Condo investment is now becoming mainstream when it comes to real estate investment because it is a cheaper alternative to detached homes. It is also not news to us that investing in rental properties is a good source of passive income. In addition, real estate has become a sanctuary for home buyers and investors who want to be financially secure or have a long-term vision for their capital and investments. Given the country’s low costs, high rental yields, and promising potential for appreciation, real estate is a good investment in the Philippines. Among the real estate properties, one long-term investment that you will not go wrong with is a condo.
What is a Condo?
A condominium, simply “condo,” is a privately owned individual residential property that is located inside a community of other housing units, such as a high-rise residential building, condo complex, or neighborhood of town homes or townhouses. In most cases, the owner owns the interior of their condominium as well as the structural components of the external walls. Most condos are housed in high-rise buildings; however, several markets also have detached condos. In addition, condo residents share ownership of the community’s shared common amenities, such as the swimming pool, clubhouses, basketball courts, function rooms, playgrounds, fitness facilities, weekend bars, and parking lots, to name a few.
Let us look at their advantages and disadvantages to weigh if it is really a good long term investment.
Advantages of Condo Investment
Passive Income
Who wouldn’t want to earn money while sleeping or without putting in too much effort? It might seem impossible, but condo investments offer these kinds of perks. If you do not want to live in a condo unit, renting it out is a good choice because it can be a source of income. There are also a lot of options on how you can generate income from condominium investment, which include:
- Pre-selling
Pre-selling is when condo unit owners sell their units to potential buyers before the condominium’s development process begins. This means that units are sold before they are finished.
- Re-selling
Re-selling means that a condo owner can sell his unit that he previously owned at a price higher than the original cost.
- Long-term rentals
This is when condo owners rent their units out to tenants for long-term stays which can be an outstanding source of monthly cash flow.
- Short-Term Rentals
If your condo unit is near a vacation spot, you can rent your unit out for tourists or as a vacation home. The vast array of Airbnb rentals in almost any location is a popular example. Short-term rentals might provide a more relaxed and laid-back atmosphere than a hotel. If your property is in a popular vacation destination, a short-term rental property is an excellent way to generate passive income. Not to mention, our country is popular for its majestic tourist destinations, making condo a good investment in the Philippines. These reasons make a condo a great investment that can give you an income without actually having to do more. It is also a good venture to maximize your hard-earned money. So invest now!
A condo is a stable and tangible investment.
People who tend to work a lot to earn a living prefer an investment that is tangible in order to fuel them to work harder to earn income and provide evidence of their hard-earned money. If you are this kind of person, condo investing is for you. Tangible assets, in general, are entities with inherent value. Compared to intangible investments like stocks, which pose higher risks as certain events like market crashes could possibly drop your investment to zero, Condominium, on the other hand, is a tangible asset that will always be worth more as its market value rises over time. Condos have also been shown to be more resilient during economic downturns and more stable than single-family residences. Thus, it can be concluded that condo is a good investment in the Philippines.
The condo has minimal upkeep.
It is not new to our ears that condos are a good alternative compared to purchasing a single family home and aside from that, condominium need less maintenance. Condo living does not require constant repairs as well as interior and exterior maintenance, as the latter is already covered in exchange for condo dues. This eliminates the hassle of extra expenditures for maintenance and repair, even if you stay for many years. Meaning that condo owners will have more time to focus on their work and lifestyle, making this one of the edges of condos compared to other properties.
Amenities
The lifestyle of today’s generation is getting more active. May it be children, teenagers, or even adults who engage in such an active lifestyle. Condominiums offer facilities that make condo purchase an ideal and are suitable for an active way of life. It includes swimming pools, clubhouses, basketball courts, social rooms, playgrounds, fitness centers, parking lots, shopping centers and many more amenities. They also have green spaces such as covered walks and jogging paths. These exclusive facilities are a great draw for renters since they do not have to pay extra to enjoy and relax. It is not new that high-quality facilities are in demand for renters and tenants. Renting out your property in the future will not burden you with having to advertise more to get buyers because these attractive facilities make it easier for you to pull in renters or tenants.
