To buy or not to buy—That is the question
In our culture, there’s a strong preference for owning a house or condominium over renting, driven by the perception that rental payments equate to a wasted investment.
Unfortunately, this desire to own a home may lead to misguided real estate choices. It’s never too late, however, to educate ourselves and be better prepared for potential real estate opportunities.
Considering the limitations of our resources amid the plethora of available properties and recognizing the emotional component in residential property investments, it’s crucial to make a thorough evaluation of the advantages and disadvantages before making a decision.This approach will help you avoid the sway of attractive marketing presentations.
Guide questions
Consider these guide questions before making your decision.
First and foremost, why do you need residential property? Is it to move closer to your work, your children’s school, or your parents? Are you seeking a larger or more compact space?
When do you need the residential property? Is it an immediate requirement, needed within a few months, within a year, or in the foreseeable future? This factor, in particular, significantly influences the budget allocation, considering that a sound household budget should generally allocate around 25 percent of income to housing expenses.
Financial status
Now, let’s consider the stability of your income stream. If you need to move in the near term, then evaluate your current financial status.
Will it suffice to purchase a property (either through cash or bank financing) or will it solely cover the security deposit and advance rental required for leasing a unit? What’s a feasible maximum amount you can allocate as a one-time payment (for down payment or security deposit and advance rent) and for subsequent monthly installments or rent for the next X number of years?
If the need is not immediate, factor in potential price increases due to inflation and other variables, such as fluctuations in interest rates. Determine a monthly allocation to save up for the required down payment, monthly amortizations, or for the security deposit and advance rent. Additionally, assess the probability of securing a bank loan.
Balancing needs, risk appetite
Where do you plan to move, taking into account your why, when, and budget? Opting for a cheap pre-selling property in a distant location may not always be the wisest choice.
In determining the where, consider the following concerning your needs and your risk appetite: availability of utilities such as water, electricity, and telecommunications; proximity to major and minor roads; accessibility to public transport; and proximity to essential establishments like grocery stores and hospitals, among others.Consider travel time and expenses, and include fluctuating cost of gas and toll fees. Renting near your workplace might be more practical and less stressful, outweighing the costs of buying a cheap house located farther away. Also check the location’s vulnerability to hazards, such as floods, landslides, and earthquakes. Check https://hazardhunter.georisk.gov.ph/map.
Meanwhile, area development plans like road expansions and new roads may affect the availability of space in the future. Review the comprehensive land use plan at https://www.geoportal.gov.ph/resources/clup.pdf.
RFO or pre-selling? Brand new or pre-owned?
What type of property suits your specific needs and budget? Are you inclined toward the privacy of a house and lot, the flexibility of an empty lot for future construction, or the security of a condominium unit? Moreover, do you prefer a brand new property, one that’s ready for occupancy (RFO), or one still under development?
If you opt for an RFO property, conduct a thorough assessment of its condition and account for the cost of repairs in your budget and timeline. Remember, a brand new property might be more cost-effective than seemingly inexpensive pre-owned one requiring extensive repairs.
Investigate also the reasons for the sale as there might be underlying property or ownership issues prompting the sale. Additionally, inquire whether the property was previously rented out, as this might have tax implications.
Reputable seller, developer
Who is the property’s developer, seller, or landlord? Opting for an established and reputable company might reduce the likelihood of repair expenses post-handover. Verify the lessor’s legitimacy as the property owner and understand the seller’s background. Determine their nationality, marital status, and current status, as these details can significantly impact the documentation or transaction process.
The cornerstone of a prudent decision in a residential property investment is a diligent assessment of these key questions. Whether one chooses to invest at age 20 or 50, a thoughtful consideration of these factors ensures a well-informed choice.
The author is the director of the Residential Brokerage team at Leechiu Property Consultants Inc.
