Real estate, like other investments, experiences ups and downs, offering you control over your investments. When the market is low, you can hold onto your property, and during its peak, selling can yield high returns. Investing in the pre-construction market offers a multitude of reasons why it’s a financially sound decision.
In this article, we’ll compare investing in real estate to traditional investments, detailing the benefits of purchasing a pre-construction property. Let’s start from the basics!
Reasons for Choosing Pre-Construction Condos as an Investment
**Leveraging**
Leverage involves using borrowed capital, like a mortgage, to purchase a condo unit. Typically, you pay a 20% down payment, and the bank covers the remaining 80%. The property appreciates at 100% of its value, and you pay the bank back over about 25 years. Pre-construction allows for down payments in stages (often 5% installments), providing financial flexibility and control. This leverage is key to earning high returns on condo investments.
**Real Estate Appreciation**
Real estate investments appreciate in value, yielding a return based on a percentage increase. The beauty of leveraging is that even with a 20% down payment, the property appreciates based on its full worth. A 10% increase in property value translates to a 50% return on investment. Mortgages are addressed upon move-in, giving you time to plan finances effectively.
**Delayed Mortgage in a High-Interest Environment**
Investing in pre-construction amidst a high-interest and high-inflation environment is wise. You secure a purchase now, and by the tentative occupancy date (2026-2030), interest rates are likely to be lower, maximising your gains due to reduced mortgage rates.
**Income Aligned with Inflation**
Real estate investments act as a shield against inflation. Rental prices remain stable or can be adjusted strategically, maintaining pace with market fluctuations. Your property’s value also increases with inflation.
**Tax Benefits**
Investing in real estate offers tax advantages. Only 50% of capital gains are taxable in Canada. You can deduct various costs from your taxes, such as mortgage interest, property taxes, and unit depreciation. Additionally, you can use excess “losses” to reduce your overall tax liability.
Final Thoughts
Investing in pre-construction condos offers unique advantages. Leverage, real estate appreciation, delayed mortgage in a high-interest environment, income in sync with inflation, and tax benefits make it an appealing investment option. Understanding these benefits equips you to make informed financial decisions, potentially reaping significant returns on your investments.
For more information and personalized investment advice, feel free to contact us. Happy investing!
