Purchasing a property is a huge decision, whether it be for the home of your dreams, or as an investment, it’s important to be aware of your options as the real estate market and financing options are constantly changing. A presale property is when a buyer purchases a property before it is built or complete, ultimately purchasing the right to a property that will be built in the future. A resale property is what you think it is – a pre-existing home. It’s a standard sale where a person is simply selling their home. Presale or Resale, hosted by Vancouver New Condos, Mike Stewart PREC and the Vancouver Real Estate Podcast, breaks down why buying presale and resale properties in Vancouver and when they are the right choice for you.
Pre-sale provides you with many benefits as a property owner:
- It’s flexible
- Presales have a 2-3 year project completion timeframe, in which you can prep your house for sale, allowing for a rush-free and comfortable move.
- As an investor, you can keep your portfolio new, put money down, work on preparing your existing revenue property to sell, and have the money to complete on pre-sale property.
- You’re protected by warranty
- In BC, all pre-sale properties are subject to a home warranty program provided by a third-party company (not the developer) that is regulated and overseen by the Provincial Government
- 1st year from completion total warranty protection providing comprehensive protection
- 2-5-10 Warranty: 2 year warranty protection on mechanical, electrical and plumbing, 5 year warranty on building envelope,10 year structural warranty
- You can get a customized unit
- What you want in a unit is often not offered on the market when you want or need it, but with pre-sale, you can get exactly what you want in a unit. You can also ask developers to customize your property, and even do upgrades.
- Gives you leverage
- It is possible to get a 100% return on investment if property value increases and pre-sale might allow you to avoid purchasing CMHC insurance.
- For Non-Resident Canadian Citizens, pre-sale offers you the ability to purchase with 10-20% down payment, payable over 18 months, rather than the 35% down payment on built properties.
- It’s Hassle Free
- Vancouver New Condos is experienced in assessing the quality of projects and taking on those worthwhile
- Mike’s team will lead you to right project in a way that is time efficient
Pre-sale is not only the right choice for aspiring homeowners but also investors. Pre-sale offers investors:
- A Low Hassle Investment and Potential for Capital Appreciation
- There is leverage and an ROI without costs (no depreciation, no tenant challenges, still receiving gain)
- If you buy a pre-sale you can assign a contract
- Tenants Desire Newer Properties
- New properties have better amenities than older properties, and there are fewer hassles and breakages to deal with as a tenant, ultimately making them more attractive.
- Newer Suites Get Higher Rent
- Being able to get higher rent is powerful for an investor (goes back to overall ROI)
With hundreds of pre-sales popping up in Metro Vancouver throughout the year, and it is never truly a bad time to invest in pre-sale property. On the other hand, re-sale properties in Vancouver present numerous opportunities that simply don’t exist in pre-sale. We’ve broken down what makes a re-sale property attractive:
- Price – Re-sales are priced 25-30% lower than resale properties
- You can negotiate with sellers rather than developers
- There are fewer costs to complete:
- For example – the breakdown of costs to complete on an $800,000 sale is
- Re-sale: $15,500
- Pre-sale: $55,500 (more expensive because GST is included in the closing costs)
- For example – the breakdown of costs to complete on an $800,000 sale is
- No construction delays:
- Pre-sale completions can have a 6 month to 1-year delay, sometimes even longer.
There are risks associated with any purchase, however, the risks associated with real estate can feel even bigger due to the financial significance of the investment. You can manage risks with a re-sale property by:
- Locking in mortgage rates, where you know the cost structures
- Know what the appraised value is so that you don’t have to be concerned with how the market is going to change in the future
- Stay up to date with the current climate of tenancy and changes in tenancy policies in order to have predictable rents
- Be less vulnerable with policy changes – it is impossible to look ahead at market and policy changes
- View property before you buy to ensure that it is the right fit
- See your parking spot – parking spots for presale properties are assigned at completion and you may be faced with a small spot or one in an undesirable location
- Buy in an established building where you are able to look at strata documents to assess the integrity of the property
- Look at: Form B, read strata minutes, find out the culture of building and how issues are dealt with, what types of fines are put out, demographics of owners, operating budget, how much is put in a contingency fund, where the budget is allocated
- Often strata fees are increased in a presale after completion
BONUS TIPS FOR RE-SALE PROPERTY TO ENSURE YOU ARE HAPPY WITH YOUR PROPERTY
- Learn to Love No Photos
- When a property has no photos you should explore it further
- When a realtor does not use photos, they benefit you as a buyer because they weed out the competition on a property
- Buy Newer
- Look for properties built within the last 10 years
- You can take advantage of 2-5-10 warranty, which does not disappear with new owners
- Newer constructions are built with rain screen technology, so you will not have to worry about leaky condos
- There is a predictability of cost – the economic life of most systems is between 20-40 years
- Buy Into A Larger Strata
- Unit entitlement (how much of the building you own) is lower in a larger strata, meaning you will pay less for your strata fee
- Believe The Hype
- It is in your best interest to follow what big developers are doing (ie. where they are planning to build large new developments), and buy resale there in a neighbouring building
- You are ultimately benefiting from the improved infrastructure
Lastly, we will leave you with some financing tips to ease the path to purchase a property on behalf of TD Bank.
- With a re-sale property purchase, with TD you can get a pre-approval or rate hold for 120 days
- With pre-sale property purchase, with TD you can get a pre-approval with 2 year rate hold, sometimes even 36 months with a TD approved site
- With a re-sale property, you can put down as little as 5% for properties under 1 million
- With a pre-sale property, the down payment is determined by the developer and there is little negotiation; on average, with instalments, it ends up being around a 20% down payment which some people just can’t afford
Important resale research tools exist to help future home buyers with their journey. There is a statistics blog available on Adam and Matt Scalena’s Vancouver Real Estate Podcast, where live inventory is shared, along with sales and sale price averages in various regions across Metro Vancouver. In addition, you should be utilizing private client services, which is a research tool that provides buyers with realtor level information updated in real time.
A lot of thought should go into the decision of whether to purchase presale or resale property in Metro Vancouver. However, with professional connections, your journey will be a lot more informed and simpler. Depending on your wants and needs, the team at Vancouver New Condos and Mike Stewart PREC a can help you find the home of your dreams or that perfect investment property. As well, make sure you take advantage of all your resources available, whether that be through Vancouver Real Estate Podcast or through other research tools. Contact us today for more information, and let us know how we can help you!