12 steps of buying pre-construction property
Pre-construction homes are very popular among real estate buyers thanks to the amazing perks and benefits they can offer. Toronto is an excellent city with not only economic opportunities galore, but the real estate industry is just as diverse and attractive! New townhomes in Toronto that have been just freshly built or are still in preconstruction are scattered across the city in various neighborhoods.
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Pre-Construction
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Representing Buyers
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When you’re on the market for a pre-construction condominium unit, you will almost always be given an assignment clause in the form of a contract.
The journey of purchasing a pre-construction property in Canada requires careful planning and due diligence. This comprehensive guide walks you through the crucial steps to ensure a successful investment.
1. Financial Preparation
Before diving into pre-construction investments, secure your finances by:
- Getting a mortgage pre-approval to understand your budget
- Setting aside 20-25% of the purchase price for the deposit structure
- Planning for additional costs like HST/GST, legal fees, and closing costs
- Maintaining proof of income and a strong credit score
2. Research Developers
The reputation of your builder is paramount. Take time to:
- Research the developer’s track record and completed projects
- Check Tarion warranty registration (in Ontario) or regional equivalents
- Read reviews from previous buyers
- Visit completed projects to assess build quality
- Verify the developer’s financial stability
3. Location Analysis
Strategic location selection significantly impacts your investment:
- Research upcoming infrastructure developments
- Check local zoning bylaws and future development plans
- Analyze neighborhood amenities and transit access
- Study local real estate market trends and appreciation potential
- Consider proximity to schools, shopping, and employment hubs
4. Review Floor Plans and Specifications
Carefully examine:
- Unit layouts and space efficiency
- Ceiling heights and window placements
- Standard finishes and upgrade options
- Parking and storage availability
- Building amenities and facilities
5. Understand the Purchase Agreement
Work with a real estate lawyer to review:
- Cooling-off period terms
- Deposit structure and payment schedule
- Closing costs and adjustments
- Assignment rights and restrictions
- Construction timeline and completion guarantees
6. Verify Development Approvals
Ensure the project has:
- Municipal building permits
- Environmental assessments
- Zoning approvals
- Construction financing
- Development permits
7. Plan for Deposits
Typical deposit structures require:
- Initial deposit upon signing (usually 5%)
- Milestone payments throughout construction
- Total deposits ranging from 15-25%
- Bank drafts or certified cheques
- Deposit insurance protection
8. Consider Tax Implications
Understand tax obligations including:
- HST/GST rebates for primary residences
- Investment property tax considerations
- Capital gains implications
- Property tax estimates
- Rental income tax planning
9. Review Builder Agreements
Pay special attention to:
- Material change clauses
- Construction delay provisions
- Cancellation terms
- Maintenance fees estimates
- Occupancy fees during interim occupancy
10. Plan for Interim Occupancy
Prepare for the period between occupancy and closing:
- Budget for occupancy fees
- Understand move-in restrictions
- Plan for potential delays
- Arrange interim financing if needed
- Schedule pre-delivery inspection
11. Closing Preparation
Several months before closing:
- Arrange final mortgage approval
- Save for closing costs
- Plan for utility connections
- Schedule final inspection
- Review closing documentation
12. Post-Purchase Planning
After securing your pre-construction property:
- Keep all documentation organized
- Monitor construction progress
- Plan for interior finishes and upgrades
- Maintain communication with the builder
- Join community social media groups
Important Considerations
Success in pre-construction investments requires:
- Patience during the construction period
- Financial flexibility for unexpected costs
- Understanding of market cycles
- Professional legal guidance
- Long-term investment perspective
Conclusion
Buying pre-construction property in Canada can be a rewarding investment when approached with thorough research and planning. Each step requires careful attention to detail and professional guidance when needed. By following these twelve steps and maintaining clear communication with all parties involved, you’ll be better positioned for a successful pre-construction property purchase.
This comprehensive approach helps ensure you’re making an informed decision while protecting your investment throughout the pre-construction process. Remember that market conditions and regulations can vary by province and municipality, so always consult with local real estate professionals for specific guidance.
Realistic Realty Of Home Buying:
When having a real estate professional on hand, you can narrow down your townhome search to properties that fit you and your expectations. Real estate specialists know how to take your criteria and find you matches that are worth your time viewing and stay within your budget.