THE BENEFITS OF BUYING PRE-CONSTRUCTION

Pre-construction real estate investments are an attractive option in a diversified investment strategy for both first time investors and seasoned individuals with substantial real estate holdings. In many cases, based on the wide range of price points available, and the tiered deposit structure, preconstruction investing has low barriers to entry and allows for substantial flexibility.  There are a number of factors which make pre-construction real estate an attractive investment option. In addition to the pre-construction investment’s potential for price growth from purchase through development and completion, there is also the market appreciation available should you hold the investment after it is complete for a period of time. Renting out the suite can defer carrying costs and can also provide an additional source of income/return.  When looking at the benefit of pre-construction investments, there are a number of items to consider:  Getting In On The Ground Floor  – If you are going to invest in pre-construction real estate, then the best time to do so is at the beginning when developers generally offer the lowest pricing for the project. As an investor, getting in on the ground floor can mean a substantial difference in the returns you achieve.  Maximize Incentives To Achieve Your Investment Objectives  – Developers will often offer ‘extras’ or specific incentive offerings in order to gain new investors in their projects and reward investors that have previously purchased in their projects. These incentives can increase your net return on investment, and can provide flexibility to you as an investor. Examples of incentive offerings would be one year of free property maintenance, the right to lease your suite during the interim occupancy period, or the ability to assign your agreement once certain thresholds are reached.  Unlocking The Power Of Leverage  – Pre-construction real estate offers you control over something with significantly more value than what you have initially invested. The contract may only ask for a total deposit of $60,000 made in installments over a 12 month period, but the suite you are purchasing is worth $300,000 and through the contract, you hold the rights to the property. You control 100% of the value, with only 20% out of pocket -- This ‘leverage’ allows you to enjoy returns based on the whole value, without the full cash outlay during the construction period.  The Creation Of Instant Equity  – One of the primary benefits of investing in pre-construction real estate is that you have the opportunity for instant equity. The $300,000 suite that you purchased at the beginning of the project, which you received a package of incentives on, and have leveraged with your $60,000 investment, will generally be worth more once complete. This instant equity creation on completion of the project is the key benefit of a pre-construction purchase. We are very conservative investors and when selecting investment opportunities for our clients we focus on neighbourhood demographics, an analysis of the current housing stock, an investigation of future development sites in the area, and an overall review of current and historic local market statistics to determine future potential.