| source: http://community.housing.queensu.ca/ |
Property business is also for young and not-so-rich
By: Michelle V. Remo
Philippine Daily Inquirer 11:21 pm | Saturday, August 25th, 2012With interest rates at historic lows and supply being abundant, the time is ripe for investing in real properties.Contrary to common notion that it is fit only for big enterprises and the extremely rich, the property business is also something the young professionals and the not-so-rich can engage in.“While an individual is young, that is the best time to start building one’s property portfolio,” Carl Dy, Property sales coach and Ayala Land Premier sales director tells SundayBiz.Ayala Land Premier is the developer of the group’s most expensive projects.At 34, Carl already has several properties in his portfolio from which he earns extra income, mostly from rent.The property sector in the Philippines has continually grown over the past three years as evidenced by the growing number of condominium buildings among other real assets.Because Asia is seen to continue driving global economic growth in the years to come, emerging markets in the region like the Philippines are expected to be keeping a robust growth as well.Carl says that at a time of economic boom, the property sector is one of those that benefit the most. As incomes rise, he says, demand for properties grows as well.Given this backdrop, he says, business-minded individuals should easily see the income opportunity over the medium to long term from investing in real properties.“Stars are aligned right now. Because of the economic boom in Asia, the benefits are trickling down to the Philippines. Almost all sectors are enjoying good business, and the property sector is not exempted,” Carl says.(click here to read full article)
It is easy in a sense that one you have purchased and have cleared the papers you really don’t have to check it on a day t day basis(in the case of a parcel of land) or even have an operating capital to run it. Maintenance will be spent on as needed basis and you really don’t need to employ people to look over or run it. It is difficult to handle because property is a tricky investment. You may have bought a very cheap property but the surrounding neighbors might not be as friendly or as peaceful thus you will surely have a difficult time to sell it or if you will be renting it out you will have a hard time looking for tenants.
Besides such, property valuation differs from time to time (I guess except for land which should be in an upward direction only). For condo in the urban areas at times prices might go up due to the boom or at times it could be down because nobody is buying or everyone is on tight finances. At times changes in traffic or if the area got flooded people who where thinking of buying a property might change their mind and in the end if everyone has a notion of that area being prone to flooding of course the value of the property will also go down in order to sell it.
But above all remember this, such real estate or property only becomes an investment if you derived profit or income from it.
This is a common mistake on us Pinoys that having a dream house is an investment: it is not.
An investment should always be a profit generating profit asset which could happen in a short or long term. Real Estate is on the long term side. It is common to hear among employees that they have made or they have fully paid their investment which is the very house they live in. If I ask you would that house where you live in bring food in your table? Of course not.
Thus we should always have that clear idea of what is an investment and what is just a house which we call home. Thus buy assets to be rented out in order to reap income form it thus we can call it an investment.
Right now it is the best time because of the low borrowing rate we enjoy at the same time enough jobs are available to the young professionals and thus the buying capacity is there. Always remember though what Carl they mentioned about buying a real property investment: cheap does not necessarily translate to good investment, you still have to do lots of learning and investigation when buying a property.
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| source: http://smdc.com/blue-residences/gallery# |
Louis Delos Angeles is a Certified Public Accountant, blogger behind Investing in Philippines, and author of Investing in Stocks: Preparing for the future small amount at a time. Check him out in Google+ Learn more about Louis and his financial freedom advocacy here.
Real state can be a good or a bad investment, all dependes in the price.
I believe that there is a bubble in Philipines, or at least is on the way, it will burst and a lot of people will loose the money, we see that every day in western countries.
It is not healthy that agents are trying to sell you properties everywere, there are advertisments in all the magazines, they come to you in the street even in malls in Davao they were trying to sell me properties in Manila.
For me it is a clear sign of over construction.
By the way I own two units one with Ayala in BF an another with Megaworld in McKinley H
Sir Louis,
I also own a condo, and I plan to have it rented.
Do you have ideas on the ins and outs of rental income (taxes, documents, contracts etc).
Thanks!
Carlo
Some analyst do see a possible real property bubble with all the condo here and there and I don’t say that one should just into investing in real property. I hope that befroe you buy real property is that you do your due diligence. Those property that truly stand out and are in a very good location and of good building quality and also add one that is well managed in case of condo units will surely stand still when indeed there is a bubble coming. Also renting it out is an alternative, if the price of property goes down you could still rent it out but again it would be a very competitive arena since everyone would know that it should be cheaper.
on the ins and outs of rental property not that yet. All I know for now is if you are renting more than a number of units or what they say is “doors” or “butas” you have to secure a business license and if your monthly rental exceeds a certain amount you should be register for a VAT and have to inculcate the 12% Vat in your monthly income. Will check it when I get a chance man 🙂
And of course the rental is a form of income thus you have ot report it as part of your income tax that is if you are reporting and if your net taxable income will be within the tax bracket 🙂
Just made a quick check on BIR’s site, Rental income from real property or personal property(like cars etc) in excess of 10k annually is subjected to expanding withholding tax of 5%. This means you will be paying the prescribe withholding tax monthly but at the end of the fiscal year you can deduct such deducted withholding tax to your income tax and whatever is left is your income tax payable.
