2. SUNDAY SUN SPECIAL. | FEBRUARY 24, 2013
STORIES BY APRILLE THOMAS
WHETHER you are looking to diversify your investment portfolio, build a potential second income earner, or simply put a roof over your head, real estate offers several benefits.
MANY PEOPLE DREAM of the day that they can purchase their “piece of the rock” and take pride in sleeping under their own roofs. For them, real estate is a symbol of their independence and maturity. Owning your own home allows you to make your own rules. Your house can even become a further extension of you when you begin to incorporate your own personal style and flair. And the joy doesn’t have to end with you; people often revel in the opportunity to create a space for their family. Having a family home helps furnish memories that your children will cherish forever.
SOME PEOPLE may never be able to afford their own property, or simply choose not to. Instead, they may opt to rent. This automatically becomes an income earner for an apartment or house owner. Rental properties provide a steady stream of monthly income which you can use to supplement, or in lieu of, your regular salary. The beauty of this investment is
that it can eventually pay for itself. Inflation can also be a proven benefit for you, because even though your mortgage will stay fixed for a time, factors such as rises in construction costs and population growth can drive up rental prices. Some people even make this their full time job, owning and caring for several rental properties.
IT’S NO SECRET that properties are more expensive than they were ten years ago. For investors, this is another benefit of real estate. While there is no absolute guarantee of what will happen to the market in the future, history has shown real estate to be an excellent source of profit through the increase in investment property value over time. Another plus is that you also have some control over this. Renovating the interiors and exterior of your home when you are ready to sell, even with the simplest of upgrades, can add value to your property. Now that we have examined some of the benefits of investing in real estate, it’s time to get down to the nitty-gritty: how to go about investing in the dream.
AS FAR AS financial investments go, the low upfront costs coupled with the lengthy repayment options of real estate may tickle your fancy. While for other investments, such as stocks, you may need the full amount upfront, real estate requires less out of pocket. Of course, how much you will have to put forward will depend on your lending institution and your own personal choices; there are some lenders that won’t even require a down payment! But we’ll get to that later.
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BUILDING YOUR OWN HOUSE ensures that you get exactly what you want. (FP)
WHEN MAKING the decision to invest in real estate, one of the first questions is usually one of whether or not it makes more sense to buy or build. The truth is that there is no “good” or “bad” decision here, it all depends on your wants, and your budget. Different people are looking for different things in a home and while some may find these in a pre-existing house, others may have to start from scratch to make sure that they get what they want.
BUYING A PROPERTY is an excellent choice for people who want to avoid the hassle of building. (RC)
Pros and cons for building Let’s say that you are very into home improvement and design and are constantly reading magazines and watching television shows about new and exciting properties. You aren’t the only one. Unfortunately, if you are absolutely sure of and not flexible with your desires, you may find that the houses currently on the market don’t satisfy you. This brings us to the first pro of building your house: it allows for customization. A lot of the houses in Barbados, particularly the older ones, have similar characteristics. If you are looking to create unique spaces and incorporate new architectural elements, you will have to build that for yourself. To build your own home, you will first need to work with a builder to produce the plans that you will need to then submit for approval to the Town and Country Development Planning Office. This process can take anywhere from three to six months. Once approved, you will need to find a construction company. If you’re using a mortgage, the bank will release a predetermined amount of money for each phase of the building process. If everything goes smoothly and the bank’s deadlines are met for
4. SUNDAY SUN SPECIAL. FEBRUARY 24, 2013
each phase and the inspector is satisfied that project is on track, then the bank will continue to release funds until the completion of the project. From that highly summarized explanation of the process, you can deduce the two biggest cons: time and stress. Waiting, making sure that everything is always on track, and dealing with setbacks, are all realistic concerns when it comes to building. This is not a good choice for the impatient. Another con is that you will need to buy the land. This is indeed an expense that you need to consider; however, some lending institutions will offer land loans that you can transform when you
are ready to build. Speaking of expenses, building a house can in the long run be more expensive per square foot than buying a pre-existing one. Our final two pros are that building will be less work on your part, and you can ensure that your house is fully up to date. A pre-existing house can come with several issues that require your attention and is probably best left to handy people who don’t mind home projects. When you choose to build, you have full control over the finishings and accents that will be used and as such, you can ensure that your home is as modern as you want it.
