Pre-Construction Investing

Pre-Construction Investing in Edmonton: Is It Worth It?

The ever-changing Edmonton real estate industry is currently presenting more opportunities than ever before to savvy investors seeking to expand and diversify their portfolios. There is a new and emerging trend that’s gaining popularity, and that’s pre-construction real estate, the purchase of a property before it’s even built, straight from the builder.

Is pre-construction investment a worthwhile endeavor in Edmonton? The quick answer is that yes, it could be, if you know what you are doing.

1. What is Pre-Construction Investing?

With pre-construction investing, you buy a home, a townhouse, and a condo before and during the construction stage. Essentially, you buy the property at the current market rate and put a deposit (5-10 percent of the purchase price), and after a period of less than one to three years, you take possession of the property.

The first and foremost is the issue of timing and appreciation. As the property is being developed, the prices are bound to rise, and so when the property is completed, the depreciated property you buy might already be appreciating and worth more than you invested.

This option attracts first-time buyers wishing to plan forward and people wishing to purchase and then sell the property after creating equity.

2. Edmonton’s Strength As a Market for Pre-Construction

Compared to other large cities in Canada, Edmonton is considered one of the more affordable markets, and that’s what makes Edmonton so attractive for the long-term investment community.

What makes Edmonton the best:

• Steady population growth: Due to interprovincial migration, employment, and a well-diversified economy.
• Expanding suburban areas: Places such as Windermere, The Orchards, Laurel, and Glenridding Heights are also attractive to both builders and purchasers.
• Lower entry costs: The pre-construction projects within Edmonton will require lower start-off costs and prices per square footage than other cities such as Calgary, Vancouver, and Toronto.
• Rent demand: The newer houses and townhouses are much sought after because of the demand for newer and energy-efficient units.

All these aspects make Edmonton a very attractive place to look for pre-construction investment prospects that promise growth and sustainable profits.

3. The Advantages of Pre-Construction Investing

There are multiple reasons why pre-construction investment could be a good option:-

(a) Build Equity Before Moving In: By locking in the current market price, you get the benefit of the appreciating market during the period of construction. If the prices go up during the time of the construction of your home, you will have built equity because you will not be carrying the full mortgage.

(b) Flexible Payment Structure: Contrary to the payment of the entire cash required for purchase, the buyer pays various deposits over a period of a few months. It becomes convenient to handle cash flow issues while acquiring a property settled in a developing area.

(c) Higher Life Expectancy: Since everything is brand new, you will get warranty protection through the Alberta New Home Warranty Program. This will translate to fewer repairs and low maintenance costs for the first couple of years, which is a massive benefit to landlords.

(d) Opportunity to Customize: Builders often enable buyers to select the floor plans, interior finishes, and upgrades, so you can accommodate future trends and lease prospects.

4. The Risks to Consider

Although pre-construction investment has several advantages, it also carries certain risks. These are a few things you should be aware of:

• Project Delays: The project schedule of a construction project might get delayed because of issues such as supply chain disruptions, permits, and the weather. It is essential to always plan for potential delays.
• Market Fluctuations: Market conditions may change, and the appreciation may not be what you first anticipated.
• Deposit Tied Up: The deposit that you’ve already put into the project gets tied up with the builder until the end of the project.
• Builder Reputation: Not all builders are the same or able to complete work within the stipulated time. Having the right realtor who connects with good builders is key.

The way to mitigate risk is through due diligence, and that includes understanding the builder’s history and having a financial plan.

5. Is It Better for Investors or Homeowners?

Both parties may find pre-construction very useful but for completely different reasons:

• For Investors: It’s a chance to capitalize on time and appreciation with fewer investment costs.
• For homeowners: It provides you the chance to plan for the future and then move into a completely new home every time you change your mind.

Edmonton Real Estate Investors look to emerging neighborhoods that are proximate to new infrastructure and other amenities that are attractive for long-term growth and rental yield.

6. How to Get Started the Right Way

Prior to entering into a pre-construction transaction, do the following:

1. Meet with a seasoned realtor who deals with pre-constructions.
2. Research the builder’s reputation and previous developments.
3. Familiarize yourself with the contract terms and conditions, such as time schedules, cancellation terms,
4. Becoming pre-approved for financing so that you understand your buying power.
5. Layout the plan of exiting the property through living, renting, and then re-selling.

Also, working along with a realtor that has the exclusive right to pre-construction projects will be beneficial for acquiring early pricing and incentives.

Final Thoughts

Is pre-construction investment a good idea for Edmonton? Absolutely! Considering the low prices and the fact that Edmonton has so much to offer, buying pre-construction properties in Edmonton could be one of the shrewdest investment decisions you ever make.

Nevertheless, success factors include knowledge, timing, and the right alliances with professionals.

At Team Sethi, we understand that pre-construction investment and involvement with reputable builders require experience and expertise that not many people possess.