Instead of buying an existing home, buyers invest in a property before it's built. This approach, while laden with potential benefits, also comes with its set of challenges and considerations. We’re here to guide you through the process to make sure your investment dollars are spent wisely.
Demand is high.
The allure of the pre-sale market is undeniable, especially in areas with well-serviced access to downtown Vancouver. Richmond, Coquitlam and Burnaby are all attracting plenty of attention.
First-time buyers, in particular, are drawn to this option. Greater Vancouver’s resale market offers a unique set of challenges, many of which can be offset by purchasing a pre-sale property. Here are a few of the most notable benefits.
Staggered deposit payments.
When investing in a pre-build, you're not expected to pay the entire deposit upfront. Instead, the payment is broken down into manageable chunks. For instance, for a project that spans two years, you might deposit five percent every six months, accumulating to a total of 20 percent. This structure ensures you can budget for each installment without depleting your savings all at once.
A strong warranty.
Another advantage of a new property over a resale one is the warranty that accompanies it. Developers are obligated to vouch for their construction quality. Typically, this warranty extends for the initial one to two years, ensuring that potential defects or issues are addressed without any financial burden on you.
The beauty of a brand-new property is, well, its beauty. Unlike properties that are even just a few years old, a new home ensures everything is up-to-date, functional, and stylish. Rest easy knowing your foundation is solid, your appliances are new, and your plumbing is in peak condition. No scratches or dents to fix upon move-in.
Potential equity growth.
Pre-sale properties offer a unique financial advantage. Buyers often secure these homes at or near the current market rate but might not move in until years later. This gap allows the property's value to potentially rise, offering homeowners increased equity even before they set foot in their new home.
Wait and see.
For those not in a rush to relocate, pre-sale properties present an attractive proposition. Perhaps you're benefiting from affordable rent or have a stable living arrangement for the foreseeable future. In such scenarios, investing in a pre-sale property allows you to secure a future home while capitalizing on current market conditions.
Prospective buyers can start their pre-sale journey on platforms like REW.ca, which offers insights into available properties. However, the real key lies in partnering with a reputable real estate agent familiar with your desired community. Such professionals can provide invaluable guidance, ensuring buyers make informed decisions.
Pick and choose.
Selecting the ideal pre-sale project goes beyond just the property itself. Buyers should consider the building's design, potential rental returns (if it's an investment property), available amenities, and the surrounding community's growth prospects. In many cases, developers will lay out a community plan, something that’s worth considering after you’ve studied timelines and floor plans. It's about envisioning both the property’s and the community’s long-term value, and determining how that fits into your lifestyle or investment goals.
A crucial aspect of the pre-sale process is the builder or developer behind the project. In cities like Richmond, there are instances where multi-year project delays have left buyers demanding their deposits be returned – an unfortunate scenario for any pre-sale investor. We spoke to Vincent Lim in Season One of RealTours, to get his perspective on risk mitigation. “There are a lot of big developers in Richmond,” said Lim. “You have to go with a developer you know.”
Buyers must ensure they're collaborating with a reputable and trustworthy developer to maximize their gains and minimize their risk. While personal research is essential, leaning on a real estate agent's expertise can provide deeper insights. Key factors to consider include the developer's track record, previous project reviews, and financial stability.
To minimize potential risks, buyers should stay informed about market trends, understand the contract's fine print, and be clear about their rights and obligations. It's also advisable to have a contingency plan, such as securing pre-approved financing, to navigate any unforeseen challenges.
When things go south.
Despite best efforts, sometimes issues arise with pre-sale projects, be it delays or other complications.
In such instances, buyers should familiarize themselves with their contractual rights. Depending on the situation, they might be entitled to compensation or even opt out of the purchase. Having a knowledgeable real estate agent and legal counsel can be invaluable during such times. Though project failures are few and far between, it’s still best to speak to your agent about worst-case scenarios before you make an investment decision.
Stay informed for success.
The pre-sale market in Greater Vancouver offers a blend of opportunity and challenge. While the potential for value appreciation is significant, it's essential for buyers to be well-informed and proactive. With the right strategies and expert guidance, navigating the pre-sale landscape can lead to rewarding outcomes—and a shiny new place to call home.