What you need to know:
Most of these properties are located in prime locations which investment savvy millennials understand will continue appreciating and by the time they are ready to sell, they will be able to make a lot of profit...
A condominium is a modern type of urban property complex consisting of various units where each unit is owned by the person living in it. These units can be identical bungalows in the same gated complex, uniform apartments in the same high-rise block or even business spaces in the same mall.
The term ‘condominium’ is a Latin word that means co-ownership; ‘con-‘ means ‘together’ and ‘dominium’ which means ‘ownership’.
Typically, condominiums by the nature of their ownership promise exclusivity, reduced stress over maintenance, security and outdoor aesthetics, while offering you a chance of owning property in high-end neighbourhoods that would otherwise be beyond one’s reach.
A bonus feature of high-end condos is access to fancy amenities like a swimming pool, a sauna and a gym, a spruced up children’s play area which condominiums typically come with.
When you live in a condominium, you will only be responsible for the interior of your house, leaving the compound, the driveway, the roof and the exterior walls to the condominium management. In comparison, if you own a house, the upkeep of the property falls on you.
Condos are easy to rent out or liquidate in case one needs quick cash. They can be easily transformed into an AirBnB or luxury furnished apartment for short term rentals since they are already located in safe and upmarket neighbourhoods.
Different types of condo buyers
Lucy Kaitetsi Wamimbi, Head of Residential Agency at Knight Frank, a premier real estate company that mainly deals in condominiums says that most young professionals that go for condominiums are those that have access to mortgage financing.
“Usually, they are early nesters with two to three children below the age of ten. They are usually between 30 and 45 years of age and want to buy their first home. Then there are investors that are older, usually about 45 to 60 years of age looking for investments or a good return on investment. Sometimes, the people in this age bracket are buying their second or third home. The third category is the empty nesters, those whose kids have grown and left them in a larger, five bedroom house with a large compound. These types are opting for a smaller home in the form of a condo because they no longer need a large home. They usually opt to rent out the larger house or sell it,” she says.
Cissy Namaganda is a property expert whose company, Cinam Constructors, has constructed several condominiums for different investors. According to her, condominiums are very attractive to young professionals in their 30s and early 40s because condos are very convenient for single people and those with smaller families.
“Condominiums are smaller than average homes which means that they may not be as attractive to larger families. Single professionals or couples with a child or two are attracted to them because they are usually built very close to the central business district where most of these people work and therefore make commuting to work convenient,” Namaganda says.
She also attributes the attractiveness of condos to younger people to social media and peer influence. “They have aspired for a fancy lifestyle for a while and once they start making real money, they want to live in Instagramable neighbourhoods that can impress their peers,” she explains.
However, as people get older, Namaganda says they are more likely to sale them with the motive of moving to larger homes farther away from the busy parts of the urban center.
“No one wants to host a kwanjula of their first born daughter in a condominium,” she quips.
Most of these properties are located in prime locations which investment savvy millennials understand will continue appreciating and by the time they are ready to sell, they will be able to make twice or thrice the amount they paid for it.
The cons of buying a condo
While the pros of owning/living in a condo are several as shown above, there are some cons that come with living in a condominium.
On top of the list is the several hidden fees that come with living in a condominium that most buyers never think about. Sometimes you may have to pay for amenities that you have no interest in using, or that you use so rarely that it would make more economic sense to use public ones.
You have no control over when maintenance and repairs get done. This decision is in the hands of the property manager or the leadership of the condominium corporation.
There is much less privacy as your neighbor maybe one meter away from you for condos in high-rise buildings. You may not fence your own house even if your neighbor on the left is insanely annoying.
Conflicts with neighbors arising from things like noise levels, parking spaces, pets and so on.
What you need to know prior to buying a condo
The tenure of the land
Many people may rush into buying condos without thinking about the land on which the property stands. It might be leasehold while you assume that it is private milo.
