Investing in real estate is among the popular routes for Filipinos in increasing their wealth. But given the volume of real estate properties being put up, investing in real estate, which involves millions of loaned or hard-earned savings, becomes a terrifying prospect.
In his talk Basic Investment Principles for First-Time Home Buyers at this year’s Philippine Property Expo, National Real Estate Association Chairman and Century Properties Senior Vice President for Sales Andy Mañalac lays out 9 basic principles on investing in Philippine real estate.
1. Know the difference between investing and speculating
Mañalac said that first-time home buyers need to know the difference between investing and speculating. Ready-for-occupancy (RFO) projects are said to be relatively safer as they can be turned over immediately upon contract sale and completion of mortgage requirements, of which home buyers can put up for rent. He cautioned that home buyers need to be wary about investing in properties that have yet to be built for the next 5 years or only offer returns after real estate prices rise over a certain period of time, like pre-selling projects. On the other hand, he said that if home buyers do prefer investing in pre-selling properties, they need to make sure that the properties are:- presenting a very good potential for capital appreciation;
- from a reputable property developer with a proven track record in terms of committed date of property turnover and quality of completed projects;
- finished within the next one to two years.
2. Invest in income-generating properties, or investments that generate positive cash flow.
First-time home buyers generate rental income when investing in office, retail, residential, and multiple-dwelling properties. Parking lots are also income-generating properties too, especially if it is situated in urban communities like townships and business districts. For home buyers who have access to bigger funds, investing in luxury properties can generate higher rental income as it has better potential for capital appreciation.
Related Content: 8 Tips to Buying a Pre-Selling Condo, Pros and Cons of Investing in Pre-Selling Property, Why People Invest in Luxury Properties3. If you will invest in a property that does not generate rental income, you need to make sure that your personal income can support the mortgage until the time the property is sold.
Flipping properties is a real estate practice wherein an owner sells a property at a markup price. Flipping is one way to earn high returns in a short period of time if you have enough resources to add value to the property and have the financial capacity to pay the mortgage until there’s a buyer who is willing to pay for your asking price.
Mañalac recommends home buyers to have at least 6-months’ worth of buffer funds to pay for the amortization. This is to ensure that home buyers are protected from unexpected delays in renting out or flipping their properties and from unexpected expenses that might prevent the buyers from paying their monthly amortizations.
Related Article: 8 Expenses First-Time Home Buyers Overlook4. Do not invest on impulse. Make a plan.
For first-time home buyers, Mañalac said that planning is an essential first step in real estate investing. This is because first-time home buyers often have very limited resources, time, and experience in investing.
Related Articles: ZipMatch’s Metro Manila Buying Guide: Helping Filipinos in Proper Home Buying, First-time Condo Buyers Checklist, Going Beyond the Brochure: 11 Things You Really Need to Know About Your Potential Home5. Set realistic goals.
How much do you really want to make? How long can you really wait to get earnings from your real estate investments? These are among the main questions first-time home buyers should ask themselves when they decide to invest in real estate, Mañalac said. Real estate should be considered as a long-term investment and should not be seen as a get-rich-quick scheme.
Related Articles: How Does Rent-To-Own Work in the Philippines?, 9 Common Real Estate Modus Operandi to Avoid in the Philippines6. Do your due diligence on the location and on the property type.
Mañalac said real estate investing is not as easy as what some real estate agents present in brochures or flyers. Price or payment terms are not always the main reason why first-time home buyers should invest their hard-earned money. Because it is a major decision, Mañalac encourages home buyers to do research in advance before making that decision to buy.
Researching information about prospective properties is now easier, thanks to the Internet. Home buyers now have access to explore properties on a single page.
How To Spot a Good Real Estate Investment
There are three major factors that make a property a good real estate investment:
- Location
First-time home buyers are urged to purchase value-created projects or projects that lend value to a location. For example, home buyers should eye properties that are situated within a development, like Bonifacio Global City or central Makati, which is now undergoing a redevelopment phase. These properties are expected to provide long-term returns to the owners.
- Information
Advance information will always be handy, Mañalac said. He added that home buyers need to read, research, ask questions, and go to a real estate broker who can give you broader professional advice. Having the foresight on the growth potential of a property involves knowing what’s happening around you, in the country, and the economy.
- Timing
Mañalac said that real estate is the only investment when there’s no mistake that can’t be corrected by time. On the other hand, he advised that home buyers should not wait too much, especially if they have limited resources. For example, he said foreigners usually purchase properties that they can see, use, and rent out immediately to reduce the risk of losing money.
7. Hire an expert.
Because you are investing your hard-earned money into buying properties, it is important that you hire the services of a real estate expert. An experienced licensed broker will not only aide home buyers throughout the buying process, but will be the go-to person come the time when you need to cash in your investment in terms of rental income or profit from flipping.
Related Articles: Why You Should Use a Real Estate Broker, 6 Reasons Real Estate Brokers Are Still Around in the Internet Age8. Know first how much can you borrow from the bank or from Pag-IBIG Fund.
It is very easy to own a home nowadays, Mañalac said. However, first-time home buyers need to know their capacity to borrow before making inquiries about properties. This is because home buyers need to make sure that they can afford the costs of not just buying, but keeping the property as your own.
Related Articles: Applying For a Pag-IBIG Loan For the First Time, Tips in Applying for a Housing Loan in the Philippines9. Compare properly.
If there’s one standard all real estate investors should live by, Mañalac said it should be this,
Look for the properties which have the highest potential. Never, never pay for services just because the price is cheap…Look at the potential and the risk of the property, not just the price.
First-time home buyers need to compare properties under the following criteria:
- By home features;
- By home amenities like swimming pool, function rooms, and parking spaces;
- By square footage;
- By sale prices or rental rates around the area;
- By property development;
- By construction quality, and
- By location and accessibility.
Are there any questions about real estate investing that you would like Andy to answer for you? #AskAndyPH by leaving your question as a comment below.
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