Philippine Real Estate Investment Done Like a Pro

The COVID-19 pandemic hurt almost all industries in the Philippines and the world.

One of the most badly hit was real estate. The disruption brought about by the global health crisis in the country’s real estate sector manifested in the rise of vacancy rates and the decline of rental prices, among other indicators.

People could not afford to purchase properties given how everyone’s livelihood was affected by the intermittent and often prolonged lockdowns. Or, if they had the money to purchase, the precarity of the period discouraged them from buying.

It’s understandable if you opted to forego real estate hunting during the peak of the pandemic. But now that we’re almost out of the dark tunnel after two long years, it may be a smart decision to seriously consider investing in real estate again.

Rest assured that the sector’s prognosis looks promising, with mortgage rates hovering between 6% and 8%. Furthermore, developers have not slowed down in their goal to provide the best real estate options for Filipinos. And yes, so long as supplies abound, prices will stay competitive, which is excellent for prospective buyers.

But first, it’s essential to know the nitty-gritty of real estate investment. Here, we list down tips for first-time property investors.

1. Know Your Options

Real estate investment affords you a variety of choices. Your eventual pick will depend on why you want to invest, how much funds you have, and how hands-on you would like to be with your investment.

There are four main property categories you may look into.

Residential – This sector caters to people in search of their first or second home. Investors who want to rent out residential properties may also consider this type.

Options include condominiums, townhouses, condotels, and stand-alone residences. Each of these has its pros and cons. For example, a condo unit might mean proximity to business districts. On the downside, they may be less private compared to, let’s say, a house in a gated subdivision.

In terms of prices, expect to shell out more for residential properties within a major city or a well-developed suburb.

Commercial – Perhaps you’re looking to invest in real estate that will earn you money pronto. Commercial property is right up your alley. For instance, you may purchase a commercial building. You can lease out units for businesses to turn into shops or office spaces. You earn from rental contracts that may last between five and 10 years.

Other types of commercial real estate include hotels, malls, and restaurants.

Industrial – This property comes in the guise of warehouses, manufacturing buildings, cold storage buildings, and research centers, among others. Either you use an industrial property for your entrepreneurial pursuits or rent it out to existing businesses. This property type is quite lucrative these days given the rise of e-commerce, which requires brands to maintain large storage spaces.

Land – You can do many things with a piece of land. You can leave it alone and wait for its value to appreciate. Alternatively, you can turn it into a ranch or a farm. There’s also the option of renting it out to businesses, such as gas stations, restaurants, and malls.

2. Make the Right Considerations

When investing in real estate, here’s what you have to consider.

Purpose – Why do you want to invest? Confront that question head-on. Are you in it for quick profit or the long haul? The answers to these queries will allow you to strategize and narrow down your options.

Funds – Skip this consideration if you have saved enough money to pay upfront the total value of the real estate property that caught your eyes. If that’s not the case, it’s vital to assess your existing resources and current income stream.

Is a property purchase financially viable? For example, if you’re buying a house, you will have to pay between 10% and 30% of the contract’s price as a down payment.

Credit score – Chances are you will apply for a loan to fund your purchase from a credible financial institution, such as a bank. That is why it’s imperative to know your credit score before even attempting to submit a loan application. It will be the first thing that a lender will check. If you feel like your credit score could be better, prioritize paying outstanding debts.

Location – This is directly linked to property value. For residential property hunters, the crux of your decision is where your priorities lie. If you don’t mind paying more for the accessibility that a premium location in the heart of a business district offers, then so be it. If you favor the serenity of the suburb and you don’t mind the commute to and from work, that’s fine, too.

Growth prospect – Before deciding on a property, research the economic and social prognosis for the area. Keep in mind that the deterioration of the neighborhood in which your property is located will have a bearing on its market price.

Look out for red flags such as migration. There must be a reason why people are leaving a particular area. On the other hand, plans for the development of new schools and other lifestyle establishments are good signs that an area’s expected to flourish in the coming years.

Psychological baggage – Look into a property’s history. For example, if you’re buying a commercial building, make sure that it’s not the spot where a well-publicized crime or accident happened that involved fatalities. That’s what psychological baggage means. And so long as people remember, the property suffers.

3. Learn Real Estate Investment Hacks

There are ways to make real estate investment easier, even for a newbie. Here are some ideas.

Read the news – Here, we mean the business pages. Keep abreast of what is happening in the real estate sector. Know real estate trends as they happen. Doing this will allow you to make an informed decision regarding when to buy or when to sell.

Look out for foreclosures – Always be on the lookout for properties about to be foreclosed. They are often sold below market rates. If you’re looking for a quick profit, this is one viable strategy to include in your real estate investment arsenal. Here, it’s best to have close ties with bank personnel since they are the first people to know about properties at risk of foreclosure. You may also visit websites, such as Foreclosure Philippines.

Go pre-selling – This is one way to maximize capital appreciation. Just make sure that you are dealing with a reputable developer. Ideally, they will deliver as promised. Look into past projects to know for sure.

Flipping property – Are you in the real estate market to make serious money as quickly as possible,? Flipping a property might be your thing. With flipping, you purchase fixer-uppers to improve and to resell. If you become an expert at flipping houses, it can become a full-time job that will earn you significant riches. To get a competitive edge, surround yourself with reliable real estate agents who will tip you off every time there’s a promising fixer-upper in the market.

Refer to data – Never purchase a property based on speculation. Always refer to credible and foolproof data. Compare and contrast the contract you are offered with actual contracts of properties sold within a specific area from both the present and the past.

Keep scrolling – Check online marketplaces for real estate deals in your city, town, state, or country.

Be smart with financing – Don’t cut corners in this regard. Do not sign above the dotted line unless you know for sure you’ve studied all your options. Banks and financing companies look for customers, and you are one. They will fight to seal the deal with you, so maximize that upper hand.

4. Know the Process

When purchasing property in the Philippines, you will likely need the following documents:

1. Contract to Sell (CTS)
2. Deed of Sale
3. Condominium Certificate of Title
4. Declaration of Real Property (Tax Declaration)

Here’s a rundown on the purchase process.

1. The seller and buyer agree on a property sale.
2. A real estate lawyer will notarize a Deed of Absolute Sale (DoAS).
3. The BIR sends a Land Tax Declaration to both parties. They submit the document to the Municipal Assessor.
4. The buyer goes to the Municipal Treasurer’s Office to pay Real Estate Tax.
5. The Municipal Assessor determines the legitimacy of the property’s declared market value.
6. The buyer goes to the Municipal Assessor to pay transfer taxes.
7. The buyer goes to BIR to pay the Documentary Stamp and Capital Gains Taxes.
8. The Registry of Deeds voids the old title of the seller and awards a new one to the buyer.
9. The buyer visits the Municipal Assessor to request a tax declaration.

Final Message

It’s not enough to save money and call it financial acuity. To achieve robust financial health that will see you through until your retirement years, it’s essential to place your money where it can grow exponentially, if possible.

In that regard, you can’t go wrong with real estate investment. For starters, you have different types of property to invest in. You’re sure to find one that best suits your needs and priorities. And whichever option you pursue, you are assured of a stable and profitable investment.