Toronto Condos

Buying Pre-Construction Toronto Condos: 14 Must-to-Know Factors

Wednesday Oct 20th, 2021


Are you thinking about buying Toronto condos before it's built? The good news is that condos are a wise investment whether you plan to live in them or want to rent them out.

However, simply owning a condo does not provide you with any financial benefits, and it can even become a liability.

The majority of investors prefer pre-construction condos. Getting in on the ground floor of a new development is an exciting option, especially when you have a say in the development and location.

So, what should a buyer look for when investing in a pre-construction Toronto condo for sale?

Here are a few things to consider if you are planning to invest in pre-construction condos.

Deposits: The average deposit is 20%, but the deposit structure is flexible.

The deposit structure is one of the reasons why investors prefer pre-construction condos. They can only put down 20% of the condo's price, but they will earn appreciation for the entire value of the property for the next 3-5 years. Tenants, insurance, mortgage payments, maintenance and taxes are also not a concern.

The deposits are usually staggered over a year, but each project is distinctive.

A typical deposit structure would be:

  • 5% at signing, which will be cashed as soon as the offer's conditional period expires.
  • 5% within 30 days, 60 days, or 90 days, and 5 percent within 120, 240, or 365 days of occupancy.

Although the above schedule is the most common, some builders will offer incentives such as 5% per year or $1000 per month for five years.

A Cooling Off Period of 10 Days

Every new condo buyer in Ontario has ten days to reconsider their decision. It's important to note that these are calendar days, not business days. The real estate market in Toronto is rapidly expanding, with buildings selling out on average within 3-6 months of their initial sale. Builders typically raise pre-construction condo prices regularly and change incentives as sales begin for the general public.

The 10-day cooling period allows you to lock in the price. It also guarantees that the builder cannot change the cost of your condo suite or sell it to anyone else.

A buyer should organize for funding pre-approval and have the agreement evaluated by their lawyer during the 10-day cooling-off period. Also, take a look at the other possibilities. Check out similar pre-construction condos for sale in Toronto projects. To make sure you're getting a fair deal, compare prices.

If the buyer changes their thoughts during the 10-day cooling-off period (for any reason), they can terminate the contract and receive their deposit back in full.

Look for a Cancellation Clause in the contract.

Before you enter into a contract, see if you can incorporate a clause allowing you to terminate the sale in the event of unforeseen circumstances. Critical illness, job loss and other unexpected events may prohibit you from completing the task. Check to see if there's a way to cancel without losing any down payments or deposits.

Be ready to accept changes

Please don't get too engrossed in the appearance of the exterior of a building, as it may alter. Builders try to have some flexibility in changing their plans. So, you can see some shades and materials different from what you first saw. You cannot avoid the changes. So, prepare yourself to find some alterations.

Keep an eye on the developer's track record

It's easy to get lost in the thrill of purchasing pre-construction Toronto condos. And, it's easy to overlook certain things in presentation centers because of the marketing strategies used and the pledge of something brand new. Always do your research on the builder before agreeing to anything, no matter how impressive they appear. Examine their previous projects to see how successful they were in terms of quality and timeliness.

The Interim Occupancy Period

There is a period of 'interim occupancy' after the condo is completed and ready to move into. The buyer can take possession or move into the unit. The buyer does not own the condo during the interim occupancy period; instead, they pay a sum to the builder approximately equal to their mortgage payment plus condo fees and taxes. There has been no land transfer, and no mortgage has been issued.

Condo fees are frequently set unreasonably low in new buildings.

Fees are set low since they are estimated years before the condo is built, also because they do not know the actual operating costs of the building. Well, this is also a sales pitch tactic. Expect a significant increase in condo fees in new buildings in the first two years, typically 10-20 percent.

Condominium registration

Condominiums officially register once they have passed all city inspections and have completed all necessary processes to become legal entities. During this time, the buyers receive the condo possession. After deciding on the mortgages, the buyers become official owners (a.k.a. the closing). This period of registration can last anywhere from three months to two years. However, it usually occurs 4-8 months after people start moving in for the interim occupancy period.

Delays: They are unavoidable.

The majority of pre-construction Toronto condos for sale projects push back. Because you can move the closing date easily around due to construction interruptions than dragging the closing date sooner, developers set their closing date unfairly early. Developers have two chances to postpone the deadline due to their delays. If there are any delays beyond their control, they can extend the closing date beyond their original two breaks without penalty. Strikes, for example, cause delays that are beyond their control.

Assignments: Selling Pre-Construction Condos Before Closing

Assignments are a way out of Pre-Construction units or cash out before the unit or building is finished.

Because no real property exists yet, they refer to as assignments. It gets this term since the contract is made between you and the builder to a buyer.

Assignment flipping is still popular, but it has slowed since the CRA announced that capital gains on assignment sales might be subject to income tax. That is to say, if they discover you were planning to flip the unit before actually closing.

Condominiums in pre-construction are ideal for investment or second homes.

Some people purchase pre-construction condos as their first home. However, you can consider them as second homes or investments. It's important to buy from a credible builder if you're a first-time buyer looking for a pre-construction condo.

Consider pre-construction sales to be a compilation of rights. When you buy pre-construction Condos for sale in Toronto, you accept the right to purchase the property once they complete. The builder has the authority to make changes to the structure and condo. For a variety of reasons, the builder has the right to terminate the project. When a project gets cancelled, first-time buyers are the hardest hit as they are out of the market for years.

Builder Closing Costs

You will have to pay for all kinds of closing costs that don't adhere to resale units. That's once the unit is officially registered and you close on the buying. All new construction projects are subject to these 'builder adjustments,' including utility connection fees, HST on appliances, and development and education costs. This builder closing costs extends easily to 1-3 percent of the original purchase price. Not to mention, the development fees in Toronto can double in the future.

Condominium Reserve Fund

At the time of purchasing a pre-built condo, you must pay the condo fees of two months to the Emergency Fund (Reserve Fund) of the condo. This usually occurs during closing.


New condos, unlike resale condos, are subject to the HST. If you're an end-user (meaning you'll be living in the unit), you'll almost certainly be eligible for an HST rebate. Most builder prices are based on the assumption that you will be living in. So, they already factor in this rebate. There is a similar (but distinct) rebate for investors. But, you must rent the condo for at least a year and prove it to be eligible. If you don't, you could end up owing thousands of dollars in HST at closing. You may not find the HST rules easy to understand. So, get legal advice before buying a condo to see if you qualify for the rebate.

Is buying a pre-construction condo right for you?

You have to consider several factors when investing in a real estate property in the pre-construction Toronto condos for sale market. However, when it comes to condo investing, the functionalities and amenities are far superior to those of a single-family home. Because of this, condos are a very appealing proposition for a buyer.

It's easy to see why Toronto condos are a good investment when considering their great locations and transportation options. After all, we all require houses to live.

Make sure you do your homework before investing in a pre-construction condo. It's critical to have faith in your builder and be aware of all costs and potential delays upfront.

If you are planning to buy condos in the beautiful city of Toronto, then TorontoCondoTeam will assist you in finding great deals for you.

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