Condominium units are seen sprouting everywhere in the Metro. It is being marketed as an investment by real estate developers and agents. Sales pitch goes like “Invest as low as Php 8,000 a month” to lure people who are dreaming to own a condo unit for their convenience. But is owning a condo really an investment?
Take note that an investment or an asset, by definition in personal finance, is something that gives you money. A liability, on the other hand, is something that takes away money from you. With these definitions, a condo unit can only be considered as an investment if you can have it rented out with a rental income higher than your monthly amortization or if you decided to sell it later on at a selling price that is significantly higher than your purchase price.
I recently sealed a deal to buy a pre-selling condo unit. It took me days to finally decide which unit am I going to get with a lot of due diligence. For the benefit of my readers and followers, here I am sharing with you some tips that I had learned.
Condominium Ownership. There are two types of condo ownership. Leasehold Ownership or Perpetual Ownership. Leasehold ownership means that the developer does not own the land where the condo was built. They are just leasing it from the land owner, usually for 50 years. Section 8c of the Republic Act 4726 or The Condominium Act of the Philippines states that:
That the project has been in existence in excess of fifty years, that it is obsolete and uneconomic, and that condominium owners holding in aggregate more than fifty percent interest in the common areas are opposed to repair or restoration or remodeling or modernizing of the project
In other words, if the condo building has been in existence for more than 50 years, it will be considered as obsolete and should be subject to demolition. Condo unit owners will then have to decide if it will be restored or repaired. If it has been decided not to be restored, then it will be sold or demolished so that a new property will be developed on the area. Condo unit owners will get their appropriate share of the proceeds of the sale of the building.
In contrast, Perpetual Ownership means that the developer owns the land and that the sale of the condo unit includes the land. Therefore, all condo unit owners owns a fraction of the land. After 50 years, since the building is deemed obsolete, the condo unit owners will jointly have to decide what to do with both land and building. Since they both own the land and the building, they will get their appropriate share of the proceeds of the sale of both in case they decided to sell it.
I got a news that Cityland has a leasehold type of ownership, hence, their condominiums are pretty cheap as compared to other developers.
Where is it located? Location is the top most primary concern that condo buyers consider nowadays. With the tremendous traffic in Metro Manila, especially during rainy seasons, convenience is the primary lure of condo developers. Check the location of the condo development. Is it near your workplace? Is it accessible via public transportation? Are there nearby retail shops and malls? Is the area not flood-prone? This should be your primary concern.
Know the Developer. Next thing that you should check is the real estate developer. Ask yourself: “How much experience do they have?” “How many years do they have in the business?” “What is their history in terms of the condo unit turn over? Are they delayed or advance?” I personally got a condo unit from DMCI.
Check Online Real Estate Forum. There is a reliable online real estate forum for condo unit owners and buyers and this is Skyscraper City. Check the site and read the comments in the thread for the condominium project you’re eyeing to buy. Or simply search it by typing “[Condo Project] Skyscrapercity” in Google. The condo project corresponds to the development you’re eyeing to buy. For example, if you are eyeing to buy at Flair Towers, then type “Flair Towers Skyscrapercity”
Find a Good Agent. If you are satisfied with both the developer and what you’ve read in the forum, then next is to find a reliable real estate agent. This one is hard to find because most agents are only after their sales commissions. Once they got their commission, then after sales service will go awry. Look for referrals from friends. Know the history of the agent. How long are they working as agent?
My advise is to look for someone with a long history of sales and exclusive to the developer only. Look for an agent, perhaps a Sales Manager, who has been in the business for several years already. There is a reason why that person got promoted as a Sales Manager and that is because he or she has a history of sales in the past. Someone with a good history of sales and a long history of stay with the developer as an agent may mean good after sales service and equipped with the knowledge in the terms and conditions of the developer so he or she can answer all your potential questions. In addition, you can be sure that he or she is still with the developer even after several years.
Check a Newly Built Project. Since you are buying a pre-selling condo unit which remains to be built in the future, check a newly built project of the developer that has already a community living in it and ask yourself if you like living in there. I personally checked one of the condo developments of DMCI at Flair Towers and I was very satisfied by what I saw. What’s unique with DMCI versus other condo developers that I checked is that they have resort-type amenities and a lumiventt design technology which allows the natural passage of air. Upon checking units at Flair Towers, I was convinced to get a unit located at a Garden Atrium since units here are cooler especially in Summer because of the natural passage of air.
Which Unit Is it? The next big question you may have is out of the available pre-selling condo units, which unit should you choose? Are you going to choose higher-floor or lower-floor? There are pros and cons for both.
Higher floor condo units tend to be more expensive because of the view. If you are going to choose higher floor, make sure you don’t have that extreme fear of heights and choose the skyline view that is more appealing to you. In addition, if you choose a higher floor unit, you may have to wait for the elevator a little longer when you go up and down and in cases of earthquakes, God forbid, higher floors unit owners will experience more shake than lower floor unit owners.
