You are likely to be someone interested in investing in properties, perhaps your first time wanting to be involved in this multi-trillion dollar industry of investing in properties. Yet, you are conflicted between investing in a newly launched condominium, or one that is put up for resale. A newly launched condominium may have its perks such as the latest facilities, but construction takes at least three years until completion ergo you will not be able to lease it out anytime soon. Even then, a resale condominium while already in place, may not have the best facilities. What should you do? Well, fret not, as we consider the pros and cons of a resale condominium and a newly launched condominium.
5 Reasons – Why Choose a Resale condo for investment?
Opportunities to Find Under Market Value/ Firesale Condo
Choosing a resale condominium provides you with the opportunity to look for condominiums that are priced under its market value. In other words, you do not have to break the bank when you choose to invest in a resale condominium. For instance, these resale condominiums can be priced as low as $400,000 for one to two bedroom units. Consider a unit at Suites @ Shrewsbury, a condo near Newton. Despite being situated in the prime central area, it was sold for only $550,000 (334 sq ft, $1,648 psf). While there may be a multitude of factors involved in the event of a firesale, a resale condominium is definitely more affordable than that of a newly launched one. For those who are new and looking to invest in their first property without needing to fork out an exorbitant amount of money, choosing resale condominiums allows you to keep a lookout for houses that are marked under its market value.
Place will be ready for rent immediately
Investing in a resale condo allows you to put the house up for rent almost immediately, since the condominium has already been built and all of its facilities are likely to be already intact. Potential tenants are also welcome to visit and examine the suitability of the house to their needs, in which being able to view it for themselves renders a much higher chance of seizing their interest. In comparison to a new launch condominium, potential tenants are only exposed to what a showroom has to offer, which may deviate from what the actual house actually is. This could possibly arouse a sense of scepticism and result in lesser people being interested. Moreover, with the resale condominium available for rent, you are introducing passive income for yourself right away. Whereas for a newly launched condominium, should it still be under construction, you are not yet entitled to receive the lease from tenants anytime soon.
Predictable Rental income
A resale condominium allows you to have a more predictable rental income because you can gauge it based on what current, or past tenants are paying for their rent. As such, you are able to make a more informed choice as to whether the resale condominium will be worth it to invest. At times, you may also be able to see the actual rental rates, which enables you to get a good figure on how much rental income you will receive. In comparison to newly launched condominiums, you do not have the ability to do so.
Spend less on Renovation and fittings if you find a unit that is well maintained
Perhaps you may be concerned about the condition of resale condominiums. Certainly, after having had people lived there, it may not be in its top notch condition it once was. However, in the event that you do come across a unit in pristine condition, which you most likely will, you do not have to pour out that much money into brandishing the apartment. This saves not only money, but your time as well. The place merely needs minor touch ups and will be available for lease sooner than you realise. This enables you to attain close to the same quality of furnishings as a brand new condominium, with the main difference in its price point.
Larger unit size
While resale condominiums may not be brand new, it certainly covers a larger proximity in terms of the size of its unit in comparison to the newly launched units. This is because of the increasing cost of construction: manpower, resources and land space, developers are required to devise a layout that will maximise the amount of space they have to work with. However, older units are definitely more spacious as costs were not as high in numbers in the past as they are now.
A larger unit provides you with a myriad number of benefits. For one, it is likely to attract more potential buyers. If people, especially families, are paying to rent out an apartment, they will more likely be satisfied if they are able to hold housewarmings to cater to their friends and families. Secondly, your customer base will expand from perhaps individuals to families since the apartment can hold more people, hence the burden of looking for potential tenants will be eased. Moreover, you are also given the freedom to mix up the furnishings deemed fit, without having to worry about whether there is enough space for that seven-seater couch or that brand new home theater you thought about setting up. Once again, this heightens the likelihood of an interested customer wanting to live in the apartment. The possibilities of a larger space are endless, and condominiums that have been around for awhile are more likely to be able to offer that extra perk.
5 Reasons – Why choose a new launch condo for investment?
Enjoy Pre/ Early Launch discounts
The saying of “early bird gets the worm” definitely applies when you invest in a brand new condominium. One of the benefits of a newly launched apartment is that you are able to enjoy early launch discounts. Developers will provide you with an array of discounts, such as vouchers or stamp duty reimbursements. It is likely that this will take place at what it is called, a VIP Preview, whereby buyers are invited to view the units firsthand before everyone else. Moreover, should you decide to go forth with your purchase, you are able to pick your unit before everyone else, allowing you to be spoilt for choice. The discount is typically at about 10 to 11%, in which after that developers will remove the discount to maintain their profits. This becomes more cost-effective, and ease your burden of having to worry about finances. Hence, while you may think that resale condominiums are guaranteed to be priced lower, think again.
