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My Problem With Pre-Construction Condos
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- เผยแพร่เมื่อ 21 ก.พ. 2023
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The opinions expressed herein are solely that of Tom Storey, not Royal LePage or the TRREB and should not be misconstrued as advice or the basis of an agency relationship whatsoever. Please consult your professional advisor prior to taking action on any decisions relating to the matters discussed in these videos. This communication is not intended to cause or induce breach of an existing agency agreement. This is not financial advice.
I came in here ready to be mad and then you softened me up with that shoutout
I think most people don't understand that there are additional closing costs.
So even if you think you got a "deal" with an assignment sale, you need to factor in closing costs where the builder will charge you like 5-10% of price and then there's the phantom rent / occupancy fees.
Great points Tom. One thing everyone should consider is that, at one point, every resale condo trading hands in the current market was a pre-con. So it’s just a matter of why buy pre-con vs resale, and doing what’s right for you - your budget, your lifestyle, your comfort level.
Precon has only ever seemed viable as an investment property. If you need a home to live in, buy resale.
I watched the ones being built at Markham Road and Major Mackenzie in Markham and they used about half the amount of lumber so save on costs. Then priced them around 2 million apiece with no backyard and no basement.
They are betting on that area being built out substantially in the coming years. Considering it was farmland seemingly only 10 years ago, i think they are right.
Thanks for the info on agents making more on preconstruction as opposed to resale homes.
Thanks for your insight about realtor incentives regarding pre-construction
What you said about realtors making more on preconstruction might be a local thing for Toronto. In Ottawa, the builders pay much much less than resale. Sometimes they don't even pay anything at all.
Yea, everything I said in this video is specific to Toronto.
Ive been around for a while. They werent actually cheaper than resale 10 yrs ago. They were 20 yrs ago. But new has always sold for more than old and the value was higher...
You've been a pro for a long time. I'm more speaking about the current issue with assignments and the last 4 years.
I am prohibited to purchase a property as a foreigner. Though I have a study permit, still there are so many restrictions and conditions apply. I hope I can buy one soon in Canada.
Well if this helps the locals can't save up enough money for a down payment that's if they ever get approved in the first place due to the average lifespan only being around 85 years. Canada doesn't have multigenerational mortgages yet.
Why a student would be alled to buy a house here. You'r not permanet as you don't have PR. Just wait until you'll be permanent here and will be able to buy a house. We are in housing crisis and canadians and PR should be the ones allowed to buy houses here.
@@donalddube3359 this is exactly correct. Many immigrants come here to study, thinking its like the US, and there is property for them. But they dont understand people who have lived here their whole life still cant own a home.
@@donalddube3359 My son, 10years old, is a Canadian with citizenship. I am here to take care of my son but everything is prohibited. To raise a kid, I need to purcahse a house
Of course, I am going to try to get PR but it takes too long time
My biggest issue I have with pre construction condos is how owners are forced to pay for occupancy fees. What year did this start and how every single developer knows this clause adds to the closing cost is beyond me. I bought a pre condo in Markham on a high floor of a 2 tower project to live in. Little did I know that I had to wait for the 2nd tower (I bought in the 1st tower on a high floor) to be completely occupy before we could go to final closing. I may end up paying "phantom" rent for up to 20 months as required by post dated cheques on my interim closing. Renting out my unit is not an option as I chose to buy pre con simply because I wanted brand new and the desired location. Why my occupancy duration is so extended is beyond anything I could have imagined. Now, I live in a building with mostly tenants because apparently an estimated 70%+ of those living in my building are all paying this occupancy fees because the monthly rent is lower than the market value because no amenities are available and the building is probably only about 80% complete. It makes me wonder how many owners were truly in this to invest or be an end user? Why can't pre construction projects just deliver a 100% completed project and move straight to final closing like major cities in Asia i.e Hong Kong. Another issue I have with the pre construction condos is how parking is "randomly" assigned. Parking spaces as we know has become a high valued property yet developers give you what they want (usually the least desirable spot). When developers submit proposals are to the city, it outlines all the underground construction down to the parking space numbers. Why can't buyers pick and choose their desired spot just like the way we pick condo units? I'm glad you touched on the higher commissions that realtors make on pre condo. They push for sales like they represent the developer which is completely unnecessary. Why do buyers even need to be "represented" in a pre con sale? I could easily represent myself by walking into a presentation centre and buy whatever I please.
The phantom rent you are paying would be similar to what you would otherwise be paying towards mortgage interest. If you're not using a mortgage, the phantom rent is similar to the present days "risk free" return which is about ~5% in GICs and other savings instruments. In sum, you're only really losing if the cash you have for closing is just sitting in the bank not earning anything.
@@megashira1 I'm not entirely understanding what you meant by the phantom rent is essentially paying towards the mortgage interest. The phantom rent is money paid each month to the developer as rent money because owners like myself don't have title to the property that I purchased but we're forced to take occupancy because the industry says my unit is liveable. This phantom rent does not go towards the mortgage as it has not kicked in yet. Which means my purchase price on signing 5 years ago + occupancy fees = new purchase price (5+ years later).
@@jcsdesign if you didn't pay phantom rent, you would otherwise be paying similar in mortgage payment interest. You have to keep in mind the developer is paying interest on the debt used to build your unit. Now that the units livable, he's essentially throwing the debt payment he's currently paying on the unit to the actual owner. You're paying interest payments on a phantom mortgage held by the developer.
People brought a few years back for 1500-1700 sqf for something is only1000 sqf now …..
Bought a couple precons (not in Toronto) because I saw ppl make loads of money buying precon in Toronto early 2010s. (At the time resale was more expensive than precon, if you can imagine) Lots of ppl bought one bedroom precon-condos in Toronto for 250k which were valued at 500k at closing. Obviously, this is not possible now. The staggered deposit and extended timeline also make them an enticing investment product.
Wait, they used to be CHEAPER than resale??
Much cheaper.
@@TomStorey that's the only way I could ever justify waiting 5 years for a project to be complete. It also makes economic sense. Pre-con must have used to be a non-brainer way to get rich. Which stole from the future generations - I.E. my cohort.
Tom I bought in Vancouver 500 sf under 500 k until 2026 is it ok ?thx
I would ask Steve Karrasch!
Hey Tom great show , i watch and learn from you regularly. I'm not clear why developers wont lower their prices but like you said will give out tons of incentives?
Hey Scotty, sorry for the delay on this response. it’s likely because they’ve already sold other units and they don’t want the previous buyers to know they’re selling the new units for less money. They will do anything possible before lowering prices.
Thoughts on United Building? 481 University Ave.
People made money in condo assignment sale in end of 2021 when condo prices went up.
Yea fair, but 2022/2023 is a different story.
Also now 9ne gas to pay capital gains plus hst
omg it's steve from blues clues. Take advice from him. LOL
Your super slow zoom in might just be your channels trademark.
Ken Burns for the win.
Hey, I'm a machinery content creator. Just wanted to stop by and send you some motivation to keep going! If you have a few minutes, I'd love your thoughts on my channel also.