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Investing In Pre- Construction Homes In Toronto-2022

Investing in Pre Construction Homes In Toronto in 2022- By Mortgage Agent/ Real Estate Agent Sima Fisher.

With vey little on the market and with a ton of growth in the Canadian housing industry its an investors dream to have the opportunity to invest in Pre-Construction homes and Condos. My general rule of thumb is anywhere an hour or two outside of Toronto is a good solid investment. Depending on your budget you can figure out what you are interested in purchasing. Make sure to have your goals and plans solid before taking the step.

When it comes to buying a pre-construction investment property in Toronto, we encourage our clients to hold their investment for at least six years. Although some sell on assignment and others decided to sell for profit then move onto the next project. It’s best to go over all the pros and cons and cater this to your personal investing goals.

The appeal of investing in pre-construction houses and condos (beyond ROI) is that they require very little effort compared to other investments. Initial money down is followed by minimal involvement for three to four years.


Investing in preconstruction in Toronto and surrounding area can be very profitable, so long as you invest in the right product. There are many pre-construction investment properties for sale in Toronto and your number one asset in choosing the right product is having a real estate agent who specializes in pre-construction investments, hopefully in part by being an investor themselves.

Let’s highlight a few points:

Condo and house Price Growth is Outpacing Historical Average

The historical average for Toronto condo prices has been 5% growth per year but in the last few years’ downtown condo prices have consistently outpaced this historical average.

It’s important to note that you should always pay attention to your local market stats, avoid lump-sum statistics that skew the data. When you’re investing in condos in downtown Toronto (C01, C08, and E01 municipalities) the average condo prices in the last two years have increased 9% and 10% respectively.

Record High Rental Prices

Beyond your equity gains, you’re also buying an investment property in a market where rental prices are at an all time high. With Toronto’s low vacancy rate and a fast-growing population, when you lease your investment property you will be able to earn a high rental income compared to other cities in Ontario.

New Builds Exempt From Rent Control

New buildings, including pre-construction condos, that are being leased for the first time are now exempt from rent control. By lifting rent control on new units, investors can rest assured they are protected against rising interest rates and have the ability to offset the increase in carrying costs, should they need to.

Find the Best Investment. Use Professionals.

Use the Right Real Estate Agent and Mortgage Agent, Real Estate lawyer and accountant. To get the most out of your property and take the equity out of your home to purchase a new investment is extremely important to work with knowledgeable professionals who know what they are doing. Make sure to ensure you’re working with a real estate agent and Mortgage agent who has your best interests at heart and doesn’t see you as a single transaction. Make sure to work with a mortgage professional and Real Estate Agent who can help you get the most Return on your Investment

Pre-Construction Investment Strategy

Whether you’re after a cash-flow positive investment, equity gains or just a great ROI. Sima Fisher and her team of professionals will make sure to help you get the proper financing so that you can invest and grow your Real Estate portfolio. Make a solid plan to properly prepare for your success in Real Estate Investing.

Investment Property Outlook

Trying to find the right investment property for you, it’s important to have all of the information surrounding your investment. From an income property standpoint: knowing rental prices and the competition for rentals in that area are extremely important.

From an investment standpoint: understanding what comparable units are trading for today and what the expected current market value will be on occupancy. These elements help provide you with a full scope on how your investment will perform in both the short and long-term. The concept is very simple. Buy as low as possible and sell for as high as possible.


Once you’ve decided which investment is right for you, you’ll need a mortgage pre-approval letter, despite not needing to arrange your mortgage for another three to four years. Here is a quick overview of the steps to purchase an investment property in Toronto.

Be Award of Deposit Structure. Have the money ready.

Your typical deposit structure on a pre-construction investment property in Toronto will be $5,000 on signing. After which, most developments require:

  • 5% of balance in 30 days

  • 5% in 60 to 90 days

  • 5% in 180 to 270 days

  • Final 5% on occupancy three to four years later

Not all properties require 20% from the builder but it’s a good idea to put down 20% for mortgage purposes.

Building Your Investment Property and Equity

After your initial deposits, you are hands-off while your pre-construction investment property is being built. From your original signing date, this build time can be three to four years.

While you sit and await its completion, the value of your investment property in Toronto will increase with the market. The equity gains will vary, but, with the right product you can see promising returns before your investment property is complete. So while you have put 10-20% down over the first year, you may easily earn a good portion of that money back in equity during the next three years.

