|Photo Credit: Fetchcomms|
- Landlord owns the apartment units
- Residents own the condo units
For people who intend to buy a condo as a living space, it presents several advantages such as:
- Conveniently located, near places of employment and shopping
- Homeowner’s association is responsible for exterior maintenance
- Includes amenities such as 24-hour concierge, security surveillance, fitness gym, swimming pools, etc.
- Relatively more secure with guards and security surveillance in place
- Potential profit during resale when market value appreciates
Condos as Investment InstrumentsWhen condos are sold however, sellers often market them as investments. Many of the prospective buyers of this sales effort are Overseas Filipino Workers (OFW). But the question is does it make sense to buy a condo as an investment? How does it compare to other financial investments such as stocks and bonds? Is it a good diversification of your investment portfolio?
To answer these questions, I rely on the wisdom of experts. They say that there are several reasons why condos are generally not good as investments.
- If you intent to rent it, annual rental rate is normally around only 5% of the condo’s market value. You should also assume at least 20% vacancy rate.
- Cost of ownership is higher due to the following fees:
- monthly membership and maintenance dues
- asset maintenance service
- lease marketing service
- MRI and other insurances
- property tax
- value-added tax (VAT)
- capital gains tax and the VAT applicable when the unit is sold
- purchase price
- quality of the property
- maintenance of the building
What’s The Verdict?Without personal experience in buying condos, I think it wise to consider what the experts are saying. It would also help to talk to friends who would tell you the truth about their own condo buying, owning and selling experience.
Condos are good real-estate properties to own if you see the need for it. This means taking advantages of the benefits it has to offer. But unless you’re talking to a condo sales person, condominiums are generally less attractive than other types of investments such as mutual funds, stocks and bonds. A data-driven analysis needs to be done showing otherwise before committing your money to condominium investments.