10 Things to look for when buying a condo

19 October 2021 | Posted in Blog, News

Purchasing a condo will probably be one of the biggest investments you’ll make. The process can prove daunting, so we’re here to guide you through the process of due diligence. Use this as your guide to help you with the decision-making process, making sure you fully understand each point before making a booking.

 

Location, location, location. When purchasing a condo, the location is fundamental. If you are looking at an area that is already well developed, you will probably be faced with a higher starting price point than areas that are just starting to develop.

It’s a good idea to do your homework and see what the overall price points for the type of condo you are interested in is in different areas across the city. If you are working with an experienced agent, they should be able to provide you with that data upon request.

 

Developer’s track record. Phnom Penh sees new condo projects launch at an impressively rapid pace with no signs of slowing down. It is fundamental to get to know the developer behind the condo that piques your interest.

Why?

Because it will give you greater insight into construction quality, planning and scheduling, financial security, compliance with government law, reputation, and brand recognition. Knowing where the project stands on these key points will allow you to make a more informed decision. As an absolute minimum, you should ask your broker to check if the developer has a sales license.

 

Property management. A well-maintained condo is in your best interest, so being informed as to who will oversee the maintenance and up-keep is important. A poorly maintained property can affect both the tenant’s experience and its market value.

You can ask the developer or your agent to see who will manage the property after the handover, so you can research on this property management group.

Sunglasses by a pool

 

 

Amenities and design. Ask the agent that you are working with for the full list of amenities the condo will be offering. This is important not only for your comfort, but also because the price you are paying for the condo should be inclusive of all amenities.

 

Realtor. Make sure that you are picking a registered agent and get to know them. You are placing a lot of confidence in their knowledge. Ensure that they are very well versed in condo sales and truly have your best interest in mind.

Finances. You will need to put pen to paper and determine what your cashflow would look like when paying for a condo. In some countries, the bank requires the mortgage payment to be no greater than one third of your salary. In Cambodia, it can be no greater than half of your salary.

When applying for a loan, you have two options. You can apply for a loan at a bank which will often require a lot of paperwork and be an overall lengthy process, but you will most likely have a more favorable interest rate than other options. Your second option is to apply for a loan directly with the developer. You will have less paperwork, but the interest rate will probably be higher than with a bank. An interest rate of 7% is generally considered a good interest rate.

 

Licensing. In order to obtain a sales license, the developer also has to have a developing license and a construction license in place. We do not encourage purchasing property when the developer does not have their licenses in place!

 

Timeline. There are two things to watch out for on this point. When doing your due diligence, ask for both the construction timeline and the handover timeline.

If the condo hasn’t been built yet, ask for the timeline of the entire project and see if it makes sense. For example, if they plan to take three years to build five floors, you should reconsider. If it is under construction, is the project on time or is it delayed? Finally, ask what sort of discount you will receive if the project is not handed over on time.

 

Re-sale rights. Ask your agent if there are any sort of restrictions if you would like to sell your condo. Some contracts do not allow you to re-sell until you have fully paid off your loan. Ask if there are any sort of penalties and, most importantly, ask if they offer you a buy back guarantee.

If they indeed offer a buy back guarantee, take your time to fully understand the conditions they offer. Will they buy it back at the exact same price regardless of how much time has gone by? Will they pay back capital but withhold interest? Gain full clarity on what a re-sale would entail before making a decision.

Size. Take into consideration both the unit size and the project size. Ask your agent for measurements for both the private area (net) and the public/shared areas (gross). Be aware that when you pay for property management and upkeep, you are also paying for the shared areas. A good benchmark to go by is having the gross area be no larger than 30% of the total.

 

Bonus! Find out what type of title the project has. Some condos are built on government land, which is lease hold, not free hold. If the project is lease hold, then make sure you understand how many years are left on the lease. You should be able to find out this information through your agent or directly from the developer. If you want to own the condo for the long term, then you should be looking for a free-hold title.