Investing in a condo prior to construction can yield amazing returns if done right. However, there are some mistakes that can turn a great ROI opportunity upside down. Here are some top mistakes to avoid when investing in a condo.
Trusting The Floor Plan
It is easy to determine the square footage of a condo when it has already been built, but preconstruction condos are a bit trickier. A condo may be advertised as 700 square feet but it can turn out that 700 square feet includes the balcony and the washroom. Therefore, what you thought was a 700 square foot condo might actually only have 560 square feet of living space. The reason for this discrepancy is that resale condos cannot include hallways, washrooms or outdoor spaces as part of their listed square footage – but preconstruction condos can. The safest way to go about avoiding this mistake is to get a breakdown of room sizes and plan details in writing. If there is a substantial difference between what was put in writing and what you end up with upon completion, you can negotiate a price reduction or try to get out of the deal.
Skipping Legal Advice
It can be very exciting to buy a new or a pre-sale condo. Chances are, you are getting a great deal on a property that will have all the trimmings and upgrades that you really want. However, you may be tempted to sign the dotted line right then and there to make sure you do not lose out on a fabulous deal. If you do sign without getting legal advice, you could end up stuck with a slew of substitutions, exclusions or inclusions that could detract from your condo’s future value. It is worth spending anywhere between $800 – $1,600 to speak to a trustworthy real estate lawyer who can walk you through your purchase agreement and flag any warning signs that you should be aware of.
Accepting Delays
Back in the day, if you purchased a new-build condo that was not completed on the date that it was said it would be complete, you would be up a river without a paddle. However, ever since the 2006 Tarion decision it is now a legal truth that you can be compensated and awarded damages if your move-in date has been significantly delayed. You can also elect to proceed without compensation or get out of the deal entirely.
Assuming Closing Costs Are Fixed
When buying a preconstruction condo, you will be given a list of closing costs. However, it is important to remember that these costs are merely estimates. Hooking up your gas and electricity meters can escalate faster than you anticipated, you can even get unexpected fees such as a “public art contributions” fee to cover the cost of a sculpture in the entrance of your new condo. Always speak to your lawyer about trying to get a cap on certain costs if possible.
While this is not a comprehensive list of mistakes you can make when investing in a condo, I hope you found this list eye-opening and helpful. If you would like more advice on what mistakes to avoid when investing in a condo, please contact me here. I would love to ensure that you are getting the most return on your investment.
