As you look into the condo market in Malaysia, always keep in mind that you should exercise utmost care. Remember, that although a condominium may appear aesthetically stunning and neat from the outside, some condo buildings are dens of problems arising from poor construction to mismanagement and unexpected repairs left unattended due to a lack of reserve funds. To avoid buying into such a property, here are a few golden rules if you are looking to invest in a condo as an investment vehicle or residence.
Do Not be Rushed to Buy a Condo
Buying on impulse is part of human nature, especially when people see something that look good. They will usually make a purchase before making a thorough inspection of the item they are buying, later to discover defects the seller was not aware of or failed to mention. Likewise, if you are an overeager condo buyer, you are likely to run into problems when you rush to complete the transaction without thoroughly examining the unit.
People rushing to buy a condo are more likely tempted by:
- The allure of becoming homeowners
- Sales pitches pressure and developer promises that are too lofty
- Not realizing that owning an apartment does have its problems
- Not understanding what communal ownership entails
Beware; There are Condo Bargains that Come With High Fees
If you find a condo unit selling at rock bottom price, but with unusually high fees, think twice before negotiations start. Some troubled condo complexes will sell their units for cheap rates due to poor construction or mismanagement, often also due to real-estate market drop. Such complexes deplete their reserve fund to cover repairs and maintenance. They will compensate for their low selling prices by charging higher than usual monthly maintenance fees.
Avoid Low Down Payments
To enjoy lower mortgage and associated monthly payments and enjoy greater chances of refinancing in the future, put more money in as down payment. Avoid advertisements that allow you to make down payments as low as 3 percent. Low down payments require that borrowers pay an extra fee for mortgage insurance which can add up to thousands of ringgits making the purchase that much more expensive.
The best down payment should be of about 25 percent the value of the condo, and this will not attract private insurance fees. In addition, this will protect you from mortgage renewal should interest rates increase or your unit’s value decreases on the market. If a unit value drop during mortgage renewal, your only choice is to apply for a high-ratio mortgage using equity in your property – your initial down payment.
No matter the size of your down payment, make sure it is not borrowed. Ideally, it should be from your savings. Borrowing cash for a down payment is risky since it create inequity in your budget and can place you in a risky position, much like those buying condos at low down payments. Remember the following:
- If you do not have a solid down payment, do not commit to buy
- Money should not be borrowed for down payment
- A solid down payment should be from your savings, wait till you have enough
- There are always great opportunities to own property at Property Guru. The longer you wait, the better you choice will be
Verify the Physical Facts
Inspect your prospective condo unit carefully, especially the well-being of the complex. Each complex is different depending on its builder and developer. Construction quality also varies. Verify the reputation and experience of the complex builder. When buying into an existing property at Property Guru, find out from the residents if there have been any unexpected repair problems recently and whether they anticipate future repairs.
Take note of utility billing. If each unit is billed separately, you will have more control over the energy you consume and monthly expenses. While some complexes are self-managed, others are run by contracted management companies. If the latter is true in your case, investigate the management company to establish their reputation.
To conduct checks, hire a qualified home inspector and an attorney. If the complex is poorly constructed or managed, you will be glad that you spent the money.
You have to consider all the facts carefully before you make any form of commitment in what may be the biggest investment you make. Take a deep breath, if necessary; sleep over your decision for a few days. Otherwise, you might succumb to developer or real estate broker pressure as they seek to make a sale for a commission.
In addition, do not let others make the decision for you. Read the rules above for days and even weeks. When you adhere to them, you will develop the buying skills that will enable you make educated decisions before putting your signature to paper.