Leasing or selling Your Income Property

It’s a tough decision. Should I rent my property out and deal with tenants or cash In and move on to my next investment property. This is where your accountant will come into play. You need good solid advice on what to do at this point. Make sure to consider Capital Gains tax.


The six year holding period we recommend when investing in condos at the pre-construction phase is the minimum time you should expect to hold. Truthfully, investing in real estate should be a long-term investment; the longer you hold, the better your gains.

10 Things You Need to Know Before Investing In Pre-Construction Condos

Planning to buy pre-construction? The good news is that they make for a sensible purchase decision whether to live in or purely for investment.

Getting in early at the development stage is an exciting prospect, especially as you have a choice over the develope. The big question is what should first-time buyers look out for investment when the condos are in the pre-construction process?

Here are the top 7 things you need to know to ensure your condo investment is a sound one.

1. Invest In A Builder Before You Invest In A Building

Making a pre-construction condo investment becomes inherently less risky when you invest only in reputable builders.

Choose condo buildings developer or reputable builder who has a solid track record of executing on their development plans in a timely fashion and without excessive delays. The developer’s post-closing history is important when you want to make

A) Did They Complete Their Buildings? How Delayed Were They?

Construction delays are inevitable with a pre-construction condo unit, it’s just how it is. Personally, I like delays. First off, the more the project delays, the longer time you have before you need to close on the brand new condo. All the while you’re leveraging the appreciation of the property market 5 to 1 (assuming you have 20% down, as with most pre-construction developments).

Secondly, if delay notices are handled improperly, which they typically are, you’re likely eligible for up to $7500. This is what’s known as a delayed occupancy rebate, and is thanks to Tarion.

The typical length of the delay is around 3 to 8 months from the initially marketed occupancy date. In my opinion, this is acceptable. However, if a developer’s past condo projects continually get delayed a year or more, that might indicate other issues. The builder may have poor financing.

B) Did Their Buildings Stand The Test Of Time?

What real estate projects did the developer complete in the past 5 years? Are the projects in good standing?

Long term success inspires confidence compared to a lack of data or experience. Investors understandably want to put their money in tried and tested ventures

You’re looking for trends here, not outliers. Consistently good quality buildings, with good resale, and stable maintenance fees are all green lights for your preferred investment property.

2. The 10 Day “Cooling-Off” Period

The 10 Day cooling-off period is mandated bylaw on all new condominium purchases in the province of Ontario. It gives you an advantage in this type of condo market that you don’t have in Resale.

When you purchase a condo from a developer, you have 10 calendar days from the date of signing to decide if you want the unit or not. Typically, builders increase most pre-construction condos prices regularly and change incentives as they open up sales to the public. The 10 day cooling period allows you to reserve the purchase price and the incentives. It also ensures the builder cannot sell the condo suite to anyone else or change the price on you.

There are two things I recommend doing during your ten-day cooling.

1. Have a lawyer review your Agreement of Purchase and Sale with the builder. The aim here is to inform you on closing costs & what the fine-print legal-jargon says.

2. Take a look at other options. Go look at another comparable pre-construction condo project. Compare the prices and incentives to be sure you’re getting a good Toronto real estate transaction.

3. Interim Occupancy vs. Closing: What’s The Difference?

Interim Occupancy is when you get the keys and can move into your property – but technically, you don’t own your condo just yet. With condominiums, you have two ‘closing’ dates:

A) What Is Interim Occupancy For Condos?

The first is Interim Occupancy when you get the keys to your unit. Occupancy for owners is staggered, usually a couple of floors per week, that way everyone isn’t moving in on the same day.

At this point – the building isn’t registered yet. If you bought with a good builder, typically registration and the final closing will happen within 6 months after the interim occupancy period. Condo builders like Tridel are notorious for moving extremely quickly and efficiently to get their buildings registered quickly.

B) What Are Interim Occupancy Fees?

Interim Occupancy Fees are what you pay the builder to occupy the unit. You don’t have the title to your unit until registration, so your mortgage payments don’t start just yet. Some people call this “rent to the builder” or “phantom rent” – but simply put, it’s just:

C) Your Monthly Condo Maintenance Fees

Your condo fees start with the interest payment on the 80% borrowed for the purchase (assuming 20% down). The builder uses the Bank of Canada key rate to determine your interest payment, and the down payment is made to the builder directly.

During the time of interim occupancy, your monthly carrying costs will actually be lower than after registration. Other condo fees include maintenance fees for the general upkeep of the building and any facilities.

