How Pre-Construction Heavily Leverages Your Money

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Pre-Construction Investing is all the rage these days.  People who know what they are doing, make big money.  It’s not as straight forward as walking into a sales site and picking up a unit and hoping for the best, and with Urbanation’s report that the average unsold price index for pre-construction is almost $200 per square foot more than the average resale in the core of Toronto, picking your projects using qualified and specialized Real Estate Professionals is now more critical than ever.

If you do it right, however, the rewards can be huge (ask us to see some case studies, and you’ll see what I’m talking about).

One of the major deciding factors when choosing a good project is the initial deposit – the deposit that you pay in the first 12 months or so.  Most developments require 20% in the first 12 months, however, there times that developers require just 15%, meaning your money is being leveraged more.

If you remember one thing from this blog, remember this: With 15% down – for every 1% your condominium appreciates, your money appreciates by 6.67%

Let me run the math by you;

ASSUME:

Condo Purchase Price: $300,000

Downpayment @ 15%: $45,000

1% Appreciation of $300,000 Condo = $303,000 = $3,000 increase

Since you only have $45,000 invested at this point the 1% increase of $3,000 needs to be calculated as a percentage of $45,000:

$3,000/$45,000 = 6.67%

When looking at new pre-construction developments, we focus very much on the appreciation rates and market value of developments.  Often times, developments appreciate at a rate of 9-11% per year.  That means that your initial investment could potentially grow by almost 70% in 1 year.

Is there speculation involved? Absolutely.  We have made some of our clients huge sums of money by investing/speculating in pre-construction condominiums, and our secret is that “not all projects are alike”.  Enormous amounts of research goes into selecting “investment” properties, including market price analysis, appreciation analysis, cash flow analysis among others to ensure that we can turn “blind speculating” into “educated speculation”.

Interested in learning more? Don’t hesitate in contacting us using the form below:

Amit Bhandari