How to invest in a condominium

Many real estate developers focus on building vertical projects such as condominium buildings because of the limited land available in the city.

As Metro Manila becomes more congested, many homebuyers eventually explore the option of owning a condo unit as their family abode or as an investment option.  Buying it as an investment option means renting out the unit to office workers or students who want to live near their places of work or schools.

Investing in a condominium unit, however, is not as simple as buying a furniture.  There are things to consider such as the location, the size of the unit, the house rules, the association dues, the tax rate, other charges, attractiveness of the project to tenants and the asset price appreciation or depreciation.

One should also study when to buy the unit--during the pre-construction stage, during the construction stage or upon full completion.  Of course, buying it while it is being built would cost much lower than a fully-completed unit.  However, you would have to pay the mortgage of the unit for two to five years without living in it while it is still being constructed.

One of the most important things to study is the location or the project's proximity to the central business district, financial center, commercial establishments, major roads, transport stations, schools, markets, etc.

It is also important to consider the developer behind the project. Its reputation, track record, land bank and financial strength provide an indication about its credibility.

What are the features of the condo?  It is considered a green building that maximizes the use of natural lighting and ventilation.  Does it provide ample space for common areas such as hallways.  Does it have enough elevators, escalators and stairs in case of emergency.  Does it have access to all important utilities, including Internet connectivity?

How much will you spend a month to live in the condo and how much do you need to charge a possible tenant?  There are various expenses associated with condo living, including association dues, real property tax, expenses on utilities, entertainment and connectivity.  Most condo projects also have commercial services such as gym, swimming pool, laundry, pet care, spa, entertainment, etc.

Do you need a parking space?  The cost of a parking slot in condo buildings has recently soared in recent years to match the price of the vehicle.

If you properly ask the right questions and consider the value of vertical building, it can yield good financial returns.  For one, the value of condo units has been rising at double-digits in recent years as more people troop to the cities to find work and earn a living.

Some investors actually invest in multiple condo units for rental income.  But buyers should make due diligence on the level of profit one can make from renting them out versus the expenses associated with owning them.