Buy high or low floors?

Some people are afraid of heights and riding the elevator to high floors gives them the uneasiness. Others are worried about possible lift failures and having to walk up the stairs is a big no no to them.

On the other hand, some people just like cool breezes blowing over their faces, fresh air and nice view over the city skyline. They go for high floors anytime and do not mind paying a higher price for such units.

If you fall into either one of the above two groups of people, there is no need to find out why you should buy high or low, as your mind is already set.

As for the rest, let’s start…

Whether to buy high or low units would largely depend on the additional price to pay for each higher floor or every few higher floors. The price of some condos will increase RM3,000 for each higher floor while others increased only RM1,000 for every fifth floor. For the former, buyers will have to pay a higher price of RM60,000 if they decide to take a unit which is 20 floors higher!

Note: For both high and low units, all buyers have to start paying progressive interest upon completion of the piling/foundation stage (S&P Schedule stage 2a: 10%) i.e. after their respective banks have released the progressive amount to the developer.

schedule h

After this stage 2a onward, things will be different for buyers.

As low units gets completed faster (i.e. stage 2b, 2c, 2d and 2e – see S&P schedule above), buyers of such units will have to start servicing their progressive interest once their banks have released the progressive payments for these stages.

High unit buyers are lucky – they just service the progressive interest every month only for the “piling/foundation” stage (10% of purchase price) and it will take at least 12 months before the construction reaches their high floor units.

To determine whether you should buy high or low for a particular project launch, start by estimating the bank’s progressive interest you have to pay if you were to take a particular low unit.

Next, compare this estimated progressive interest with the price of the high units (we will ignore the progressive interest for the high unit). If the latter is very much higher, you should consider getting the lower unit as you can save a lot of money by not paying the premium prices for high units.

Generally, it is better to buy a high unit if the price difference for every higher floor is small. On the other hand, get a low unit if the price difference for every higher floor is substantial. Furthermore, the sub-sale or resale price between lower units as compared with high units is generally not a lot. If this is the case, why do you want to pay through the roof by getting a high unit? This is the reason why savvy investors will always want to know the price difference for each higher floor.

Benefits of getting a high floor

– You pay less progressive interest. If your cash flow is a bit tight, get a high unit if the price difference per floor is not a lot.

– By the time you start to pay the full progressive interest, the condo would be almost completed which you can then rent it out to generate cash flow.

– The risk of losing all your money is low. You will not lose much if the developer suddenly close shop as your bank only released stage 2a (10% – completion of piling/foundation) plus maybe you down payment. However, if you buy low units, the building stage would quickly or already reach your floor – by this time, your bank would already release around 80% of your loan. If the developer goes under, you will have pay your monthly installment until your loan is fully settled even when your abandoned property is not completed and has no value.

I hope this article is useful in deciding whether to buy high floors or low floors.

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