Some experts say that buying a piece of real estate automatically makes you an investor. Robert Kiyosaki, however, would beg to differ. The author of Rich Dad, Poor Dad argues that you can only consider a property an asset when it puts money into your pocket. Considering that you’ll probably acquire the biggest debt in your life to attain home ownership, his statement makes perfect sense.
If you’re planning to buy a condo for sale in Cebu City via financing, it will likely serve as a liability. It won’t be an asset because it will take cash out of your pocket through monthly mortgage payments and regular maintenance fees. But this scenario will only be true if you’re going to use it as your primary residence. If you have other places to live, your property can become a goldmine.
Here are four ways to turn an inherent liability, like a condo unit, into a moneymaking asset.
Choose a Promising Location
Capital appreciation is one of the most popular means to grow your wealth passively in real estate. As the local economy goes stronger, the land values in the area increase. The rate of appreciation depends on several factors, but the bottom line is that you don’t put any effort to gain from it. You can leave the property alone, and you can build equity on it without breaking a sweat. The smaller your down payment is, the higher the rate of return will be.
The only caveat is that you have no control over the market factors behind capital appreciation. Unless you’re an entrepreneur yourself who can invest a ton of money locally, you can only pray that the economy gets better over time.
What you can do, though, is to pick a location that you feel will boom economically. One way to assess the future prosperity of an area is to look for brewing or ongoing infrastructure and other development projects. If the location eventually becomes a more attractive place to live or work, your property’s value will rise. You can reap the rewards you’ll earn passively at resale.
It’s not uncommon for condo units to be up for grabs before the building’s construction. Since property prices at the lowest during pre-selling, it can be an opportune time to buy. But then again, there’s no telling how fast or how much the rate of appreciation will be. Plus, depreciation is always a possibility. This move is a risky bet, but ask yourself if it’s the kind of risk you’re willing to take.
Spruce It Up
A fully furnished property commands a higher asking price than a bare unit does. The success of this strategy will depend on your ability to make smart improvements. Understand that all homeowners have unique taste; some people love simplicity while others gravitate toward extravagance. You can’t appeal to both so pick your target buyer before “flipping” a condo.
Rent It Out
A rental property can offer a steady flow of income over a certain period. Thanks to platforms like Airbnb, anyone can now be an occasional landlord and make money by renting to transient guests. If you’re buying a new unit exclusively for this purpose, though, make sure your budget can handle any mortgage payment during vacancy periods. It can be hard to predict occupancy sometimes, so make sure your lifestyle won’t suffer if your unit stays empty for a long time.
While the line separating asset and liability is blurry at times, make sure you understand the fundamental difference between the two. This way, you can make money out of your property as intended or be okay not to earn anything when you don’t really expect to.