Attention all future condo investors! Are you ready to dive into the exciting world of pre-construction condos in Toronto? Of course, you are! But wait, before you sign on the dotted line, you need to know what to look for in a pre-construction condo investment opportunity. Don't worry, we've got you covered.


First things first, let's talk about the fees. Yes, we know, fees are not exactly the most thrilling topic, but trust us, they are important! When investing in a pre-construction condo, you'll need to factor in the following fees: 


1. Deposits

When you buy a pre-construction condo, you'll need to make a deposit. The amount of the deposit will vary depending on the developer. However, in (almost) all cases, its 20%


2. HST

You'll also need to pay HST on your pre-construction condo. The HST rate is currently 13%.


3. Legal Fees

You'll need to pay legal fees when you buy a pre-construction condo. The legal fees will vary depending on the lawyer. However, they're typically between $1,000 and $2,000.


4. Land Transfer Tax

You'll also need to pay land transfer tax when you buy a pre-construction condo. The land transfer tax rate varies depending on the value of the condo.


5. Development Levies 

Levies are paid to the developer if there are unforeseen costs that come up in the development stage. Most builders will promote a cap on these so investors aren’t scared off by the unknown cost.


6. Occupancy Fees

PHANTOM RENT! You may end up paying this fee to the developer if the unit is ready to occupy but hasn’t registered yet. This often means you have access to the unit, but you don’t have a mortgage on it. Most developers will allow investors to lease out their unit in this time period. 


Now, let's talk about the clauses. You know, those little details buried deep in the contract that can make or break your investment. In our opinion the most important have to be: 


1. Assignment Clause

An assignment clause is a clause in the purchase agreement that allows you to sell your pre-construction condo to someone else before it's built. This can be a helpful clause if you change your mind about buying the condo or if you need to raise money.


2.  Default Clause

A default clause is a clause in the purchase agreement that outlines what happens if you don't fulfill your obligations under the agreement. This could include things like losing your deposit or being sued by the developer.


Lastly, you need to know that developers are looking for a pre-approval from either a broker or a bank. This is to ensure that your intention isn’t to ride the market and sell it before it closes. Getting a pre-approval means you must be approved for the full mortgage amount and will have to show the 20% down payment already liquid. 


Pre-constructions are an amazing way to be able to get into the real estate market at a good price and be able to spread out your investment over the span of the build. Though there is risk involved, and a higher capital investment, by the end of it, you’ll have a brand-new condo, which would have appreciated in the time it’s been built and will be a tenants dream if you want to rent it out.


Make sure you reach out to us for our extensive list of pre-construction access, our investor guides, and of course our mortgage services! We’d love to be part of your investment journey.