Debunking Pre-Construction Condo Myths

Posted by Alex Wilson on Monday, July 29th, 2019 at 9:00am.

This week is all about debunking pre-construction condo myths to help ease your concerns about investing in pre-construction.

All Work, No Play

One of the main misconceptions is that being a landlord is a lot of work and that you are constantly having to visit properties and dealing with tenants. Because these are brand new condos, there is very little if anything at all that you need to worry about. When owning a freehold home, there is a lot more maintenance involved like landscaping, snow removal, and dealing with expensive issues like frozen pipes, updating your air conditioning, fixing your roof, etc. When it comes to a brand new condo in Toronto’s core, you remove most issues you would have with a freehold home. Tenants may give you a call whether it be because a lightbulb’s out or there’s a problem with the plumbing. If any issues do arise with the actual unit, that is the responsibility of the property manager. If anything is wrong within the unit, such as a clogged toilet or a lightbulb needs to be changed, that is the responsibility of the tenant. So, if the problem is outside of the unit, it’s the building manager’s problem, and if there’s an issue within the unit, the tenant is responsible. 
Now you may be thinking, “What if my tenant doesn’t pay their rent?” Condos in the greater Toronto area, especially near the commercial developments we discussed in last week’s article, have a higher rent rate and are rented by professionals making a higher income looking for a home to sleep and eat in when they aren’t working or out in the city. On the first of every month, their rent will be transferred to your account. Low maintenance tenants, low maintenance process. 

Nightmare Tenants

You always hear horror stories of tenants trashing the place, damaging the unit, not paying their rent, creating tense experiences with neighbours, and more. Though many landlords do deal with such tenants, this kind of issue really doesn’t apply to this situation. As mentioned above, the tenants renting these condos are professionals that wake up, go to work, enjoy what downtown Toronto has to offer, come back to sleep in the evening. 
At the end of the day, it comes down to how you screen your tenants. First, request an employment letter and employment validation. This way you know where they’re working and how much they’re making so you can get a good understanding of whether or not they can afford the rent. Second, complete the credit check yourself. It is very easy for people to fake their credit check. By doing it yourself, using websites such as Equifax and TransUnion, you’ll be getting the credit check directly from the horse’s mouth. Third, check their references but take them with a grain of salt. There’s no real way to confirm who is on the other side of that phone. It could be a legitimate reference or it could be a friend pretending to be a previous landlord. Fourth, social media! Check their LinkedIn, their Facebook, their Instagram. This gives you a look into their social life and how they spend most of their off-time. 
By following these 4 steps, you can feel confident that you’re renting out the condo to the right tenant. 

Rent Control

Another main concern many people have is that their costs are going to be increasing and they are worried about not being able to raise their rent because of rent control. In November 2018, the current government removed rent control for any unit that has not been rented out prior to that date. This means that any pre-construction developments, or brand new building finished after November 2018, is not subject to rent control and you are able to raise your rent after the first year while keeping in mind that you are still subject to market forces.

HST Included?

Having to pay HST on new condos is another common misconception and can get very confusing for investors. So, is HST included in the purchase price of your investment unit? Here, in Toronto, the HST is always included. That being said, when you buy as an investor the builder has factored the HST rebate on the unit. This means that, if you're moving in, there is an HST rebate in their proforma statement when they sold you the unit. As an investor, they don’t know what your exact plans are with the unit and they may be worried that you won’t meet all the government requirements to obtain the rebate at which point the government will call the builder and take back the HST rebate. 
So yes, on your final closing you do pay the HST rebate portion, which can be somewhere between $24,000-$27,000, but then you apply for the rebate and include your one year lease and get that money back. It’s not costing you any more than what you originally agreed to. This is simply an extra step that needs to be made as an investor and you receive the rebate in full 3 to 4 months after the final closing.

What about market crashes?

Being successful in the real estate market all comes down to playing the long game. You only really lose money when you put yourself in a situation where you have to sell. Yes, the market does change and will sometimes go down, but it’ll always go back up, as well. If you’re in for the long game and use the tools provided to you in these blogs and videos, you won’t lose money and you’ll never have to worry about a market crash in real estate because we have a ridiculously low vacancy rate in a high population city. We know the jobs are here and we know the people are here. Downtown Toronto is the epicentre of Canada. This is where people are going to move, so you’ll always have a tenant.

Reach out!

If you’re interested in investing, you can contact me at or give me a call/text me at (416) 996-5181.


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