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A closing consideration for building a home is whether you plan to live there for good. If your house is “too unique” you may have a challenge selling it in the future. This is something you should think about.
Pros and cons for buying Buying a pre-existing house is still a very popular choice. Just like building, it has its pros and cons and in the end it comes down to your preferences. This is an excellent choice for people who are “in a hurry” to buy and don’t want the hassle of building. The first pro when buying a house is that it’s a packaged deal. Unlike the option of building, you don’t have to worry about buying land first.
On the flipside, you have to settle for the pre-existing land’s size and location. For example, you may find a house that you really like design wise, but you may have wanted a larger backyard, or to live in a different neighbourhood. Bearing that in mind, the bottom line is that the house will already be there. And if you’re buying a house that’s relatively new or well taken care of, it may be move-in ready. That fact would definitely attract prospective property owners. Indeed, if the house isn’t updated, you may also have to factor in the costs of remodelling and/or renovating. This can be expensive if you need to make a lot of changes. Another consideration is the amount of work you will have to put it in if you
ONE OF THE PROS of buying a pre-existing property is that you get what you see. (FP) don’t want to hire a professional. Are you handy with tools and projects? You need to think about this when buying an older home. Besides the major surface issues, you also need to consider that after a while, things will go wrong. You can’t escape it. Getting the house inspected before you buy it may save you some surprises, but be prepared for unexpected problems of varying natures.
The final pro of buying a pre-existing property is that you get what you see. You would be able to see and understand the character of the house in an already established neighbourhood and decide if that’s where you want to be. So in the end, buying or building, it’s up to you. Whatever you decide, we have compiled some key points in this feature that should help you get started on your journey.
6. SUNDAY SUN SPECIAL. FEBRUARY 24, 2013
FEBRUARY 24, 2013. SUNDAY SUN SPECIAL 7
WHEN PLANNING for a real estate investment, you will probably spend lots of time considering your wish list and hoping that you can find a property that delivers. When shopping in Barbados, you will find that there are many factors to consider, including location and your lifestyle choices. We’ve gathered some of the choices that you may contemplate in an attempt to help you get the ball rolling on what you want.
THESE ARE OFTEN considered prime spots. After all, who wouldn’t want to wake up to an ocean view outside their bedroom window, sit on a deck and watch the sunset, or be able to take a dip in sea with just a few steps? The pros of a spot like this are easily recognizable, but there are some considerations. A higher price tag is the first and most obvious concern. If this is indeed a problem for you, try looking at maybe getting a property that isn’t necessarily beach front, but just across the road or somewhere nearby. This way you can get a lower price tag and still be close enough for a quick beach run. Also, if you’re planning to buy a property near the sea, consider the high maintenance that may be required, especially for your stainless steel appliances, as the salt in the sea water is of a corrosive nature.
WHILE our “country” and “city” definitions may not be as clear-cut as those in larger countries where there’s a more prominent distinction between the two, there is a relative difference between living in Bridgetown and its environs versus a property in the middle of St Andrew. Obvious benefits of living in highly populated areas in St Michael include quick access to gas stations, supermarkets, businesses and bus routes. Your commute to work will be shorter, for those working in the more popular commercial areas of St Michael or Christ Church, which will save you each month in gas. However, you will be sacrificing space and will probably have to pay a higher price for these sought after spots. The first con most people think of with regards to the country is the distance they will have to travel each day and the gas required to do so. The upside to this, however, is that you won’t have to fight heavy traffic. Another reasonable concern is the lack of resources such as supermarkets and businesses, in close proximity. That leads us to the two major positives of country living, which are the more spacious lots and lower price tags. Additionally, you are more likely to find a peaceful neighbourhood in the country and a great sense of community. So whatever your choice, whether it is a cute home in a gated community where you can play golf whenever your heart desires, or a spacious, less expensive home on the East Coast with amazing ocean views, make sure that you have carefully thought out your decision. If in doubt, try talking to a friend, family member or real estate agent. Sometimes other people who know you well can offer useful advice when property hunting.
