Millennials are victims of stereotype. They are often regarded as entitled, impatient, lazy, and narcissistic. But hate them or love them, it is the millennials’ turn to drive the global economy. Being the largest generation in history, the millennials have not only taken over the workforce, but once they have reached their spending years, expect their impact to the economy to be really huge.
As the first generation of digital natives, they have developed a different set of behaviors when it comes to spending and investing. But if you think they are the happy-go-lucky type when it comes to money, think again. A recent survey revealed that millennials are actually very wise when it comes to money — sticking to a budget, researching before purchasing, and would rather pay in cash than swipe a credit card.
Backed by research and lessons from previous generations, millennials are also confident about investing. Cautious but confident. A survey conducted by Rappler showed that while Filipino millennials are cautious about financial investments especially in real estate, they also are not afraid to ask questions while being diligent at research in order to make informed decisions. When it comes to property investment, they check whether the location is strategic, the developer is reputable, and if the property has high rental income. For starters, that’s pretty good.
Condos are obviously the most popular real estate investment for millennials in the Philippines. It supports their life and career goals, complements their lifestyle, and offers a lot of possibilities.
But what do millennials have to know about investing in a condo? Given that they are fond of research, let this article open your eyes about condominium investments.
Different Condos for Different Folks. In 2016, about 40% of real estate sales were contributed by millennials aged between 27 and 35. When millennials reach a pay scale of Php35,000 to Php45,000 a month, they begin to actively look for an investment, which in most likelihood is real estate.
But while some condos are cheaper or looks more inviting than the others, remember that finding a home is never a case of one-size-fits-all. A condo by the bay looks truly luxurious, but if you are building a career in Ortigas, that may not be the best investment for you. A condo with world-class amenities may seem really posh, but if it is going to take more than half of your salary, you might not be able to see it through. Or maybe you would prefer a transit-oriented development over resort communities, given their strategic location in major highways or connection to rail systems.
Let’s say you are working in Ortigas now, but can you afford a condo there? The best cities perfect for professional success aren’t just Makati, BGC, and Ortigas. If they are too expensive for you, look outside the peripheries such as Pasig or Mandaluyong, the new addresses of progress. If you are working remotely, condo features for work-from-home employees are preferred over proximity to public transportation.
Think of your current financial standing, lifestyle, needs, and career outlook. Think of what you are truly looking for in a condo. Does a condo with so many amenities really necessary or would a one-bedroom condo in a building do?
Align Career and Life Goals with Investment. It is impossible to make a solid investment without looking towards the future. If you are a supervisor at a BPO company now, and you have enough to pay the 30% down payment of a condo within a five-year preselling structure, you have to look beyond five years. Are you going to be a manager then and afford a Php2-million bank loan? While this is not totally within your control, it makes sense to align your career goals with your investment goals. On a personal level, consider having a family of your own. This will impact your priorities and finances.
Know the Financing Schemes. “No down payment” and “zero interest” are truly very enticing. It is flexible and affordable financing schemes like this that makes property investment attractive to middle-income millennials. You can avail of these mostly on a preselling stage. You have to pay a certain amount for three to five years before the property is turned over. Depending on the location and developer, this sometimes goes for as low as Php7,000 per month for a studio. Consider that while paying the equity, you still need to pay rent somewhere.
But what happens after that? Bank financing is the popular option. Your loanable amount of around Php2 million will be payable in 10 to 15 years depending on your salary. Now, this is where it gets real. From Php7,000, your monthly amortization can reach Php15,000 to Php20,000. This is why it is important to align your career goals with your investment because you have to be able to gauge if you can afford to pay the bank after five years down payment.
There’s also rent to own. You have to pay a minimum amount, around 5% or 10% of the unit, move in, and pay the bank for the rest. This saves you monthly rent in another place that you’d still have to pay in a preselling scheme.
You also have to remember that there are bank fees you have to pay when applying for a loan such as processing fees. At the same time, factor in the turnover fee that you agreed to pay the developer.
What do you want to do with it? Why are you buying a condo? Do you want to live in it or rent it out? There is no right or wrong answer there, everything depends on your lifestyle and goals. But knowing what you want to do with your condo is important because it will define other factors such as location, size, amenities, and value.
If you are going to live in it, and you are planning on getting married, then a studio may not be the best fit. If you want to rent it out at a price that is higher than your mortgage so that you’ll have extra income, you have to choose a prime location. If you intend to sell it, you have to consider the amenities, location, and being in one of the top cities to live in the metro if you want higher returns.
Ultimately, millennials have to realize that with investing comes responsibilities. You’re going to have to manage your finances, taxes, and run your own home. You can’t afford to be without a stable job, and you would have to sacrifice not getting a new pair of shoes every time you want to. Investing, risking your hard-earned money, isn’t going to be easy. But if you do it right, it’s going to be so worth it.
The article was written and submitted for publication (as guest post) by Jeanette Anzon. She is the writer and editor of www.AdventureDweller.com. She writes mostly about home improvements, home guides and designs, and real estate investments.