Monday, March 3, 2014

Investing in pre-selling condos

If you’re interested in buying a condo, take advantage of pre-selling rates, where you can buy premium units at much lower prices. However, this investment strategy can feel a lot like a “blind date” — you haven’t seen the unit, and you’re betting on what the neighborhood will be like in 5 to 10 years. This is the reason it is important to do your research.

This list of criteria will help you decide if a condo is a good investment; it will help maximize your working capital and manage your risks.

If the unit does not satisfy four out of the five criteria, it may be time to reconsider and look for other options. You’ve worked too hard for your money to risk gambling it on a piece of real estate property with low potential. 

As an OFW working abroad, it may be difficult for you to assess what a neighborhood will be like, or for you to check on construction progress every now and then. That’s why it’s crucial to buy a unit from a trusted developer with a good reputation and a solid portfolio of successful products

You’ve worked too hard for your money to risk gambling it on a piece of real estate property with low potential.

1. Pricing

There is an investment theory that says you make money in real estate depending on the amount you pay, rather than the amount for which you sell.
First, compute the total cost of the property, including taxes, the agent’s fees, bank interest, and other charges. Also ask what the basic fixtures are — you may need to spend for lighting, plumbing, and painting. Computing costs will help you budget for additional improvements and prevent any conflicts with your agent over “hidden fees”. It is best to ask a lot of questions at the beginning of negotiations; the best agents will be helpful and transparent, and will have the experience to tell you what costs you can encounter as a new property owner.

Second, find out about the price of other buildings of the same standard in that neighborhood. For example, if you are considering buying a condo in the Fort, inquire about the selling or rental rates for a similar-sized unit within the city. Not only will you know if you are getting a fair price, but you can also compute how much you stand to earn if you want to rent out your unit in the future.

2. Developer experience

The Philippine real estate industry is booming, and the strong economy and excellent interest rates mean there is no better time to invest in property than right now. However, the problem with that is there are a lot of small developers who are trying to make a quick buck from the hot market. More often than not, these developments are of poor quality and design. The materials are shoddy, the layouts waste space, and the developers do nothing to improve the neighborhood. While the property looks good on paper, buyers discover too late that the streets surrounding it are small and poorly lit, or the window overlooks a junkyard. Poor plumbing and water supply or unreliable barangay security can create headaches and turn away any buyers or renters you hope to attract in the future.

As an OFW working abroad, it may be difficult for you to assess what a neighborhood will be like, or for you to check on construction progress every now and then. That’s why it’s crucial to buy a unit from a trusted developer with a good reputation and a solid portfolio of successful products. This kind of developer has invested too much in its own reputation and equity to make a quick buck on a client. Real estate companies like Megaworld also take property development a step further, building townships with residential, recreational and business districts that improve the total area. So, while you invest in a unit, Megaworld likewise invests in the neighborhood, increasing the unit’s value exponentially.

3. Design and amenities

Most real estate brochures will list the size of the unit and give a quick rundown of condo amenities, such as a pool, gym or playground. However, beyond what you get, it’s just as important to ask about how it will look. There is an “X factor” in design that can make a big difference in the price of two units with identical sizes and amenities. A world-class design, with modern use of color and materials, and an intelligent use of space, feels far more “luxe” and –- this is quite important for investors — can be sold and rented out at a higher price to an upscale market.

These elements are very important when buying units in the Fort, which will typically attract expatriates, corporate executives, and high-income families. As an investor, you need to consider what they would be willing to pay for a unit in a premium location, as well as their tastes and needs. A unit with global design and the backing of a well-known developer is more likely to have a steady stream of buyers or renters from this demographic–and that means a steady stream of income for you.

4. Location and area

The profitability of condo investments rest on location, location, location. Or, as another saying goes, the neighborhood makes the condo and not the other way around. So, when buying a condo, research the city or area where it will stand. What are the projected demands for property in 5 to 10 years? What improvements will be made in the area?

For example, provincial properties tend to very cheap, because the areas are usually underdeveloped. Roads, water supply, electricity, and internet access can all be in their early stages, and may take years to get fully completed. You will also have to gamble on factors beyond your control, like city planning and zoning. Will the area next to your lot be sold to a factory? Will there really be a mall in that area, or will it just be a street of small shops and sari-sari stores? How accessible are schools, hospitals, or offices? The neighborhood defines the level of convenience, security, and quality of life — and ultimately, the kind of returns you will get on your investment.

Of course, you are more likely to get returns from investing in a developing area, where there is potential to buy at a lower price and then sell when it has reached its potential. But the median course is to invest in a developing area in a location that has already proven its potential. One good example is Bonifacio Global City (BGC). While it is in the swiftly developing Taguig City, it is also just a few minutes away from the commercial business districts of Makati and Ortigas. BGC has already attracted multinational companies, embassies, and hotels. Unlike the other cities that have become congested, there are still many areas that are being developed in BGC.

5. Quality of customer service

You will have a lot of questions, and that’s good — investors always, and should, make informed decisions. It’s important for you to deal with a sales agent who is ready to answer these questions, provide the materials you need, and run the numbers. Be wary of any agents who reply to questions with vague marketing hype, and not actual facts. If an agent is impatient, rude, or uninformed, don’t be afraid to contact the head office and ask for another one.

This 2014, Megaworld has launched its 24/7 service center to better meet the needs of its existing and potential clients.
 
This is a show of commitment and responsibility towards enhancing your investment experience.
With the right independent research, and the help of a sales agent who can provide you with necessary facts, OFWs can invest in condo units that will be a steady source of income for themselves and their families.- Nicole Adarme

Article courtesy of Megaworld.

Nicole is the staff head of Marketing Communications for Megaworld at the Fort. She handles brand strategy, concept development, and media and press relationship management. She is a political science graduate from McGill University in Montreal, Canada, and is an avid language enthusiast. She speaks English, French, Mandarin and Tagalog, having spent time immersed in these corresponding cultures. She is also a classically trained ballerina who enjoys world travel and epic movies.  


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