Investing in resale condominiums makes perfectly good sense, right? After all, they are immediately available. Because of the inventory, there is virtually no sitting around waiting for what could be years before a pre-construction unit is finished and ready to rent or sell. On top of this, there are no guarantees with pre-construction investments as they may never be finished. Let’s take a look at why pre-construction condos are a popular investment.
The Future of Housing
In many major cities, condos have become the housing of preferences as populations grown denser and land becomes less available than ever. Because of this, condominiums (even pre-constructed buildings) are being thought of in terms of commodities. Consumers are always on the lookout for the “latest and greatest,” making investing in pre-construction units a sound investment.
The Advantage of Buying in Low
Depending on the city in which you plan to invest, it is possible to find pre-construction prices per square foot at less than resale units. For example, you might find pre-constructed prices in the range of $800 to $1,000 per square foot, while resale units are selling at $1,200 to $1,500 per square foot. Buying in at the lower pre-construction price might take longer for you to realize a return on your investment, but in the long run the return will be much larger.
More Favorable Financing Terms
If you plan to invest in resale property, you will have to come up with a 20% down payment before you get started. However, and this may one of the best reasons why pre-construction condos are a popular investment, with a pre-construction unit you may only have to come up with a 5% down payment. Anytime you can reduce the amount of a deposit you have to pay, you are effectively lowering the final price of the property. Any money you save can always be used towards your next investment.
You Have Plenty of Time
Since you are investing before the property has been built, you have time before you need to start looking for a mortgage. Not only will this give you time to find more favorable terms, but your mortgage won’t even start until the unit is move-in-ready. An excellent option for the self-employed and those investors who expect to see an increase in their income in the future.
Your Money is Needed by Developers
If you are interested in buying a single, ready to go property, the owner can afford to hold out for a better offer. However, most developers must be able to prove they have already sold 70% of the units in order to secure financing. This means they need investors just like you to achieve this goal. No pre-sales equals no loans which equals no project.
These are only a few of the most common reasons why pre-construction condos are a popular investment today. The less you have to spend up-front when investing in condos or for that matter any other form of real estate, the more you are likely to realize when the time comes to sell.