Buying a condominium is a big step in your life, especially if it’s your first purchase. It’s a move up from an apartment, and possibly your first step into a major investment for your present as well as your future. If you make the right moves, you could net yourself a deal that puts you in the black in a few months, and with time, it could become an investment for your next residential upgrade. Alternatively, it can be your ideal financial move to begin building a portfolio for passive income through your very own tenant.
Whatever your reasons, the steps to buying a unit are always going to be the same. In short, you pick between an existing building and an upcoming project. You also choose a reputable developer and decide whether you’re planning to sell a turnkey property or get a place to stay for the long term. Finally, you review the documents, speak to your lender, and make your purchase. However, like any huge investment, there’s a lot more to it than just that. It’s those details that we’re aiming to tackle here.
Evaluating Your Financial Situation
Any investment – whether for your immediate financial future, or for your general quality of life and an upgrade from a shabby apartment – requires you to first evaluate where you stand before you make a stand, financially.
The easiest way to determine that is to go to the experts: your bank. Don’t just guess where you’re standing with your financial details. Head to your bank and ask them directly about condominium purchases. Chances are, your bank has a lending program specifically tailored towards your demographic, and they’ll be able to discuss with you what kind of a loan you can take out, based on your credit history, current income, and payment history.
This is called getting pre-approved for a loan. Whenever you plan on buying property, getting preapproved for a loan is a very good idea, unless you can just buy the entire property in its entirety without taking out a loan, or have the option to buy in installments. Outside of letting you know exactly what you can afford, the big boon in getting preapproved right off the bat means you know exactly what you can’t afford, which is just as important. Avoid looking at property outside your price range. Going the extra mile for a somewhat nicer home may seem like a decent investment for yourself, but it’ll only cause you trouble, especially if something happens to you and you have to miss a payment.
Next, think about whether or not buying a unit is really the best financial decision for you at the moment. Are you in love? Are there kids on the way? Or do you already have kids, and are thinking of expanding the family? A unit can be a pretty great place to grow up if you can make it work, but nothing really beats a house with a lot. Maybe, instead of looking for a high-rise, what you really need (even if you only need it in a year or so) is a house. Buying property now isn’t a bad idea if you’re sure you can get it resold shortly, but without the real estate and investment experience to pull that off, you’re better off looking into the residential market outside the city center for something larger and quieter, closer to a school.
Alternatively, if you’re trying to downsize, you may feel more at home with a townhouse. Townhouses cost less than condos, and don’t offer the same amenities while offering a lot of the same restrictions. However, if you can make it work, a townhouse can be a beautiful fit for a family.
If you’re a foreigner, then buying may not necessarily be the best thing, either, especially if you see yourself being on the move often. You do not want a property tying you down, and even as a potential landlord, owning an empty property will still cost you taxes and maintenance fees, and without the right on-site marketing, you may be looking at a financial black hole rather than an investment. Also remember that, as per the Global Property Guide, Singapore is a country with pro-landlord laws. This is good news when you’re trying to lease out a unit, but this also means that you have to be more careful when drafting and negotiating contracts as a tenant.
With that out of the way, though, there are a great many reasons to buy into a condominium. If you’re far off from thinking about starting a family, or if you’d love to raise a family in a condo, then that’s great. Alternatively, you can buy a live-in home while really keeping it around as a quick investment once the unit appreciates in value.
Once you’ve made up your mind about your purchase, it’s time to get started on finding that home of yours.
Agent or No Agent?
Not getting an agent when buying a condo is a great way to avoid extra costs, but you have to think about whether that’s really the wisest decision to make. Real estate agents, whether or not you like them, are quite good at what they do. Realtors have connections and networking skills within the real estate industry that you’re unlikely to have, unless you work in the same field.
While you think you may have looked through every new launch condo and scoured every entry on directories and websites like PropertyGuru Singapore, it could very well be that your potential real estate agent caught wind of a condo unit in your favorite location at a great price.
An agent lets you find your best potential deal in the area, provided you find the right agent. That means finding a realtor who actually knows their area best. You’re looking for someone who’s been working in the same residential district for most of the tenure, and is good enough at their job to know what listings you’d be most interested in.
Get a Lawyer
Once you’ve actually found a condo through a budget limit (your loan) and a realtor, it’s time to hire someone with eyes for the legality of condo ownership. Contracts can be a tricky thing, and if they’re worded the right way, you may miss a crucial clause.
Every condo is owned first by the development company that builds it, and then by the individual owners of the condominium building itself. That basically means that, when you buy into a building, you’re getting ownership of a percentage of the building corresponding to how much of the building your unit represents. So say there are two hundred units in the building. Owning a single unit puts you at 0.5 percent ownership of the property. That also means you take on 0.5 percent of the costs of maintaining the building’s common area: the hallways, elevators, stairs, and windows. These spaces are maintained through your monthly fees. The exact conditions of these fees, and how they may increase over time, plus any legal responsibility you possess regarding the insurance in your unit and so on, should be outlined in the contract of ownership that you sign before getting your property.
That’s why having a lawyer by your side to look things over helps. Note that buildings often advertise low maintenance fees. This may be true, but once a building undergoes its first major repair due to aging, your maintenance fees will take a sudden hike. As per Investopedia, bad money management on the building’s board can also lead to an increase in rates, so make yourself aware of the developer’s reputation and the owners of your building. Beware of the possibility of a price hike, as it can give you a good timeline when considering when to sell your part of the building.