When you’re new to the field of investing, the first time can be very exciting and equally terrifying. Investing in real estate involves large sums of money, and anything involving large sums of money can make your heart pound. However, that doesn’t mean your fears have to be confirmed. With the right guidance and the right information, you can turn this first time into a happy and very, very lucrative memory. All it takes is the courage to start.
Now, when it comes to investments, among foreigners in Asia, your only real bet at making money through the use of property is by investing in the market. But the question then becomes this: what criteria do you follow to make the most out of your investment? Do you look into new developments or upcoming projects? Or do you look for pre-existing developments, with a history of reputability? Do you try and go for locations with strong infrastructure? Or do you go ahead and try to make money off of up-and-coming areas with a lot of future development?
Thailand is a special case, especially when it comes to investing. For one, the country just got out of a political uprising and martial law. To most economies, this would be utterly devastating. But despite that fact, Bangkok’s condominium index is still up 14 percent according to Global Property Guide. While these projects may no longer be quite as attractive for developers to build as the economy slows, planned mass transit systems mean that development could still be picked up. There’s also an entire second-hand market of existing units that is currently flourishing among locals and foreigners alike.
There are a lot of questions to be answered, so let’s start with the easy ones. First, the rules.
Condos are joint-ownership dwellings of a very large and efficient kind. Basically, it is a project started and completed by a development company that seeks investors to buy into the building by pre-buying a suite. Once the project is complete, anything available is sold, and the individual owners of each suite own a percentage share of the entire project.
The building and its maintenance costs are handled by a committee that also drafts contracts that each owner has to abide by, to ensure that safety and security are kept to a high standard within the property. A new launch condo has lower maintenance fees, which makes them more attractive to investors looking to turn a profit through directory sites like DDProperty.
Every owner has monthly fees, which are usually paid on an annual or semi-annual basis, for the upkeep cost of the building’s common area, such as the hallways, the windows, the elevators and stairs and so on. Of the entire building, only 40 percent of all owners are usually allowed to be foreigners. Furthermore, a set percentage of the building is allowed to be rented out to tenants. Tenants are a higher risk than owners because they carry less of a financial liability – they have less skin in the game when something goes wrong or if something breaks.
The specifics of every building are handled by the company that built it and its owners, but for the most part, this is the gist of how these buildings work. Now, as the building ages, the maintenance costs usually increase. This is why new is more attractive. In addition, newer units are generally better for investments as they’re bound to increase in value. Newer units are also often smaller, to allow for more affordable prices. The big thing is knowing which market is more likely to make you a profit, and when. That’s why it’s important to understand the market and its many factors.
Location Is Important, But Not That Important
There’s a very famous phrase thrown around in real estate: “location, location, location,” but the location you choose is less important when you’re investing in this market. Why? Because location research is what developers specialize in. You can do your own research to determine which location is the best to make money off of, but every building is built in a great location.
In any case, neighborhoods are important in real estate investment. From nearby schools to mass transit systems, shopping centers, business centers and office buildings and more – it’s the neighborhood that makes the value of a piece of property, not necessarily the piece of property itself. But that doesn’t mean that a condo or house can’t fluctuate in value – or that you can’t affect its value – based solely on how you change and affect the home.
However, when you’re investing in units, what really matters isn’t the location, but the demographic. Developers create condos with a specific group of people in mind. Reliable and experienced developers put a lot of money into a project solely on their research, and that means that you can usually trust that whomever the developers create their units for, that target demographic is going to buy into the project.
New Versus Old Condos, and What to Consider When Buying
There are several considerations to make when buying a unit for profitable purposes, and one of them is the cost of maintenance fees. Typically, new units have very low maintenance fees. After all, new units don’t have to undergo expensive repairs or other such measures. Instead, new buildings face the issue of rising fees. Fees rise steadily until the first round of repairs are due, which is when the reserve funds of the association may not be enough, and maintenance fees take a substantial hike.
One key is to sell before the fees go up. New condos advertise themselves through low maintenance fees and keeping that selling point when cashing in on your purchase helps. Additionally, newer units come with less problems in general. They are also pricey in comparison to older units.
Older units are an investment when you’re strapped for cash, but they may be harder to sell at a profit. These may be better as choices to actually live in, with the option of turning them into a passive income source through tenants. However, you have to make sure you can offer your older condo up for rent before buying it, lest the development you’re investing in has already reached its maximum tenant numbers.
So, the gist of it is this: if you’re looking to sell your unit and get rid of the responsibility and potential liability of a useless property, then buying into a condominium project before its completion date, and choosing a project wisely by doing your homework on the developers and their track records is your best bet. This way, you get a piece of property that will appreciate in value and has the benefit of low maintenance costs. This may be a very competitive market at the moment as developers are currently developing less than in previous years according to Colliers.
Older condominiums, on the other hand, are more prone to repairs. They’re usually only a good investment choice when your investment plan is to offer the unit up for rent. In this case, a passive income can seem quite profitable, but if anything goes wrong, then the financial liability of having to deal with the damages can be profound, especially if the worst case scenario occurs and your tenant skips out on you a few months after the initial deposit fee has been covered. Either which way, old or new, it’s the individual buildings and the factors surrounding them that matter in an investment. Talk to developers, get a lawyer and consult a real estate agent in your area for more in-depth information.