What’s a pasalo? First-time buyers might have come across the term in their search for their ideal property investment. Simply put, pasalo happens when a condo’s first owner is no longer interested in pursuing their property purchase — and this can be for one of two reasons.
One is when the first buyer only intended to flip the condo and is cashing in on their return on investment (ROI) before in-house or bank financing kicks in. But the second is what condo nightmares are made of — pasalo in the event that the buyer can no longer afford to shoulder the expenses associated with homeownership and needs to let go of the property.
If it’s the latter, the buyers risk selling their property investment at a loss to recuperate some of the money they put in rather than potentially losing it altogether if they default on their payments.
Pasalo for the wrong reasons is a condo owner’s worst nightmare. So, how do you ensure that you don’t end up losing your condo investment?
Preparedness is the key
Knowing your financial options is crucial when investing in a condo. Some buyers put their condos up for pasalo because they weren’t approved for bank financing. It’s important to anticipate these potential roadblocks so you can make informed decisions aligned with your financial goals and resources.
Do your due diligence
Buying a condo for the first time is a thrilling experience, but new homeowners often fall into the trap of just listening to a sales pitch without doing their research.
Common mistakes some buyers make include rushing the reservation fee and down payment because they want to have their name put on the title, but these first-time potential homeowners often forget that the reservation fee and DP aren’t the only costs they’ll have to pay.
Once the bank or in-house financing goes into play, the monthly amortization can increase significantly. Other expenses that come with condo ownership also include monthly dues, property taxes, and closing fees. Buyers who aren’t financially capable will sell at a loss, which is never a good thing.
Don’t make impulsive decisions
It’s not just a sales pitch. That promo for the condo you’ve been eyeing is ending soon, and you only have a week to decide if you will push through with the sale. Suppose the development is preselling and in a favorable location.
In that case, chances are you’ll be in competition with buyers who have already decided on the unit they want (could be what you want, too!), have already done the research, and are just waiting to sign the papers. But remember that you stand to lose a lot more if you say yes without being prepared for the financial aspect.
Avoid overextending your budget
It’s a dream come true to have your own place to call home. No landlords, just you. But be careful not to overextend your finances just to meet the payments. Avoid taking on too much debt or stretching your budget to its limits, and build your emergency fund for unexpected expenses, like renovations, taxes, and other costs.
Say no to speculation
Some beginner real estate investors buy a condo to rent it out based on projected profits. Worse is that there are a few of these newbie investors who factor in the potential income to pay off the monthly amortization. It’s not a bad idea to buy a condo for this purpose, be it short-term or long-term, but it’s an especially awful idea to expect the rental income you anticipate to come in to be solely responsible for paying off the mortgage, association dues, and property taxes.
You’re not always going to have a tenant leasing your unit, and if you don’t have savings to help you tide over the times that you don’t, you may end up losing your property to foreclosure.
Keep your condo investment with #PropertyDoneProperly
Think you’re ready to invest in property? Talk to a real estate professional who will have your best interests at heart.
DMCI Homes is a known developer of quality and affordable condominium projects in the Philippines, and our Property Advisors are well-versed experts in the market who can help you find the condo tailored to your financial needs and personal preferences. The most important decision you can make here is to choose the right broker.