How To Prepare For Your Preconstruction Investment?
How To Prepare For Your Preconstruction Investment
Number of available homes plummets to record low
The best preconstruction projects come to the market and sell out very quickly. These types of projects are the ones with the great potential, strong demand and limited supply. Investors that are prepared and ready to take action are reap the rewards while those who are less prepared often lose out on great opportunities. Here’s a classic example of what happens with someone who is prepared vs. someone who is not.
Investor A is excited about a great new preconstruction condo and immediately reviews the floorplans and pricing and submits a worksheet.
The worksheet is accepted by the developer and the Agreement of Purchase and Sale is issued and signed. The 10-day recission (‘cooling off’) period starts and the Investor now needs to obtain their mortgage pre-approval, submit their initial deposit and have their real estate lawyer review the Agreement.
The Investor finds out that their cash for the deposit is tied up and will take 2-3 weeks to be divested, they have not filed their previous year’s tax returns and their mortgage broker/bank cannot complete their pre-approval, and finally they don’t know any real estate lawyers that specialize in preconstruction.
The Investor requests an extension from the developer that is declined. The developer has more worksheets than units to sell and moves on to the next one.
Investor B is also excited about the same project and immediately reviews the floorplans and pricing and submits a worksheet.
They already have their mortgage pre-approval ready to go, along side a bank draft for the initial deposit. Their real estate lawyer is well established and reviews their Agreement within a day or two.
The Investor completes their due diligence and fulfills the developer’s requirements and firms up their deal.
The project quickly sells out and subsequently the developer releases a second phase to the development 6 months later. This time the pricing is higher than in the previous phase and the incentives are a bit less attractive.
Investor A is now prepared with their mortgage pre-approval, deposit funds and has found a real estate lawyer and ends up investing in the project. This Investor still has a solid investment from a reputable builder but lost the opportunity to get in at an earlier more lucrative phase.
So, here’s how you can ensure you are prepared:
1- Obtain a mortgage pre-approval.
- Your mortgage broker or bank will work with you to determine a budget and can issue you a pre-approval.
2- Ensure you have down payment funds readily available.
- Your mortgage broker or bank will work with you to determine a budget and can issue you a pre-approval.
3- Ensure your Dream Team is in place.
- Having a real estate lawyer that specializes in preconstruction is critical. Your lawyer will work to protect your interest and ensure you understand what you are agreeing to. The same goes for a mortgage specialist.
- These are just a few critical points to ensure you are prepared for your next investment.
Get your FREE guide to preconstruction investing in Calgary!
Start simplifying your investment decisions with Calgary Preconstruction Condo Investment Guide. Inside, you’ll discover:
- Why preconstruction properties are a secure, profitable investment
- How and when to invest – and in which projects
- The power of leveraging time and capital
- How to cash out and cash flow your investment
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