Why Builders Matter

Toronto Skyline

At first glance, picking a pre-construction builder might not seem all that important. Buyers rarely, if ever, choose a property because they love the builder. But picking the right builder is key to ensuring you get the property you want on time and on budget, which is especially important for investment properties. Knowing your builders - and choosing a realtor who does too - can lower your prices and improve your product, netting you a stronger investment.

When I’m choosing a project, I pick builders with a good reputation. Unfortunately, reputation isn’t concrete or measurable, and can often be difficult to find information about. What you can find out about, however, is a builder’s consistency.

A great builder consistently delivers what they said they would, when they said they would, for the price they said they would. And this is easier to quantify. You can very usually find out if a builder has failed to deliver the product their investors were expecting in their past projects.

So what about new builders, who don’t have a history of past projects?

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I don’t think there’s anything inherently wrong with choosing a new builder. In fact, there might be a few benefits to working with new entrants. But newer builders often don’t have their financials as tight as they should. They haven’t yet streamlined their processes or formed quality, long-term relationships with their people. They make first-timer mistakes. When purchasing a property for investment, new builders are unnecessary risks.

But it’s not always that obvious. Often new builders are actually amalgamates of older building firms, who can have up to fifty years of collective experience and absolutely zero completed projects under their new branding. Fortunately, realtors are privy to a wealth of information not otherwise available and can share this with you.

Choosing a realtor who specializes in investment properties and who works closely with builders increases the likelihood of picking a property with a reputable builder. Your realtor should know to stay away from the builders who quietly cancelled their last project, or took an extra year to deliver a building. Consulting more than one realtor will also help you suss out which ones have a history of good business throughout the industry.

There are other great ways to find out information on builders. You can usually find reviews from end users of recently completed projects on RealNet and other real estate forums. Even sites like Reddit can be helpful for personal reviews and company experiences. But also know that consumers rarely post anything positive in online reviews - you’ll often find a slew of negative comments and reviews on just about every builder in the city. The important thing to look for is whether you can live with the negative possibilities from each builder, or whether you can pre-empt any past problems. Get a lawyer to review any contracts so you don’t end up with a unit that’s missing a stove, or has hidden fees. Reading reviews of builders can show some of the pitfalls of previous buyers so, hopefully, you can avoid them.

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Another great, but simple, measuring tool for evaluating a builder’s reputation is their branding. Builders who brand their projects with their name are staking their reputation on each building. While not the perfect metric for evaluating a builder, it’s an interesting way to see which builders trust their projects with their name and which ones don’t.

Meanwhile, picking the builder with the best reputation isn’t always the right choice for you. Hot builders with favourable partners and trendy projects aren’t necessarily the best investment. In fact, well-established builders often charge well above what a project is truly worth simply because investors overvalue their reputation. But that overcharging isn’t warranted, and won’t net you the best possible investment for your money.

As an investor, it’s important to remember that you’re going to be renting out your unit. Many buyers want to spring for the trendiest projects, the best builders, and the most expensive fixtures. But paying for the absolute best does not guarantee you more money, better tenants, or long-term gains. It only guarantees you a higher cost.

So picking the right builder - rather than the best builder - is integral to making the right investment choice. Your realtor should be able to steer you in the right direction and find the appropriate middle ground when it comes to selecting a builder. But also do your own research to make sure your builder is the right one for you.

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Irene Lee, Sales Representative

RE/MAX Realtron Realty Inc., Brokerage
183 Willowdale Avenue, Toronto, M2N 4Y9
Direct: 416-888-1404 | Office: 416-222-8600