Toronto Real Estate investors are offered many choices when looking to purchase a Toronto condo in 2020. In this article I explain the three steps and three most common ways to invest in Toronto Condos in 2020 and beyond. Ready? Here it is:
Step #1 – Set Your Budget:
The first step in committing to any investment in understanding your available resources:
- Your available cash
- Your available loan
- Other sources of funds (family, gift, savings, etc)
Your Available Cash
The amount of free cash you are able to conjure will make your deposit. For example, you can come up with $95,000, that’s the amount you can put forth towards your deposit(s).
Your Available Mortgage
Typical Toronto Condo buyers will “put down” ie. deposit 20% of the purchase price from their own cash resources, and get a mortgage for the rest (80%).
In order to assess how much you an borrow, use a Affordability Calculator such as this one: https://searchmortgage.ca/calculators
Save a Bit for Closing
The process of Registration, also known as ‘Closing” or “Final Closing”, requires some cash, too. For some buyers, mostly pre-constrcution investors, the closing process happens much later than the actual purchase date. For some buyers, mostly re-sale buyers, the closing will happen shortly after purchase.
Be sure to have enough cash set aside for your closings costs! If you require help estimating what it is, let me know and I’ll guide you.
Your Total Budget:
Your total budget required consists of these elements:
- Cash Available
- Mortgage Available
- Any other sources
Step #2 – Find Your Condo:
Finding and acquiring a condo is usually quick and easy, but sometimes it’s a daunting task, so let’s review your options:
The Three Types of Condo Investments:
Generally speaking, you can purchase condos in one of three methods:
Investing in Toronto’s Pre-Construction Condos
The most popular choice for investors in recent years and now is investing in condo projects that are yet to be built. There are some clear advantages to this method, and this is why it is the most popular choice:
- Early Investors get the best price and best unit selection
- Early investors get various incentives
- Deposit of only 15% – 20% of the amount is required
- The Deposit is split into several payments (usually 5% each)
- The deposit is stretched over a period of time typically ranging from 180b days to a 2 years
- Investors may flip (“assign”) prior to closing
- Investors LEVERAGE their deposits (15%) yet gain over the TOTAL amount
In short, this is a win-win situation for many investors and developers.
Investing in Toronto Condo Assignments
Many investors buy “Assignments” – a condo that have previously purchased from developer, but yet to close (register).
Investing in Assignments have its advantages:
- Assignments are usually cheaper than developer’s inventory
- Buying into a sold-out building
- Investor is ready now, was not ready before
- Investor is new to town
- Need a new place and want to close soon
I have posted several videos regarding assignments, you can find all of them here, and I suggest watching these first:
Investing in Re-Sale Condos
Every year, about 10,000 Toronto homes change hands on the open market. This is called “Re-Sale” as the condos are sold from the current owner to the next one. This process for condos is similar to buying a typical home:
- A Condo is offered for sale
- Showings commence
- Offers are taken
- Best offer wins
In any give time there are thousands of option for home/condo buyers. To locate the best one for you, you first must determine:
- Your available budget (Step 1)
- Desired area
- Type of Home (condo, town, beds, baths, etc)
- Anything else (parking, locker, amenities, etc)
I highly recommend getting an experienced Realtor on your side. Just like you don’t fix your own teeth or install electrical, you need a professional to help you navigate through the process, choices and negotiating decsicions.
There are many tricks, pitfalls and avoidances to be aware of, a dedicated professional who is focused on Toronto Real Estate can help you secure that property, reduce risks, limit your stress and get the best possible price for your investment.
If you’d like to learn more, contact me here.
- Your Realtor
- Your Mortgage Broker
- Your Real Estate Lawyer
The actual closing is done by the lawyer, with support from your Realtor (documents, deal particulars), and your Mortgage Broker (loan type and terms).
Step #3 – Close the Deal
Preparation is everything. A well prepared investor can expect closing to be an easy and smooth process. The three professionals that will guide and help you in the process are:
Closed? Success! You have purchased your first (or second) property. Enjoy !