THERE IS a relative difference between living in Bridgetown and its environs versus a property further inland. (RC)
IF YOU’RE PLANNING to buy a property near the sea, consider the high maintenance that may be required. (RC)
ON THE POSITIVE SIDE, gated communities can offer residents a greater sense of security and privacy. (FP)
YOU MAY BE FAMILIAR with some of the gated communities in Barbados such as Millennium Heights, Royal Westmoreland, and even the relatively new Valley View development. Driving past these closed gates, you may be curious about what life is like behind them. Whether or not living in a gated community is “better” is surely debatable, but at the end of the day it’s simply a matter of preference. On the positive side, gated communities can offer residents a greater sense of security and privacy as well as a feeling of exclusivity. Gated communities are often quiet, beauteous and well kept, which
would be another plus for homeowners who are taken with kerb appeal. On the other hand, some people might find these very factors to be unattractive. Some may view the constant monitoring as an invasion of privacy. The rules of the communities may be seen as encroaching on their freedom and as a result some would rather live in an open neighbourhood where everyone is free to come and go as they please. Lastly, the costs that may be associated with the upkeep of the neighbourhood may not sit well with everyone, especially those who would feel their money is better spent elsewhere.
Get a free mortgage check-up and see how you could: Reduce your monthly payments. Save thousands in interest over time. Add living space or upgrade with a renovation you can afford. Bring us your mortgage and we’ll show you how to save†. Visit your nearest branch today.
Discover what’s possible
barbados.scotiabank.com †Conditions apply. Subject to credit approval. Ask for details in the branch. *Trademark of The Bank of Nova Scotia, used under licence (
).
6. SUNDAY SUN SPECIAL. FEBRUARY 24, 2013
FEBRUARY 24, 2013. SUNDAY SUN SPECIAL 7
WHEN PLANNING for a real estate investment, you will probably spend lots of time considering your wish list and hoping that you can find a property that delivers. When shopping in Barbados, you will find that there are many factors to consider, including location and your lifestyle choices. We’ve gathered some of the choices that you may contemplate in an attempt to help you get the ball rolling on what you want.
THESE ARE OFTEN considered prime spots. After all, who wouldn’t want to wake up to an ocean view outside their bedroom window, sit on a deck and watch the sunset, or be able to take a dip in sea with just a few steps? The pros of a spot like this are easily recognizable, but there are some considerations. A higher price tag is the first and most obvious concern. If this is indeed a problem for you, try looking at maybe getting a property that isn’t necessarily beach front, but just across the road or somewhere nearby. This way you can get a lower price tag and still be close enough for a quick beach run. Also, if you’re planning to buy a property near the sea, consider the high maintenance that may be required, especially for your stainless steel appliances, as the salt in the sea water is of a corrosive nature.
WHILE our “country” and “city” definitions may not be as clear-cut as those in larger countries where there’s a more prominent distinction between the two, there is a relative difference between living in Bridgetown and its environs versus a property in the middle of St Andrew. Obvious benefits of living in highly populated areas in St Michael include quick access to gas stations, supermarkets, businesses and bus routes. Your commute to work will be shorter, for those working in the more popular commercial areas of St Michael or Christ Church, which will save you each month in gas. However, you will be sacrificing space and will probably have to pay a higher price for these sought after spots. The first con most people think of with regards to the country is the distance they will have to travel each day and the gas required to do so. The upside to this, however, is that you won’t have to fight heavy traffic. Another reasonable concern is the lack of resources such as supermarkets and businesses, in close proximity. That leads us to the two major positives of country living, which are the more spacious lots and lower price tags. Additionally, you are more likely to find a peaceful neighbourhood in the country and a great sense of community. So whatever your choice, whether it is a cute home in a gated community where you can play golf whenever your heart desires, or a spacious, less expensive home on the East Coast with amazing ocean views, make sure that you have carefully thought out your decision. If in doubt, try talking to a friend, family member or real estate agent. Sometimes other people who know you well can offer useful advice when property hunting.
