Author: Financial Awakening Blog
If you still haven’t read Step 1 – Plan ahead. Imagine where you are when you retire, I highly recommend you to read it first.
When it comes to condo pre construction investment, there is one decision you always need to make: Whether to pay for the premium and purchase a high floor unit or save the money and purchase a low floor unit. The answer would depend on what you need and what are you future plan for the unit. Let’s first look at the pros and cons of high floor and low floor respectively.
High Floor in Condos
- better views: the high floor you are, the further you can see.
- quieter: you will hear much less noise from the road and street. You will also hear less plumbing noise from other units
- more privcy: less people will be able to peak into what you are doing.
- Higher resale value: the premium you pay will be justified when you resale your unit
- lower ceilings compare to lower floors
- more wait time for elevators
- harder to exit when there’s emergeency fire
Low Floor in Condos
- Convenient: can take either the stairs or eleveators
- Cheaper in price
- can exit easier if there’s emergency fire
- Higher risk of burglars
- less privcy: people can see what you are doing when they walk by the street
- Noisy: can hear the noise from street much louder
As I said before, whether higher floor will benefit you or not depends on your plan. Due to the fact that higher floor will most likely get the same rent as a lower floor, if you plan to purchase and rent to get cash flow passive income, it is going to be harder with a higher floor. However, on the contrary, if you are planning to purchase and hold, then higher floor will grant you a better resale value.
It is not a good idea to leave your unit empty while waiting for it to appreciate. So unless you are super rich and do not care about the cash flow at all, then it is a good idea to get a balance between appreciation opportunity and positive cash flow.
You can calculate how much you can afford by calculating the total expenses and compare it with the rent. With this method, you will know which floor is the highest that you can afford, which still produce positive cash flow. You can then lower the floors a bit to create a safe margin.
People will pay more for higher floors in new condos, but not so much for old condos (20+ years). It is a good idea to sell your condo
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