Condo with the latest facilities, features and design
It is no doubt that choosing a newly launched condominium gives you the latest facilities, features and design as compared to a resale. The infrastructure, design of the apartment complex, the interior of the unit and outdoor facilities will likely be more up to date with the current times. Take for instance, a resale condominium is less likely to have the luxury of a smart home as compared to a newly launched one. Newly launched condominiums are brand new to the touch, and once construction has ended, you are greeted by a luxurious condominium, one that you are able to experience firsthand.
In addition, as developers become more and more competitive, they warrant the need to be able to provide convenience for their residents. Developers are introducing new facilities such as commercial space within the apartment complex, such as supermarkets, hair salons, childcare centres etc. Compare that to a resale condominium, and you will realise that they are almost worlds apart. It is definitely tempting to choose a newly launched condominium, because we are eager to get our hands on what is the latest in markets.
Lower maintenance costs for new condos
Investing in a newly launched condominium means that you are less likely to be exposed to the horrors of a malfunctioning appliance. There will be new appliances furnished within the household, which means that these items will take awhile before wear and tear. Because of that, you do not have to worry about paying more money to fix these things, as it will be in spotless condition. However, the risks of paying for maintenance at a resale condominium is much higher, since it is older.
Wider range of units to choose from
At a new launch, you are undoubtedly spoilt for choice. One of the early buyers? Even more so. A new launch allows you to select which unit catches your attention the most, or perhaps the one that allows you to attain your preferred customer base. Exhibit A; families. You can discuss this with your property agent, letting them know your preferences and what you are looking for. You are also open to visit the showroom by yourself, but hiring a property agent makes it a less stressful process as they will guide you through it, without the need of having to figure everything out by yourself.
This is a stark contrast to a resale condominium, because a resale condominium only allows you to view the particular unit that is up for sale. This poses the issue of a conflict between the interior and exterior. For example, you are obsessed with how spacious the unit is, but they may not offer the facilities most condominiums are offering, making the unit slightly less fit for rent. Or maybe greenery upon entering the condominium is flawless in your eyes and makes you feel at home, but the unit for resale is situated away from all that, left in an awkward spot. These little things here and there makes up the decision of potential tenants, and should they identify a certain flaw that does not align with what they are looking for, the unit is most likely not going to be leased out.
Progressive Payment Plan Option
After the withdrawal of the deferred payment scheme (DPS) in 2007, the government has introduced the progressive payment plan whereby home buyers will have to produce payment in installments after each stage of the construction work has been completed. The option of a progressive payment plan, while may seem daunting initially, it could actually be suitable for you. With this plan, it allows you to set aside money in larger frequencies, at a smaller value. In other words, you are not expected to produce 80% of the cost of the house at one shot. Instead, you produce about 5 to 10% each time a part of the condominium has been built. This ensures that you are providing payment constantly, and you do not run the risk of being unable to pay the share required after the house has been completed.
A resale condominium on the other hand, requires four payments. First, you are required to produce 1% of the cost: the option fee, in exchange for the option to purchase (OTP). This allows you to reserve the property for purchase. Next, the exercise fee, in which the buyer has to exercise the Option To Purchase and sign the Sales & Purchase Agreement at a law firm. This consists of 4% of the cost, to be paid in cash. Subsequently, the third payment is the Buyer’s Stamp Duty, which for the first purchase is 3% – $5400, and can be paid in cash or through the CPF Opening Account. The final 95% of the payment will be made for the fourth payment, within 8 to 10 weeks of obtaining the OTP.
Conclusion – Which is a better Property Investment?
Whether you choose to invest in a resale condominium or a newly launched condominium, you have to consider the circumstances you are under. What is your current financial situation, and are you able to provide payment immediately? What are the facilities you are looking to have within the condominium, and perhaps what are your intentions with regard to the house? Do you intend to use it solely for lease, or do you intend to use it for personal use in the next couple of years? Hopefully these few questions posed allows you to have a better understanding on which property investment is more suited for you.
If you require further advice, feel free to get in touch with us! There is no obligation fee.