Resale Condos vs Preconstruction: What’s Better?
You have two options when exploring a new condo purchase: Resale or Pre-construction. A resale property has a history of past owners/tenants. A pre-construction condo, on the other hand, is a brand-new unit in a new building. On the surface, it sounds like a no brainer: Why would you want a pre-owned condo when you can purchase a new one? The truth is, it’s not that simple. There are advantages and disadvantages to both options, and the best option depends on several factors. Here’s what you should consider when making your decision:
Nobody can predict the future of house pricing in any given city, but there are common rules of thumb that apply to preconstruction resale value. Typically, preconstruction units increase in price point by the time the unit is registered. Now, that doesn’t necessarily mean you’ll build a ton of equity in the brief period between signing the deal and having a completed, physical unit. This depends on the housing market. Assuming there is no significant dip or crash, you’ll typically see more equity with preconstruction. On the other hand, if there is a crash in the market, that equity may go out the window. Of course, if this were the case, so would the equity on a resale unit. So, the market crashing is a risk that you take. Besides, price point isn’t the only factor in a worthwhile investment. You must look at overall value. Is the unit in a good neighborhood? What has the growth rate been in that neighborhood? Is the builder reputable? Regarding the builder, you’ll want to negotiate beyond just the price point: Did you negotiate a cap on builder’s fees? Did you negotiate upgrades to the unit? If your main goal is investment with as quick a turnaround as possible, then preconstruction is typically a better option provided you’ve done your research and have negotiated all the necessary factors. If you haven’t done your research, preconstruction can leave you with the short end of the stick.
A preconstruction unit will require a full 20% to be paid as a down payment. On a resale unit, you can put down as little as 5%. With that said, the 20% down payment on preconstruction is broken into a series of smaller payments between the time of signing the deal and occupancy (the day you move in). This allows for more time to source the full 20%. Regardless, if starting funds are an issue, you may want to consider resale. At the same time, preconstruction units do typically come at a lower price point vs resale, so the lower price point might close the gap between the 20% and the 5%, making both options feasible. This would depend on the specific units you are exploring.
Knowing What You’re Buying
Buying preconstruction poses the risk of not knowing what you’re buying; there is no physical unit for you to inspect. You buy based off floor plans. With a resale unit, you know exactly what you’re getting. You can visit and inspect the unit prior to signing the deal. With that said, a nice perk to preconstruction is that you can set your unit apart from the other units in the building by negotiating small tweaks to it’s layout, thus creating a potentially higher resale value. Moreover, there is no risk of wear and tear on a brand-new unit. With resale, you may overlook certain renovations or fixes that need to be made. With that said, if you’re central goal is a living space, resale will give you a better idea of what that space will look and feel like.
If you’re hard pressed to move in now, resale is your only option. Preconstruction condos need to be built, and time delays are common. These delays can range anywhere from 6 months to a few years after the projected finish date; builders can delay for a plethora of reasons, and unfortunately, you move at their schedule. Resale will have concrete move in dates and you’ll typically be able to move in immediately after signing a deal.
So, Which Option is Best?
The better option depends on a variety of factors, as I hope this post has illustrated. If you’re goal is investment, explore preconstruction, but do your research. It’s typically recommended to hire a professional realtor/management company who has experience with preconstruction, and be sure to negotiate during the sales process. Preconstruction can be very lucrative depending on the factors discussed. If you’re more interested in a living space, resale is a straight forward and reliable way to win. Preconstruction should be considered only by those who have researched thoroughly and understand the ins and outs.
Enter Blog Post Here