But because of the location and the allure of the property that is being sold, some clients may rush into purchasing, according to Namaganda. This becomes even trickier if you are buying a resale condo (used) because you may not know that the lease is left with five years to expire.
“The prospective buyer must know that if it is leasehold, who renews the lease? And how much will it cost to renew? You must know the land tenure,” she says.
She adds that even if the land is private milo, you do not own the land on which your house stands. It is co-owned by all the residents and you may not do whatever you want with it such as planting trees or flowers without the consent of the association.
Before buying a condo, one must factor in the monthly service fees that come with living in a condo. These fees are required of all the co-owners of the condos for the day-to-day running of the property like security, power and water, cleaning and garbage collection. Making an effort to understand how these how those figures are arrived at and how they are accounted for will save you so much stress and regret.
Buying a new condo
Most new condominiums are often put up for sale before their construction has been completed or even begun. This means that you may have to select your unit from a floor plan blueprint. This comes with pros and cons.
While options like getting to choose the best locations in the property or suggesting some personal preferences to be included in the constriction are at your disposal, it is impossible to visualize exactly how the condo will look like and feel. The sketches can only show so much.
While you get to live in a shiny new home, if you intend to get the condo on a mortgage, the bank may not allow you one before the property is finished and registered and construction of your unit may not be completed by the expected date.
Buying a resale condo
Namaganda says that while purchasing a resale condo affords you the chance to see what you’re buying, you may overlook the fact that the lease on the land is expiring soon.
Buying a resale condo means there is no lengthy waiting periods before you can move in. Resale condos are typically cheaper you can check if you want to live here by checking out the other co-owners to see if you fit.
But buying an old condo also comes with some disadvantages. For instance, older resale condominiums may require more maintenance and repair than new ones and they may not be as instagramable as a brand new one.
Buying a condo for investment
Before diving into the search for the perfect condo listing, it is important to take a step back and determine whether or not investing in condos is the right fit for you. The condo investment process is quite different from investing in detached single-family properties, with its own unique set of rewards and challenges.
Deciding to start investing in condos is arguably similar to making any other type of investing decision. This includes asking yourself whether you have the right mindset, bandwidth, and commitment, as well as whether or not you can align a particular investing strategy with your personal and financial goals.
Because the purchase price for a condo is typically lower than a single-family home in many markets, condominium investing offers a lower barrier to entry for many investors.
However, it is important to ask yourself whether or not condo investing is the right fit for you and weigh the pros and cons.
Condo as a first home
Those looking to buy a condo as a first home should also consider the purchase as an investment. Unlike a rental property, those paying down a mortgage are simultaneously building equity in a physical real estate asset.
Instead of throwing money away each month in the form of rent, paying down a mortgage is more akin to a forced savings account. While interest rates will certainly detract from many owners’ ability to save, the equity they manage to accumulate is a great way to accumulate wealth.
If that was not enough, real estate tends to appreciate in value more often than not. That isn’t to say a condo is guaranteed to increase in value, but rather that there’s an increased likelihood that the condo will be worth more in the future.
Condo as a rental property
Investors looking to buy a condo in order to generate passive income will treat the asset a lot like a single-family home. That said, some differences must be considered.
First and foremost, investors need to confirm whether or not they can even rent the condo out. Some condo associations do not even allow owners to rent their units, so make sure there are no limitations preventing you from leasing the unit.
In the event there are no rules preventing the owner from renting the unit out, investing in a condo is a lot like investing in a detached home.
Investors will need confirm the numbers work out. More importantly, will the cash flow generated be enough to cover the mortgage, fees, and make the investment worthwhile?
The reverse fund
Experts say that typically, there is a bank account that is set up by the co-owners of the property through their association, usually referred to as a condominium corporation where everyone must deposit a certain amount to cater for repairs, major or minor. It is a reserve fund and it is separate from the monthly service fees.
Additional reporting: fortunebuilders.com