5 benefits and 5 risks when investing in apartments in HCMC in 2018

You have some free money and want to invest in apartment type in HCMC? But you do not know what are the benefits and the risks of this type of investment. Let’s take a closer look at this issue in the article below.

The benefits of investing in apartments in HCMC in 2018

Advantage 1: Can invest with small cash flow, not need much capital

For apartment type, investors can choose payment option with deferred payment from 24-36 months. Even on the market has appeared the owners apply payment methods lasting 60-72 months to help home buyers have conditions to buy installments easier. One more thing the buyer of the apartment should know is that once the payment is made once, the buyer can get a discount of 5-15% depending on the particular project. Compared to other forms of real estate investment such as land, individual houses in the inner city, villas … the payment method “long-winded” when investing apartments help buyers can accumulate gradually.

Advantage 2: Easy and fast loans

Compared to other types of property, apartment apartments are often appraised by banks for borrowers rather quickly as investors associate or mortgage the project to the bank, this is called the form of guarantee of selling the house formed in the future.

 The procedure for borrowing apartments is easier than other types of housing

Advantage 3: The law of protection of apartment buyers increasingly tight

According to the amended Housing Law, developers of apartment projects all have to fulfill their obligation to cooperate with the bank to guarantee the sale of houses to be built in the future to protect the interests of home buyers. If the investor can not hand over the house, the bank will pay damages to the buyer. Provision of sale of the apartment upon completion of the foundation and the management agency of the sector continuously announce and update the list of apartments qualified for sale also in the effort of information transparency, protection of interests of home buyers.

Advantage 4: It is possible to invest in surfing according to the progress of the project

Normally a project owner in Vietnam takes 18 – 24 months to complete the project, from the time of publication, start of construction, construction until completion, handover of the apartment. During the construction of this project, retail investors not only have to pay the construction fee but also take advantage of the opportunity to increase price through the positive changes of the project to surf with difference in the 5-7% range. For example, the price of a finished apartment is lower than the price of the roof, finished. This is the form of price increases in each stage of sales, it is quite common.

Advantage 5: Obtain cash flow from rental

Upon receipt of the house, the apartment is easily leased due to the security, comfort and utilities excel. The profit margin from leasing is equivalent to or more than the bank interest rate (about 6% per annum). Compared with the land can not be rented, the villa quite picky because of the expensive rent, the apartment is considered as the easiest investment for leasing. Depending on the location and grade of the high-grade apartment or apartment, average, from the 15th year onwards, apartment investment can enter the payback period, start to net income.

If you are planning to invest in a rental property and are wondering how to calculate the profit margin, here is a simple formula that you can apply:

Rental price for a month multiplied by 12 (months), then divided by the total value of the apartment will be the percentage rate of rental profit:

For example: A high-grade apartment in HCM City costs $ 3,600 / sq m, average rent is about $ 27 / sq m / month (self-managed – CBRE). Total rent received in the year will be 324 USD / sqm (27USD / sqm / month x 12 months). So the profit margin for a year will be: (27×12) /3,600 = 9%.

This is how the profit margin is calculated for one year. This formula can be applied to all forms of real estate such as apartment, house, land, house … But in addition to this number you also have to pay management costs, taxes, maintenance fees … You It also has to estimate the number of months of vacancy (no one hired) to estimate the specific profit of the year.

Investment flaws in HCMC apartments in 2018

Disadvantage 1: Easily governed by virtual values ​​due to advertising

All apartment projects are classified into the form of housing in the future, selling and collecting money in advance, the next house. When buying a condo project, investors will have to pay money from signing the contract but can not immediately see the product at the project, mainly based on the perspective. As a result, condo investment is more or less influenced by PR (advertising) campaigns with messages far beyond the real context.

Disadvantage 2: Difficult to increase suddenly like real estate

Excluding the first 10 years of good mining, house prices may continue to rise at a narrow margin of less than 5% per annum, as apartment prices enter the saturation stage. From the age of 15-20 years onwards, condominiums are difficult to increase in price because the quality of works will decrease over time. At the same time, it is necessary to use maintenance funds to continue operating the machines or repairing some items. If the maintenance fund is well managed, the quality of the building will remain stable for several decades to come.

Disadvantage 3: Bank loans are low

Although customers are considered easy to buy home mortgages, mortgages at banks are often not priced high. This is mainly due to the fact that the bank has to take into account the depreciation of the assets over time due to the deterioration or degradation of the works. Typically, when the apartment has a book (asset ownership certificate), the bank will set a maximum value of no more than 50% of the value of the property. At the same time, the price of land, townhouses are valued at 60-70%.

Disadvantage 4: Fierce competition because the supply is too large

The number of apartment projects launched in HCM City in the last three years has increased to tens of thousands of products per year. The overwhelming supply will lead to flat-rate apartments with lower liquidity than expected or lower rents.

Disadvantage 5: Apartment disputes are always smoldering, can break out at any time

This is the factor investors apartment can not control. If the status quo takes place permanently, it will result in a reduction in the value of the property. As the commercial apartment market in big cities of Vietnam has developed strongly in the last one or two decades, the legal system is still on the impetus, the culture of apartment buildings is weak and conscious. least. The management of condominiums is largely unprofessional and requires more time for rebuilding. Thus, disputed parties (between buyers and investors) or third-party disputes (both between the buyer and the owner and the management and the board) continue acting for many years and also in the future.

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