THERE IS a relative difference between living in Bridgetown and its environs versus a property further inland. (RC)
IF YOU’RE PLANNING to buy a property near the sea, consider the high maintenance that may be required. (RC)
ON THE POSITIVE SIDE, gated communities can offer residents a greater sense of security and privacy. (FP)
YOU MAY BE FAMILIAR with some of the gated communities in Barbados such as Millennium Heights, Royal Westmoreland, and even the relatively new Valley View development. Driving past these closed gates, you may be curious about what life is like behind them. Whether or not living in a gated community is “better” is surely debatable, but at the end of the day it’s simply a matter of preference. On the positive side, gated communities can offer residents a greater sense of security and privacy as well as a feeling of exclusivity. Gated communities are often quiet, beauteous and well kept, which
would be another plus for homeowners who are taken with kerb appeal. On the other hand, some people might find these very factors to be unattractive. Some may view the constant monitoring as an invasion of privacy. The rules of the communities may be seen as encroaching on their freedom and as a result some would rather live in an open neighbourhood where everyone is free to come and go as they please. Lastly, the costs that may be associated with the upkeep of the neighbourhood may not sit well with everyone, especially those who would feel their money is better spent elsewhere.
Get a free mortgage check-up and see how you could: Reduce your monthly payments. Save thousands in interest over time. Add living space or upgrade with a renovation you can afford. Bring us your mortgage and we’ll show you how to save†. Visit your nearest branch today.
Discover what’s possible
barbados.scotiabank.com †Conditions apply. Subject to credit approval. Ask for details in the branch. *Trademark of The Bank of Nova Scotia, used under licence (
).
8. SUNDAY SUN SPECIAL. FEBRUARY 24, 2013
WHEN YOU ARE considering purchasing real estate, the financial aspect is no doubt a major concern for many. How are you going to afford it? How much will you offer as a down payment? However, the first question that you should be asking is, “What can I afford?” This will be the most important question to answer. By the time you have made the decision to purchase any kind of property, you probably would have already started saving with a goal in mind. If you are just thinking about the future and haven’t yet started planning for your big purchase, that’s not a problem. We have advice for you as well.
Getting your finances in order
Shop around The first thing that you should do is go window-shopping for properties. Yes, it may sound counterintuitive to go shopping without money, but you need to see what is out there. You can do this several ways: by looking in the newspaper, searching online databases, or even just driving around and looking at properties with “for sale” signs. This puts you in a good position to understand what you want. Let’s say that you have a mental budget of $180 000 and you want to buy a plot of land. You should know what parishes have land available in that price range and what square footage you can get for that price. The answer will vary by parish, and you may end up deciding that you don’t need to spend that much money, or that you want to spend a little more to get exactly what you want, where you want it.
Save up From there, it’s time to get the down payment. How much you need will depend mainly on the financier you choose. Some may offer you as little as five per cent or nothing at all. Ultimately, the more you have for a down payment, the less you have to borrow and therefore the less you will have to pay back. Talk to your mortgage specialist about these details to determine what’s best for you. Consider what debt you already have. That isn’t to say that you will be automatically disqualified because of an outstanding car loan, but your debts will be taken into consideration. If possible, why not wait until you have paid off your major debts? Ask questions Another aspect that you may want to ask your lender about is mortgage insurance. Some people opt to take out a policy for their mortgage to avoid having to have their life insurance policies tied up in the transaction. For example, you can get insurance that will protect you in the event of your spouse’s death. Some lenders will make insurance mandatory if you are borrowing above a certain amount. The particulars will vary from lender to lender. All that being said, here is a general list from Scotiabank of what you may be expected to provide for a mortgage application. Be sure to double check with your particular lender for their requirements. Mortgage application checklist For mortgage loans: Agreement of sale Copy of deed/certificate of title Valuation report Copies of lease receipts (if applicable) Up to date land and building taxes and water rates Certificate of compliance Two forms of valid identification (identification card, Driver’s permit/passport) Confirmation of savings/debt Job letter Recent pay slip (If self-employed, evidence to support income, for example, financial statements for the last 12 months or more) Builder’s risk and comprehensive home insurance coverage For new construction loans: Approved building plans Builder’s detailed estimate Building contract Quantity surveyor’s report
WHEN PLANNING your purchase talk to your mortgage specialist, supplying the necessary details in order to determine what’s best for you. (FP)
FEBRUARY 24, 2013. SUNDAY SUN SPECIAL 9
A PROPERTY will probably be the most expensive purchase you make in your lifetime. And when you’re looking at spending hundreds of thousands of dollars, some people may look to cut out as many extra costs as possible. One of the ways they may look to do this is by neglecting to involve a real estate agent. While on the surface it may seem like a nice way to save some cash, the truth is that there is a reason why so many people have turned to real estate agencies for help.
