Would you be able to produce decent profit from purchasing Pre-development Condos?
Monday Aug 27th, 2018Share
Truly, however you have to follow these three rules
First, only buy pre-construction condos that are selling for prices at or just above the price of resale condos in the same area. You hope to benefit from the increase in prices during the construction phase. Remember that when your unit is ready, it will enter the resale market. If you buy too far above the resale market, any increases in prices will only get you back to break-even.
Secondly, estimate what rents you will get from your unit and put a big enough down payment to cash flow the condo positive. Sometimes 20% will do but be prepared to put up to 30% down. Cash flow positive brings me to my last point.
Be prepared to hold the unit for at least 6 years from the time you first bought it. Anything less will create unnecessary tax problems – income tax as opposed to capital gains tax and more HST than you planned for.
Real estate is a long term investment. Flippers eventually get caught.