Someone who identifies herself as part of the Millenial Generation or Gen Y once asked me how I handle my family’s finances, including strategies on saving and/or investing.
I look back fondly at a time when I had just started working for a few years, and being in that life pace where I had ‘landed myself a decent enough job, but not yet quite making it.’ I suppose the question comes with a mix of the desire to move things forward in her life economically but at the same time feeling not quite confident to stick her fingers into something that requires long-term financial commitment.
Because it has worked for me, I was quick to share this advice: Go into condo leasing.
It may be daunting for a millennial who’s just starting a career to even conceive of regularly deducting a significant amount from a seemingly meager salary to be able to pay off the monthly amortization of a condo, but believe me when I say it IS doable.
How? Where do I get the extra cash? I hardly earn enough for my own upkeep.
Check your daily practices. See that expensive coffee frappe you just bought? What about that designer bag you purchased last week? And let’s not forget your newly upgraded mobile phone. Shall I go on?
Needless to say, these little things lumped together, if you make a conscious effort to save, will eventually yield a bigger nest egg, which will then mean stronger purchasing power to allow for bigger, more significant purchases…like a condo unit. Now is as good a time as any to seriously look into condo investing.
The past decade has shown us significant changes in family living and mobility. Whereas before families choose their ideal home, and expect to live there until they retire, the family behavioral landscape now is much more mobile, more active, and increasingly dynamic. More and more families are choosing to live in condos instead of houses. We can blame the worsening traffic and numerous condo projects sprouting all over the metro for that.
This observed growing mobility provided the push for our own family to go into condo leasing. What was once a family get-away place or hang-out turned out to be a great source of passive income.
Having said that, as in any business, there were hits and misses in the process, but I’m happy to note that there were a lot more hits. I’m sharing these tips based on lessons I’ve learned from condo leasing.
1. Be smart about choosing you condo’s location.
This cannot be emphasized enough. If you have to ensure making the right decision about just one thing, let it be the wise choice of location. More often, the area where your condo is located becomes a bigger factor in the decision making process of a would-be renter, than the condo unit itself. Choose an area where businesses thrive, ones which are near schools, and has close proximity to malls, groceries, hospitals, and churches. It goes without saying that you’ll also need to check on the building history of the condo corporate developer.
2. Size matters.
Getting a family-size unit of 2 to 3 bedrooms with 2 toilets and bath may be a bigger cash-out investment, but this proved to be a more attractive rental offering than a studio dwelling. One, because there is an abundance of studio-size units, which means more competition in rentals. Two, because a head of the family will likely allot a higher budget to spend for rent for the comfort of his family, than, say a couple or a single tenant who would be willing to scrimp on rent since they’re on solo flight anyway, and would have less need for extra amenities.
3. Colors can increase or decrease your unit’s rental potential.
My interior designer and I had a long discussion on the merits and demerits of using either a neutral or bold color. I had always favored whites or neutrals since I like my place bright and cheery, but she argued that a low-key, subdued shade or a vivid flash of color gives a place the added oomph, which makes it more cozy. We eventually struck a compromise of painting the unit a mix of whites, and a subdued gray, and injected colors through easy-to-replace accents like throw pillows and bed sheets.
4. Interior design is key.
To renovate or not? This is a question you need to weigh carefully. Renovations and a great interior design work can push up your leasing potential significantly but a major rework may also put a hole in your pocket, and make it more challenging to get back your investment through rental fees. My own experience on this was good, in that, after renovating a plain-looking 3 BR unit, I was able to lease out the same unit for thrice as much as its previous rental fee.
Another good thing that comes out of having this passive income through rentals – now you can eye another condo investment using the extra income from your initial condo rental to finance monthly payments.
No worries, that designer bag can always wait.