One of the frequently asked questions is which one should you buy – a condo vs house investment?
Well, it’s really depends on what you want to achieve over long period of time. Before we dive into the comparison between both type of properties, let us understand the reasons why we need to invest in the first place. You see, we need to invest our money at one point in our lives. Simply because we know that by saving alone won’t cut the job. Savings alone won’t make us rich or at least richer. This is because of inflation is eating into our savings. Your RM10,000 today won’t be worth the same 15 years later. Your buying power is getting less and less.
Pro Tips: Property investment never a short-term game
The other reason is to build long term wealth. A good investment will grow overtime. I can’t think of anything other t han investment that could beat inflation. Years go by and sooner than you think we will retire. Time passes by without us realizing how much time we lost along the way. An investment for retirement is another reason why we invest. In fact, that’s my financial goal. We need to master our personal finance before we even talk about investment. There is no other way to go about it. I have created a personal finance course online that focuses on wealth creation through personal finance mastery. You can check it out here.
Commentary on the topic via Anchor.fm
So let’s get back to the main topic:- condo vs house investment. Which one better?
Landed houses tend to appreciate more than condos, partly because people have a hard time envisioning paying a higher sales price for a property where they have to pay maintenance fee. Everyone needs to pay for the maintenance fee with the exception to the developers who built them.
Appreciation on Value
Yes, condos generally appreciate in value. But, if you’re trying to decide between a condo vs house investment, keep in mind that a landed house is usually going to grow in value faster than a condo will. The reason is to do with land. And it has always been the land! In condo, the same piece of land shared by all parcel owners. Thus the value will not be as much as landed houses.
Cost Effectiveness
The price of a condo is usually less expensive than a free-standing house. Condos are much smaller in square footage, and maintenance is typically cheaper because you’re only responsible for the interior of your home. Keep in mind that the fewer amenities the condo complex has, the lower the maintenance fee. On contrary, the downsides of owning a condo is that there are many things which out of your control. For example, unless the building management imposing strict regulation to prevent owners from defaulting their maintenance fee, otherwise the facilities won’t be properly maintained such as swimming pool, fitness center, security system, and maintenance crew, which they all cost money. Not to mentioned that there are many potential issues with the management committee such as mismanaged funds etc.
In landed houses where they are not on strata title, there would be no maintenance fee.
Down Payment
How large of a down payment will you need for a mortgage on a condo vs house investment? The short answer is 3 percent to 20 percent of your unit’s purchase price, with 10 percent being common for those buyers who must rely on conventional loans to finance their units. And that’s the same for both condo and house. With exception to off plan property (under construction projects) where the developers are giving rebates. Thus, the down payment is very minimal. Sometimes it is as little as RM1,000 only.
When it comes to property investment, condo is generally more affordable option than landed house due to the fact that the average price for condo vs house is much lower. When the initial investment is lower, there’s potential to generate higher return on investment due to affordability and resell-ability.
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Building Maintenance
What happens after the building is eventually condemned as uninhabitable? Anyone’s guess, but it might be that unless owners themselves have resources to rebuild the condo through sinking fund contribution. Most of the new condominium projects today are designed and built with modern techniques and durable materials to endure the ordinary wear and tear of everyday use. Modern condos will likely remain in good shape even after 50 years. We could easily see these in Hong Kong. The value of a condo typically will increase until a saturated point before a full refurbishment is done especially to the facade of the building.
General Security
It’s way harder – not to say impossible – to rob an apartment or a condo. This means that it is much safer to live in a luxury condo than in a house! The around the clock staff, the 24/7 security, and the overall sense of community all help to make condo living a safe, happy, and amazing experience. In fact, single and professional tenants prefer to stay in condo more than landed house. One of the reasons is security. Like I mentioned before, they are landed house with the same 24/7 security. These landed houses will definitely have higher take up take than those without.
Land Exclusivity
A condominium is one of a group of housing units where the homeowners own their individual unit space, and all the dwellings share ownership of common use areas. All the land in the condominium project is owned in common by all the homeowners. While landed houses, you are the only rightful owner to the land. That’s explain why landed house appreciate faster than condos. These days the appreciation more apparent when they are more condos than house! Supply and demand in action.
Conclusion
In my opinion, if you started off your first investment property, I suggest you to get condos. Reason being the maintenance in terms of repair is much easier than landed house. All you need to care is the internal of your parcel unit. However, if you are thinking to invest for long-term and even for retirement, I would suggest you to buy a landed house. This is simply because if you retired and have no active income, the last thing you want is to have maintenance fee to be paid monthly.
