Why Are Presales In Condos So Attractive?
One of the topics in the Vancouver real estate market that has been very popular is that covers the presale market. Before outlining the reasons why a presale property is so attractive, it is important to distinguish the difference between a “presale” property and an already “built” property.
A presale of pre-construction property is one that has not yet been built – the buyer is buying the future rights to the property that will be built anytime from one to three years in the future. On the other hand a built property is one that already exists – it can be physically viewed and is probably marketed on the MLS (Multiple Listing Service) website.
Here are a few of the main reasons why a presale is attractive to investors:
The power of leverage: A pre-sale can be purchased with as little as a 5%-25% deposit, allowing the investor to benefit from a large investment without having paid anywhere near the entire amount ultimately due.
Consider an investor buying a presale $500,000 condo in 2019 with a completion date of 2023 and a 10% or $50,000 down payment up front. In 2023, the value of the condo appreciated to roughly $800,000. With a $50,000 down payment, the investor has made a profit of $300,000 if the contract of purchase and sale as an assignment is sold.
Since the property in now worth $800,000, the investor has an advantage when taking out a mortgage. The down payment now is the $300,000 appreciation in equity and the $50,000 that was paid as a deposit, making it $350,000 on a mortgage of $450,000!
Easy to rent out and a better rent: A new building has the latest appliances and modern features that are not readily available in older ones. They will also have attractive amenities such as gyms, steam rooms, roof top patios etc. All these amenities are a great draw to attract new tenants. Let’s face it tenants like buyers like brand new. At the same time, a higher rent can be commanded, as tenants will pay a premium for newer homes and the extra amenities.
Home warranty protection In BC, all pre-sale properties are subject to a Provincial government regulated home warranty program that has to be provided by a third party company. The warranty insurance known as a 2-5-10 Warranty includes 2 years on materials and labor, 5 years on the building exterior and 10 years on the structure of the home.
This warranty goes a long way in protecting the owner in the first ten years after completion.
Ability to customize With a pre-sale unit, there are many options available for customizing the unit in terms of color scheme, appliances, design, etc. In some cases the developer can usually be consulted to make changes to the unit that may not be part of the overall design.
Looking at presale? We offer a great collection of presale assignments in Vancouver, West Vancouver and North Vancouver. Speak to a trusted Virani advisor. Some of these assignments are exclusive and the list is always being updated.