Buying your first home is always an exciting endeavour, but don’t let the excitement get the best of you. Read our quick guide so you know what to consider when buying your first home!
Always think of a house as a long-term investment
Regardless of whether you're renting, flipping, or living in it, buying a house is a substantial long-term investment. For the average person, a home typically represents about half of their net worth. Therefore, it is crucial to carefully assess the financial implications before making a purchase. This involves diligently considering the numbers to ensure that you can not only afford the required payments but also maintain your daily essentials, such as keeping the lights on.
Location
This advice holds the truth not only for businesses but also for prospective homeowners. While bedrooms, bathrooms, and parking spaces are important criteria for evaluating a home, the often overlooked aspect is the value brought by its location.
The location of a potential home should be given significant consideration based on individual needs. For instance, a single person may not prioritise proximity to a nearby school, whereas a family would place it high on their list of requirements.
No matter your specific needs, it is crucial to carefully consider the location of your home, taking into account both short-term and long-term considerations.
Land Appreciates, Buildings Depreciate
This is another important principle to remember for future homeowners, especially those wondering whether they should buy an apartment or a house.
When it comes to long-term investment, a small house on a plot of land often holds the advantage over an apartment. The flexibility of remodelling or rebuilding a house provides the opportunity for continuous improvement. Additionally, if you choose to relocate, you can rent or sell the house, benefiting from the rising land prices and securing a profitable return on your initial investment.
On the other hand, apartments offer easier acquisition since the construction and development are already handled by the developer. Higher-end apartments may also come with appealing amenities like pools, gyms, and spas, which could increase the overall value and desirability.
Ultimately, the decision between a house and an apartment depends on your personal preferences and financial goals. It's crucial to keep in mind that buildings can be replaced, but the underlying land will always remain valuable.
How Much Should I Spend On A Home in Cambodia?
When it comes to property investment in Cambodia, the amount you should spend ultimately depends on your personal needs and financial capacity. For most buyers, banks or lending institutions typically require a downpayment of approximately 30% of the property's value unless you are a cash buyer.
Some property developers even offer loans to buyers, providing an alternative financing option. However, it's essential to be aware that interest rates for housing loans in the country can reach as high as 12% per annum.
Aside from loan interest, there are other upfront costs to consider. Legal and transfer fees are significant factors that demand attention. For example, acquiring a land title within the municipality of Phnom Penh requires a transfer tax of 4% for both Soft and Hard titles. It's important to note that this 4% transfer tax is based on separate criteria held by the relevant land office and is not solely determined by the property's sale value. The actual cost may vary depending on the criteria set by the land office.
If you happen to be a foreign national, it's essential to know that you cannot directly purchase landed property in Cambodia. However, there are mechanisms and guidelines for foreign ownership outlined in our Cambodia Investor Guide.
In conclusion, before investing your hard-earned money in Cambodian property, take the time to thoroughly assess all costs involved. Crunching the numbers and understanding the financial implications will help ensure a well-informed and successful investment venture.
What if I Want to Keep Renting?
For many prospective homeowners, renting proves to be a valid and attractive choice. It offers several advantages, including lower upfront costs, the landlord assuming maintenance responsibilities, and the flexibility to relocate easily in response to job changes or significant life events like marriage or having children.
However, it's important to note that purchasing a house doesn't necessarily tie you down. If you decide to move later on, you have the option to retain the property as an investment and rent it out while you live elsewhere. This way, you can enjoy the benefits of both homeownership and the potential returns from a rental property.
Real estate is a remarkably secure long-term investment, with its value consistently on the rise. As the saying goes, "They aren't making any more land," emphasizing its potential for appreciation. If you have the financial means, purchasing real estate is typically the smarter decision. Another option is to acquire property and rent it out, treating it as an investment while you choose to reside elsewhere.
Few More Tips!
When it comes to loans, remember that negotiation is always on the table. If you believe there are concessions the bank can make, don't be afraid to voice your requests. You can try asking for a more favourable interest rate or even request the waiving of early termination fees. Keep in mind that loans are a significant source of revenue for banks, so they are often willing to make their offers more appealing.
Why is this the case? Cambodia boasts more than a dozen major banks, and they certainly don't want to lose your business. So, don't hesitate to explore better terms and make the most of your loan agreements.
You can further leverage your position if you’re a long-time depositor in the bank. Having a good long-standing relationship with your bank lets them know you’re gonna be a good investment - and you should use that to get a better deal.
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