So, you’ve decided to buy an investment condo in 2016. Congratulations!
As a first-time investor, there are five questions you need to ask yourself before buying a new condo:
1. What are your goals?
Before you buy any investment condo, you should figure out what your goals are. Are you looking to make a short- or long-term investment? What kind of return are you looking to achieve? Are you more interested in income or capital gain – or both? Deciding what your goals are up front will better help you achieve them in the long run.
2. What can you afford?
Talk to your mortgage broker or lender and get a mortgage pre-approval before you start your search. This will help you figure out what you can afford, and will help you start to narrow your search. Also, make sure you are prepared for the developer’s requirements with respect to financing. Most new condos will require a 15 to 20 per cent deposit up front, as well as a mortgage approval letter showing you can afford the unit you are purchasing.
3. What is your exit strategy?
This is a very important question many first-time investors fail to answer before buying a new condo. Will you buy, hold and rent for the long term before selling? Will you buy pre-construction and then flip (assign) your unit prior to the final closing? Will you buy pre-construction, close on the unit, rent it out for one or two years, and then sell it? Will you buy, wait for completion, and then refinance and re-invest the proceeds? Take time to assess the risks and rewards associated with the different exit strategies and start with the end in mind.
4. What should you buy?
Buying a new condo for investment purposes is different than buying for yourself. Some units make better investments than others. Questions to consider include: Which locations are likely to experience the most growth in the next few years? What type of unit is the most attractive to renters? Which type of unit tends to appreciate faster than others?
5. When should you buy?
Understanding the typical marketing cycle that a new condo goes through from pre-construction to completion will help you identify the right time to buy. When buying for investment, it is generally best to buy at the earliest possible stage when a new building launches. This is when prices are the lowest, and availability of investor-grade suites is highest. But there are other great opportunities to buy, including right before the developer meets the sales target to secure construction financing, or during the occupancy stage. In both of these instances developers tend to be highly motivated to sell and this is when they often introduce great buyer incentives or cash discounts.Content courtesy of http://www. http://nexthome.yp.ca/
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