What should I consider before buying a condo under construction, for flipping at a profit?
I am planning on buying a second condo, with the hope of selling it for a profit as soon as the construction is finished (i.e. flipping it). My questions are:
What significant risks are there in flipping a new condominium?
Is buying a condo under construction a better idea than to buy from a previous owner and then trying to sell it for a profit?
In the former case (buying when under construction), do I keep paying the mortgage until the construction is complete, or do the payments start only after the construction is complete?
In Canada, when you wish to buy a condo from another owner, you can use the MLS.ca property search tools. To find one to buy under construction, is there a particular site you can use? I don't want to be driving around looking for condos under construction. :)
Are the closing costs for buying and selling the same in the 2 cases?
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Ignoring any difference in how mortgages work and tax differences between the United States and Canada the biggest risk is that you will be competing with the builder.
If they are building hundreds more condos in the complex you will be lost among their advertising. If you don't have the correct set of options for the potential buyer, they can easily switch focus to the builder.
Unless you got a great deal because you were one of the first to buy, you can't sell for more than the builder or a potential buyer will just use the builder. If you can offer something the builder can't offer, immediate delivery you might be able to overcome the price issue, but you will still be limited in how much you can charge for that quicker delivery.
I bought my first place this way. Somebody got a great deal because the builder was trying to get a certain percentage sold so he could start construction. When it was built they could sell it right away at a price a few thousand below what the builder was offering. There was a lag of six months for people waiting for the builder, but I was able to move in in just a few weeks.
In some communities the builder might make it very hard to sell. They can limit your access to the model. There is nothing but the model for you to show a potential buyer.
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