condo at a lower cost, with significant appreciation as the community grows. The objective is to make investments in a neighborhood where housing, jobs, and population are expected to increase.

The location of your property is critical in many aspects. Whether you are considering pre-construction or resale, researching the location of your property is essential. Still, there are substantial differences between the two choices.

Additional Fees

When picking between a pre-construction apartment and a resale, you must also consider the additional costs associated with each.

Pre-construction condos may save you money on maintenance fees, which might be higher in resale condos due to older facilities and shared features. Pre-construction, on the other hand, obligates you to pay final closing fees, which may include land transfer tax, property tax, levies, such as development charges and park levies, as well as the remaining down payment.

Closing costs for resale condos are always lower than pre-construction closing costs, however there are additional fees associated with managing older units. Additionally, resale units have higher maintenance fees due to the necessity for repairs across the aging building. Because customers prefer new construction over old, resale condos don’t appreciate as much as pre-construction ones. Renters want modern finishes and the latest features and amenities, so you may end up paying more for maintenance and renovations.

The Future is Bright for Investors

The real estate market will continue to rise at both the federal and provincial levels of government. Although real estate used to be developed horizontally, Places to Grow Act efforts focus on vertical development within the Greater Golden Horseshoe. This indicates that condominiums with a mix of functions are now the primary focus rather than low-rise residences. Condos are, in other words, the future. Additionally, with the rise of immigration and population expansion, as well as affordability difficulties, condominiums are better positioned to house the growing population in places near transit and employment.

Investing in the pre-construction market puts you ahead of the game by allowing you to purchase a unit at the lowest possible rate while reaping the most possible return on investment. Undoubtedly, it carries risks, just like any investment, but the benefits are what make it worthwhile.

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