Strategic Location
Other property types, like affordable homes that are located away from commercial establishments and will require buyers to commute, are a big no, and the possibility of renting them out is small. However, condominium is a property that offers another reason why it is a good long term investment. Comparing it to single family homes, condos will not make their condo owners pay more for transportation services because these properties are placed in prime locations. If you become a unit owner for a long time, you can save lots of money on transportation. On the other hand, if you are planning to rent your unit out, potential tenants are just around the corner because it is placed in strategic and specific location where most works and commercial establishments are located. This is one benefit of purchasing condos especially in our country’s traffic jam that provide great hassle for more workers, thus owning or buying a condo is a good investment in the Philippines. This prime location of the condominiums minimizes the time spent commuting, as condominiums are placed near commercial establishments and shopping malls, which are just walking distance from the building and owners has an easy access to commercial establishments.
Time Value and Return on Investment in the Philippines
There is no need to worry about buyers because condos are getting more in demand due to urbanization. Condo building is not only evident in big cities like Manila but also in some provinces, which have been booming with developments, local businesses, infrastructure projects, transportation, and industrial areas. This results in a higher demand for residential space for professionals, retirees, families, or even single professionals. This means that investing in condos poses a great advantage because condos are now becoming popular in the market and will tend to sell quickly. Moreover, there is also a strong probability that in a few years, condo units’ value will increase due to the market’s rising demand due to urbanization, which makes this kind of real estate property one of the safest real estate investments. Aside from that, the advantage of investing in condos is that it has a high chance of selling quickly because of certain benefits such as its location, security features, and affordability.
Condos often go with trends.
Home styles are changing quickly as the years go by. There are a lot of trends when it comes to home design and people are fond of going with what is in trends. People tend to look for spaces that are up-to-date, such as minimalist, industrial, and Scandinavian types of design. If you plan to stay for a long time and are into DIYing personal space, worry less as you can design your own condo based on your preferences and trends. However, if you plan to rent your space out or sell it and you fear that the design might not be too appealing because it is outdated, do not think too much as you can flip your space into a style that goes with what is in style. In this kind of real estate investment, the property owner are free to do whatever they want with the property. The majority of condo management companies have remodeling standards in place. This is one of the benefits of condos compared to single family homes because flipping outdated spaces is possible. In view of this, if the owner plans to rent it out, there is also a chance of selling it at a higher value. This reason makes a condo a good investment for personal use, for families, and even for future investments.
DISADVANTAGES OF CONDO INVESTMENT
Regulations and Rules
If you’re used to purchasing in houses, you should be aware that condos frequently have restrictions and rental laws that you’ll need to follow by. Any guidelines governing rentals that could affect your capacity to locate renters for your investment property are ones you should pay special attention to.
Recurring condo fees
In some situations, a condo may include a monthly charge that is subject to increase at any time. Remember that there may be an association charge associated with some of the amenities offered by condos. Make sure the condo complex or building has strong financial standing so that common fees don’t increase too frequently.
Cost of Living is High
The cost of a unit is largely influenced by its location. Additionally, the majority of condos for sale don’t come fully equipped. Therefore, the buyer will be responsible for the unit improvement. You may consider other factors in addition to the unit cost, such as the hoa fees. The maintenance of the entire building, as well as the salaries of the guards, administrators, and condo staff, are the things you need to paid for by the monthly fees that are collected from the tenants. Condo fees could potentially rise over time! Additionally, there is a penalty for not paying monthly fees.
Smaller Rooms
Comparing condo apartments to houses and land, they are essentially smaller! The average size of a condos in the nation is less than 50 square meters, and the cheapest unit you can likely find has a floor area as small as 18 square meters, making it nearly difficult to fit a one-bedroom! Additionally, since you do not own any space outside of your unit, as was already discussed earlier, there is no possibility for you to add additions.
Greater Regulations and Invasion of Privacy
Apart from the interior of your unit, there isn’t much you can do to improve a condo once you’ve bought it. Extensions are essentially not possible outside that. Due to its limitations, a condo is not a wise investment if you intend to have a large family. Dogs, use of the common areas, and repairs all adhere to very tight rules, mostly to make building upkeep easier. In addition, up to 4 neighbors shared walls. Given that you’ll be interacting with neighbors above, below, and on both sides of you, privacy and peace might not be fully observed.
When it comes to real estate investment or any kind of investments, the advantages and disadvantages should be taken into account. However, in order for you to have a stable investment, the best option is a tangible investment such as condo investment because it poses minimal risk. Condo investment has downside but these advantages outweigh these disadvantages. Thus, it can be concluded that in the long run, condo is a good long term investment because it give its potential owners or investor an option; a condo for personal use, a condo as a rental property and a condo as a second or vacation home.