D) What Is Final Closing?

The final closing is when the builder registers the Condo Corporation with the City. This is when your bank pays the builder the 80% balance, when your mortgage starts, and when you receive the title for your unit.

This is also when final adjustments and closing costs will be calculated and paid. This includes factors such as property taxes, legal fees and land transfer tax. Plus any other costs as outlined by your Agreement of Purchase and Sale.

4. Closing Costs: Development Fees & Levies on Investment

It’s important to do your research and due diligence.

The development fees and levies get determined when a property is developed. When a building goes up, the population density for the neighbourhood increases. The city is going to determine the impact on the neighbourhood. As a result, they will charge the builder a per-unit price. This funds the local infrastructure needed to support the residents that the building is bringing in. For example, new streets, parks, schools, future transit solutions, etc.

If your Agreement with the builder wasn’t reviewed by a good lawyer in the ten days, and you had an uneducated realtor guiding you, it’s very possible that your closing costs aren’t capped. In that case, if the City charges the builder $25,000-50,000 per unit, the builder will pass that cost along to you on the final closing. It’s critical to have a pre-construction realtor and lawyer on your side when you walk into the sales centre. The sales reps that work for the builder represent the builder, you need to have representation on your side.

5. HST Rebates For Investors On Condos

HST is included in the purchase price of the house/condo. If you’re moving into the property yourself, or one of your family members is, that’s all you need to know.

However, as an Investor, you need to be aware that on the final closing, you’ll be charged HST again. Without going into too much detail here, you can get 100% of your HST rebate if you file for it within 1 year and provide the government with a one-year rental lease agreement proving that you rented the unit out in the rental market. More on that in this video.

6. Assignments: Selling Pre-Construction Condos Before Closing

Assignments are your way out, or your way to cash out, of Pre-Construction units before the unit or building is actually complete. You call them assignments because you simply assign the Contract between you and the builder to a buyer – since no real property exists yet.

Assignment flipping is somewhat prominent but has slowed since the CRA decided that it may start applying income tax to the capital gains on an assignment sale. That’s if they determine your intention was to flip the unit before closing. Regardless, your right to assign is your way out of a pre-construction contract should life change. It also applies if you simply want to pull your profits and not close on the unit.

Many people try to assign their resale units themselves through Kijiji or word of mouth, but I highly recommend avoiding this route for a couple of reasons.

These include:

1. You’re unlikely to get fair market value. You may have to sell well below it to get any interest from low-traffic media like Kijiji and Facebook.

2. Assignment sales involve a lot more paperwork and legal headache than regular condo sales.

The bottom line is, you’re better off having a pre-construction realtor or team who specializes in assignment sales sell your unit for you. You have a far better chance of receiving fair value for your unit, and the commission paid will generally stand at minimal level compared to the price difference you’ll make versus selling it yourself.

7. Fair Market Value

It is important to use a Realtor to find you a pre construction home. Realistically builders don’t want clients walking off the street and have already arranged for Realtors to have VIP access to the projects so they don’t have to deal with sales. You as customer will not get a discount from going into the builder yourself so it makes sense to have a realtor represent you with your best interest in mind.

The truth is – it depends on the unit, and it depends on the development. Some projects have its price at 5% under market value, while some have 10% above it. Sometimes, a project priced 10% under market value has a specific unit or two priced 10% over its resale market value.

Buying a pre-construction condo with 20% down, or less, allows you to leverage 100% of the asset’s appreciation at a five-to-one ratio..

Is A Pre-Construction Condo A Better Investment Than A Single-Family House?

You’ll generally have to pay more to buy a single-family house compared with a condo as a house requires a lot more investment when compared to condos. Facilities such as playgrounds, pools, gym, etc. will not be pre-built in most houses.

So if you are wondering: “is buying a pre-con condo/house a good investment?”, the shorter answer here is yes. In the coming years, this investment will definitely pay you back. It all depends on affordability. I will help you by first analysing how much you can afford and than you can figure out if you want to buy a house outside of the city or a condo in the city. Budget matters a lot and it’s important to know first what you can afford. Some builders only require 10% down while others require 20%. For mortgage purposes it’s a solid idea to put down 20%. To avoid CMHC insurance fees and to get better options to get a mortgage.

If you have any questions, please feel free to reach out to me

Sima Fisher

National Mortgage Loans

647-803 -8811


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