I’ve personally purchased two pre-sale condos in Victoria, B.C. in the last few years. How do I determine whether a pre-sale is a good buy or not? I use approximately 6 to 7 different methods and one method I particularly like is comparing the pre-sale unit to the existing inventory of newer condos.
For example, if I am interested in a 600 sq./ft. one bedroom pre-sale unit in a luxury building I will take a look at what 600 sq./ft. units are selling for currently in similar luxury buildings. If similar completed units are selling at $300,000, for example, and the pre-sale is priced at $250,000, for example, than I would consider this enough of a spread to buy a pre-sale unit. Hypothetically, in the above scenario if the real estate condo market stays completed flat during the 2 year build out period the pre-sale should be worth more on completion. If the market is down a big spread mitigates the chances of losing money. However, if completed units are selling for $300,000 and the pre-sale is priced at $315,000 then it doesn’t make a whole lot of sense to buy the pre-sale unless you really want have something that is brand new and never lived in.
This is one of my methods of assessing pre-sale value.