When purchasing a condominium, one of the crucial decisions you’ll face is choosing between a pre-construction or resale condo. Both options have pros and cons, and finding the right fit depends on your unique needs, preferences, and financial situation. In this comprehensive guide, Toronto realtor James Fields will walk you through the key differences between pre-construction and resale condos, helping you make an informed decision.
Difference by Definition: Pre-construction condos are properties that have yet to be built. These units are sold by developers at a lower price, with the potential for future appreciation, leverage, and rental income. Additionally, you can take advantage of extended deposit structures over 3 to 5 years and various developer incentives.
On the other hand, resale condos are previously lived-in properties sold by the owners. These units have already experienced significant appreciation; if they are older than five years, they are no longer considered new on MLS listings. Resale condos typically require larger down payments and may incur higher maintenance fees.
Closing Dates: With pre-construction condos, the closing date occurs years down the line through two phases: Interim Occupancy and Final Closing. This timeline allows you more time to save money for your down payment and secure a mortgage while benefiting from the potential appreciation of the unit.
In contrast, purchasing a resale condo means closing dates can be as little as a few weeks away, requiring an immediate down payment and mortgage acquisition.
Renting Options: Pre-construction properties cannot be rented until the Interim Occupancy phase when they become tangible assets. However, leasing the unit before the Final Closing phase could lead to benefits from future rental market prices.
On the other hand, resale condos can be rented out immediately after purchasing, based on current rental rates in the market.
Location Matters: Pre-construction condos are often located in upcoming neighbourhoods, offering the potential for significant appreciation as the community develops. On the other hand, resale condos allow you to choose properties in already-established areas with a desirable reputation and realized value.
Additional Fees: While pre-construction condos may have lower maintenance fees, their final closing costs can be higher due to land transfer tax, property tax, and development charges. Resale condos come with lower closing costs but might incur higher maintenance fees and potential repair or renovation expenses.
Questions to Consider:
- Are pre-construction condos available in your desired area, or is it fully developed with only resale options?
- Can you meet the down payment schedule required for pre-construction condos?
- Is your move-in date flexible enough to accommodate potential delays in pre-construction delivery?
- Would you be comfortable living through the settling phase in a new building if you choose pre-construction?
- Can you afford resale condos in your desired area, or should you consider pre- or late-construction alternatives?
With expert advice from Toronto realtor James Fields and honestly answering these essential questions, you can decide between a pre-construction or resale condo that suits your lifestyle and financial goals.
What are pre-construction condos?
Pre-construction condos are properties that have yet to be built. Developers sell them at a lower price and offer the potential for future appreciation, leverage, and rental income. Buyers can use extended deposit structures over 3 to 5 years and various developer incentives.
What are resale condos?
Resale condos are previously lived-in properties sold by the owners. These units have already experienced significant appreciation; if they are older than five years, they are no longer considered new on MLS listings. Resale condos typically require larger down payments and may have higher maintenance fees.
What is the difference in closing dates between pre-construction and resale condos?
With pre-construction condos, the closing date occurs years down the line through two phases: Interim Occupancy and Final Closing. This timeline allows buyers more time to save money for their down payment and secure a mortgage while potentially benefiting from the unit’s appreciation. On the other hand, purchasing a resale condo means closing dates can be as a few weeks away, requiring an immediate down payment and mortgage acquisition.
Can pre-construction condos be rented?
Pre-construction properties cannot be rented until the Interim Occupancy phase when they become tangible assets. However, leasing the unit before the Final Closing phase could lead to benefits from future rental market prices.