Time is money The first reason of course, is time. Unless you have a flexible job that will allow you to take up house hunting as parttime employment, you may find it beneficial to use an agent. The hunting process can be very time consuming, and seeing as this is such a luxury purchase, wouldn’t you want to have someone on your side who will give your case their undivided attention? You want to make sure that you get your money’s worth, whether it is $100 000, $500 000 or $1 000 000.
Having the know-how Real estate agents’ most valuable asset is their expertise. They have literally been there, done that. Especially in a market as small as Barbados’, established agencies have had the time to know everything there is to know. While you may just go online and see a house that you like, a real estate agent can offer a more critical way of looking at a house. For example, is the house overpriced or underpriced? Does the house require major repairs? These are all things they will consider. Also, some agencies specialize in specific types of real estate, such as luxury villas. Choosing an agency with a niche may expedite your search.
Seeing the invisible When spending so much money, who wouldn’t want a deal? Some sellers choose not to publicly advertise for whatever reason, but will still list with an agency. Therefore, your “diamond in the rough” may be awaiting you, but by choosing not to hire an agent, you’ll never even have a clue. Let’s say that you really want an outdoor kitchen with a built-in barbecue. Even if your dream house is listed online or in the newspaper, the seller may not include that feature in the listing. However, it’s an agents business to know how many houses in Barbados have outdoor kitchens with built-in barbecues. Again, you could be missing out big time because you didn’t have an expert on your side.
Be prepared Do you have a lot of space in your current home? That’s what you will need if you choose to buy a house without an agent. Paperwork is a major aspect of purchasing a property. A lot of the paperwork can be convoluted with terminology and customs that you may not fully understand. But an agent will know how to complete the necessary paperwork like the back of their hand. I’m sure that after you set your sights on a house, you don’t want to lose out on it because of an avoidable error.
What next? After you have made the decision for or against an agent, you may want to familiarize yourself with the process. You won’t need to remember every figure for every step, but this is your money that you’re spending so you should at least be aware. Altman Real Estate has prepared a summarized guide about the process and some facts that you may not have known, whether you are buying land or a house. Of course, this list is by no means exhaustive and you should definitely speak with your agent or lawyer about how each of these relates to you and your specific situation.
The buying process The buyer puts in a verbal offer on the property they would like to purchase. Once the offer has been accepted, the buyer will require a registered Barbadian attorney to search the register and establish the title to the property prior.
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10. SUNDAY SUN SPECIAL. FEBRUARY 24, 2013
The contract is prepared by the vendor’s attorney, which provides for a deposit to be made securing the property. This ten per cent deposit is held by the vendor’s attorney in escrow until completion, when the balance of the purchase price is paid and the title passes to the purchaser by way of the conveyance. The remaining 90 per cent of the balance due is paid at time of conveyance. The title may be taken in an individual's name or through a corporate vehicle set up to own the property. It is usual in the case of non-residents of Barbados that they purchase property through a company which may be incorporated outside Barbados, but which must be registered to do business in Barbados.