Lower floor condo units, on the other hand, are cheaper in terms of price and are closer to the amenities. If you want a little exercise, you can go up and down to your condo using stairs. You can avoid the long wait in elevators especially if you’re in a hurry. However, since these units are closer to the ground, you may experience hearing the noise of buses if the condo is near a highway or if the location is in a flood-prone area, you may experience flood in your condo unit. In addition, if there is a lot of developments around the area, cellphone signal maybe blocked and you may experience a weak reception of signal.
How About Parking Space? Parking space prices nowadays are expensive. In fact, with one parking space, you can already buy a brand new car. So the question might linger to you if you are going to buy a parking space or not. Consider this. If you are used in commuting and the location of the condo is very accessible to public transportation such as MRT, you may opt not to buy a parking.
In cases you decided to buy a parking space, I advise to choose one located at basement 3 and up. Parking spaces located at basement 4 and below tend to have less air in it and thus harder to breathe for some. In addition, if you have the option, choose one that is nearer the elevator so you will only need to walk a little into it in cases you have big or heavy purchases that you need to put inside your condo.
Take note also that if you bought a parking space, there will be an additional cost to your monthly association dues and yearly real estate property taxes and insurance since these costs are dependent on the size of both your unit and parking. So you would have less costs if you don’t have a parking. However, for those who have cars, you can buy a parking space for your convenience. You can have it rented in case you’re not using it. Again, check your current and future cash flows if you can afford to buy one. Consider the pros and cons I mentioned.
Check for the layout plan. You can only rely on the layout plan since it is still in a pre-selling stage. Do you like the position of your bed, kitchen, living room, and toilet and bathroom? Also check the layout of the whole floor where your unit is located. How many units are there in one floor? Fewer units per floor are preferred so as not to be dense.
In addition, check the finishes of your condo upon turn over. What are the finishes of your bathroom, living room, bedroom and kitchen? What furniture and appliances, if there are, are included upon turn over? If you are tall like a basketball player, you need to check out a model unit too and see the measurement of floor to ceiling if you are convenient to it.
Check for Payment Terms. Check the payment terms offered by the developer. Ask as much discount as possible and assess your cash flow if you can afford it. You can avail more discounts if you can pay a higher down payment. For pre-selling units, down payment is staggered equally monthly until turn over date at zero percent interest. You can also avail further discounts if you will pay via post-dated checks or auto debit to your bank account and another discount if you will avail of bank financing for the remaining of the down payment.
Turnover and Closing Fees. Ask your agent about turnover and closing fees. For DMCI agents, these are usually disclosed outright. However, for agents of other developers, these are not usually disclosed outright to the buyer. Without outright disclosure upon purchase, this becomes the ‘hidden fees’ that buyers call. Closing fees are expenses of the developer that covers documentary stamps tax, transfer tax, registration fees, notarial and documentation fees, administrative and handling fees. I must admit for DMCI, their closing fees is high at 9.6% to 10.5%, depending on your payment terms, as compared to other developers. This is what I didn’t like about DMCI. But yes, perhaps that is the price you have to pay if you want a unit with them nowadays. Again, ask how you can avail of a discount in closing fees, depending on your preferred payment terms. If it’s too much for you to pay the closing fees in one time lump sum during turn over, you can opt to have this included in the balance subject to bank financing – 90% will be included in bank financing and 10% shall be paid to DMCI.
Aside from closing fees, there are also turn over fees. Turn over fees, meanwhile, covers Meralco deposit, water deposit, joining fee, and 3 months advance of association dues, which would roughly amount to P35k to P40k depending on the size of your unit.
In addition, if you availed of a bank financing upon turn over, there is a bank charge that is equivalent to P20,000 for every million worth of the amount to be financed by the bank to facilitate processing of the bank loan. You must also be ready with this upon turn over.
Check the Maintenance Costs. Living in a condo also involves maintenance costs. You will need to pay the monthly association dues and the yearly real estate property tax (RPT) and property insurance. This depends on the size of your unit so the bigger your unit, the higher amount you will need to pay. Parking spaces, as I mentioned above, will also be included in the computation so you will need to pay higher amount if you also bought one. Ask your agent how much per square meter is the association dues in your condo unit and an approximate amount for the RPT and insurance.
As part of the monthly association dues, unit owners will also share the utility expenses incurred for common areas such as water and electricity. For DMCI, this will be billed separately from the regular monthly association dues. In addition, there may be special assessment fees which the Condo Corporation will bill you covering additional expenses which are not part of the association dues. This covers insurance expenses and RPT on common areas, major repairs and maintenance on buildings and common areas, purchase of new equipment, or special services such as termite treatment. Again, all these costs will be dependent on how big is your unit plus your parking space, if you have one.
Check Contract To Sell. Lastly, once the contract to sell has been made, check it thoroughly. Check the total contract price (TCP) and closing fees and the provisions for default. For DMCI, default payments on monthly installments on down payment have a 3% monthly penalty fee and this is compounded monthly. For late payments on association dues, they have penalty of 12% per annum. Just imagine the huge costs of default! So before signing that payment term, check your current and potential future cash flow if you can afford it.
Whether it will just be an investment or a place you can call home, buying a condo for the sake of convenience has its own high price tag. Choose wisely with these tips so as to make sure you can get bang for the buck for your hard-earned money.
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