Is a Pre-Construction Condo a good starting point?

Submitted by rgb033@gmail.com on Thu, 11/12/2020 - 22:46

I'm new to Real Estate Investing. I'm actually working on getting our first HELOC set up as we refinance our existing mortgage on our primary family home.
I'm wondering is a Pre-Construction Condo is a good option to start off with as opposed to a single-family home or resale condo?
I'd appreciate any advice and or tips on how a newbie gets started... Thanks in Advance. -R

- March 16, 2021

You don't have to be the person who does the work. Period. You can find others who have great deals and are looking for an investor. Depending on the arrangement you make, you could end up being on title and having someone else do all the work. Sounds pretty good to me! And in fact, that's how we operate our real estate investing company - we do both rent-to-own and buy & hold; we find the properties and the investors (and in the case of RTO, the tenant-buyers). Our investors are passive which they really like.

Keep asking the questions and as our community grows here online, you'll find more and more people who have lots of options and can give you lots of ideas.

- March 16, 2021

I'm a newbie myself but my impression is condos are hard to cash flow and maintenance fees are beyond your control making it that much harder to plan for. You are pretty much hoping for capital appreciation and rents rising which is looking pretty tough in the current environment.

If you're looking for an investment with a solid downpayment I think it's fine but it will limit you from expanding your portfolio vs strategies like BRRRR

- March 16, 2021

Hi @Laurel, Thanks for the comments. Very much appreciated.
When you say Passive ... How passive are we talking? I currently don't have a team to work with.
No RE Agent to help me look for the best investments.
No Mortgage Broker to get me the best Deals and Rates
No Renovators/HandyPerson to fix the property up
These are just some of the reasons I've joined this network/community to gain knowledge and expert advice.
If there are other options that should be considered, I'm open to them.
Thanks again for the comments. Have a great weekend> Stay cool and hydrated. -R

- March 16, 2021

Thanks for the input, Peter. I agree that the BRRR method does look to be one of the better investment options for portfolio growth. However, I'm unsure if I have the available time or team to pursue this method quite yet. I dunno? maybe I'm wrong to think that there is a bit more of a time commitment with a BRRR than just buying and renting a condo?
It's conceivable that one would have written into the renter's agreement that annual (allowable) increases will be added on as well as annual property inspections. So, if the condo's maintenance fee increases would there not be a cause to increase this as well to the tenant? I dunno? Am I wrong?

- March 16, 2021

I'm new to Real Estate Investing. I'm actually working on getting our first HELOC set up as we refinance our existing mortgage on our primary family home.
I'm wondering is a Pre-Construction Condo is a good option to start off with as opposed to a single-family home or resale condo?
I'd appreciate any advice and or tips on how a newbie gets started... Thanks in Advance. -R

- March 16, 2021

If you're looking for truly passive investments there are lots of JV opportunities out there. As far as rent increases, if you are buying precontruction now in ON, (limits to rent increases on older condos), you can increase as much as you want annually. The question is, will someone pay it?Just because your costs rise doesn't mean someone else is willing to pay it. I mean market dynamics should adjust for higher rents being demanded for higher costs but that's not a certainty.

- March 16, 2021

One thing to think about with pre-construction condos is that the time-line can literally be YEARS before you see any return on your investment, let alone a return OF your investment.

I agree with Peter that there are many other strategies out there that are probably more effective based on your needs of course. BRRR is just one of many.

I think you're also operating under the common misconception that you have to spend a lot of time and effort when you invest in real estate. That's absolutely NOT true. You can be a total passive investor if that's what you want to be.

- April 21, 2021

...strategy...because you are not competing with 10 other buyers who don't care what they pay for their new home because the purchase price won't matter in 15 years when the kids are gone and they sell that house. You as an investor DO care about the purchase price...a LOT! But when you walk into a sales office to buy a condo pre-construction, they hand you a sheet called a price list and that's the price you pay...you pay what the market says it is worth...not what some idiot with a bank account bigger than his/her brain think they can pay. There are of course some criteria to take into consideration and if you email me I'll send you my list of 8 KEY Criteria...