Town and Country Development Planning approval If the purchaser is buying vacant land, the vendor will require a certificate of compliance from the Town and Country Development Planning Office (TCDPO), which certifies that the roads and services have been provided in accordance with planning guidelines. If the purchaser is buying a built property that is to be improved, or intends to build a property on the land, he will require planning permission from TCDPO. In all cases application is made to the TCPO and permission is usually granted within a period of two to six months.
vendor would normally incur sales commissions of five per cent, transfer tax of 2.5 per cent, stamp duty of one per cent and legal fees of approximately 1.5 per cent.
Annual ownership costs Residential land tax is taxed on the improved value at the following rates: 0 per cent on first $150 000 0.1 per cent on next $250 000 0.45 per cent on next $600 000 0.75 per cent on excess of the value greater than $1 000 000 A tax cap of $60 000 has been placed on residential properties. All unimproved land is taxed at 0.6 per cent of the site value. All other properties are taxed at 0.65 per cent of the improved value. Pensioners occupying their own residences shall pay land tax calculated and payable on only 50 per cent of the improved value of the property in excess of 150 000. Land used exclusively for agricultural purposes may be granted a rebate of 0.5 per cent of the land tax paid, some conditions apply. For villas, a rebate of 25 per cent of tax paid is granted on production of a Certificate from the Barbados Tourism Authority.
Property insurance Legal fees Each party bears their own legal fees, which are based on a scale of fees ranging between 1.5 per cent and two per cent + 17.5 per cent Value Added Tax. ALL UNIMPROVED LAND is taxed at 0.6 per cent of the site value. (RC)
Total selling costs Approximately ten per cent. When selling a property the
The main other operating costs would include insurance, which ranges from 0.4 per cent for residences; 0.6 per cent up to 0.8 per cent for commercial buildings; 0.9 per cent for hotels, and in all cases would depend on characteristics of the building and the site. Other major costs would include metered utilities and any common assessments applicable to master planned communities.
FEBRUARY 24, 2013. SUNDAY SUN SPECIAL 11
Out with the old
WHEN RENOVATING an old building one should pay special attention to the electrical wiring, plumbing and roof reinforcement. (FPs)
AS PREVIOUSLY STATED in this feature, buying an older house and remodelling it is definitely an option worth exploring. It is often a great choice for potential property owners who want a lot of the features of a newer home but can’t afford it, or those who simply prefer the charm of an older home. When considering this option, you should seek to educate yourself about the task you’ll be undertaking. You can never prepare for everything, but this is an expensive decision that you want to make sure you have thought through fully. You’ll start with a plan of the house that you intend to remodel. Although you can attempt to go about this yourself, it’s highly advised that you turn to an expert for such a potentially extensive and expensive job. As such, you should hire an architect, with whom you will sit and create a game plan. The final plan will then have to go to the Town and Country Development Planning Office for approval. Then it’s time to hire a contractor. Many advise that you use a contractor who is insured, if this is possible. You can also ask your architect to assist you with the process of selecting a contractor. The architect will then take on the responsibility of inspecting the site on a continual basis once the construction has begun. It will be the architect’s job to ensure that the contractor is fulfilling his mandate. Another duty of the architect will be the certification of funds to the contractor, including the release of the retention after all of the remedial work has been completed. Even in the most well planned, well thought out cases, you should still expect some type of delay along the way and some additional expenses. We have compiled a list of some of the issues that property owners planning a remodel may encounter.
Foundation This is a fairly obvious potential problem, because the foundation has to withstand the test of time. Foundations that aren't strong enough can crack, allowing water to penetrate.
Lead pipes While we are all well aware of the dangers of ingesting lead, there was a point in time when houses were built with lead pipes. Rather than embark on the vast task of replacing all of the pipes, some homeowners may choose to install a filtration system that will extract the lead from the water.
Electricity You should consider the year that your house was built and what codes and regulations were in place at the time. This ensures that you will be prepared for any surprises that may come when the construction starts, such as the electrical wires just being buried in the wall without any conduit or capping.
Hurricane protection In the past, houses may have been built with the roof trusses secured to the header by just a nail driven in at a 45 degree angle. While this initially serves its purpose, it can become hazardous in the event of a hurricane. You may therefore have to look into having hurricane straps installed, which will offer a stronger hold and can sometimes come galvanized to prevent corrosion.
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