For the VAT issue on lease or rental you can check out this post from Foreclosure Philippines at this link http://www.foreclosurephilippines.com/2011/11/threshold-for-vat-exemptions-to-be-increased-effective-january-1-2012.html
let me clear that a bit 🙂
you might either pay a percenatge tax or VAT depending on the threshold set and also you might be covered by the expanded withholding tax if you exceed a certain threshold. I gotta polished my tax laws been a long time since applying Philippine tax deduction to my day to day transactions 🙂
I don’t live in the Philippines and I don’t pay taxes in the Philippines, I have to check the taxes I need to pay in that case…
Regarding tax laws, agreed with paying either the percentage tax or VAT for the rental income.
My thoughts on condo investment:
I have not read an agreement for condo purchases before but I am just wondering, what is it that you buy from condo developer - is it ownership for the piece of unit in the building or just the rights to have it?
Say 50 to 70 years from now, upon the deterioration of the useful life of the building, will the unit still be yours or will be given back to the developer? Or will the developer give you a certain value for your unit?
- - -
On real estate investing per se, I would still go for buying a land or a land that already has a house on it, rather than getting a condo unit.
It is freehold ownership, I agree land is a good investment, of course it depends on the location… I’m looking into busuanga for that.
Also land is more volatile than condo units.
hi Lynlyn,
ownership varies from one developer to the other.
in my case, the unit will not be returned to the developer. Hence it’s ours forever.
i chose condo, as it is easier to be rented out. good proximity at CBD, relatively safer and flood proof.
When planning to go into real estate business, make sure to check all necessary details in the market first like accessibility, price, marketability and so on. This way, you can be guaranteed that your business will not go zero.
Nice exchange of thoughts guys really appreciate it.
Well we have different reasons for investing in real estate whether its a condo or land, the bottom line is we want to have a source if passive income and in either investing in condo or in a land with structure we could achieve such. We all have good points and that is true because it all depends on location and accessibility of the property. The recent flood in Metro Manila made an impact that condo living is indeed a good investment in the urban areas while a lot situated in a very prime location will surely have lots of bidders for possible commercial establishment or probably if you really have a huge lot a subdivision project.
Tax wise be always aware of the limits for rental. Paying VAT is problematic due to the attached special reporting requirement but it does help you out if you have other business that has to pay VAT as well, that is you can offset it…… man I really need to relearn all tax rules in the Philippines….sis Lyn Lyn is there a crash review for such?
@Dalamar: Hi there. I’m just wondering: Are you also a Filipino? It seems to be a small world - because I often see your username in other blogsites I frequently visit. 🙂 Busuanga is a great place, especially for tourism. Are you planning to convert such place to a rest house/resort?
@Carlo: Just my curiosity and questions on condo investment. What will happen to your unit say 50-70 years from now when the building has deteriorated? What does it say in the contract about that? How about with the building per se, who owns it?
@Kuya Louis, I have never heard of any crash course for our Philippine tax rules (I am interested to re-learn again, if there’s any). But try to buy the book of my tax professor, Sir Tamayo. His book is really simple, straight forward and easy to follow. I learned to love tax rulings because of his teachings. =)
@Lyn Lyn, I’m not Filipino, I’m Spanish, my wife and Doughter are Filipinas… We live in UAE.
I have two websites: http://www.dalamarblog.com and http://www.buscandolalibertad.com both in Spanish.
This is me basically: http://www.linkedin.com/in/dsobrado
wow never thought that great minds will come here to my humble blog. Sis Lyn will look for Professor Tamayo’s book, Carlo keep on asking and answers will surely come, Mr. Dalamar muchos gracias for your inputs
@Kuya Louis: I’m waiting for Carlo’s answer to my question, but I guess you can also answer it since you have a condo investment. (I have not read any condo investment contract that’s why my questions are based on curiosity and based on my learning about building deterioration.) Have you ever thought of what will happen to your condo unit if the building will deteriorate, say in the next 50-70 years from now? Is there any stipulation in the contract regarding the “useful life” of the building? Isn’t it that the developer has the right to the building? At the time of demolition and constructing improvements to the building, what is your right as a condo owner?
@Dalamar: Oh, so that’s the reason why your websites are written in Spanish. =D Glad to meet you here. I’ve recently been in Spain and it’s the BEST place to go shopping for ZARA!!! =D Have you been eyeing a property in Busuanga?
In Busuanga I saw Fernavale as the only subdivicion in the area:
http://filrealtor.wordpress.com/lots-raw-lands/fernvale-coron-palawan/
But after some research the papers don’t like right, and there might me legal issues with it.
I checked land plots but it is a tricky thing, there are a lot of rules and possible issues, I need to spend more time on-site.
And I still have the problem of the squatters, I need to have someone to take care of the land.
@LynLyn
The unit will still be mine after 50+ yrs (supported by a certificate of condo unit title).
It was not stipulated in the contract though. BUT.. It’s also NOT stipulated that I have to return the unit after ‘N’ yrs.
I asked the agent about that, plus other unit owners before buying. Just the same, the unit will still be mine. If it has to be returned, then it should have been in the contract.
About the ownership of the building, it’s like this: the developer owns the common area, while the units (and parking slot) is owned by the buyers.
I hope this helps 🙂
@Dalamar: I have been to Busuanga before, but it’s more of leisure and travel. =) It’s a good place for relaxation because Palawan is one of the best spots for tourist destination in our country. Indeed, in property investing, we need to perform due diligence prior to purchasing the properties. Do you have any person that would be able to check properties for you in Phils? How about investing in Davao? It’s also one of the best cities in the country - with tourist spots just nearby. =)
@Carlo: Thanks for that. But, uhm..ahm…I’m quite not convinced. =D Sorry (I don’t sound to be mean. I guess it’s just the nature of my job to always have that “skepticism” in terms of written agreements. Ask Kuya Louis!!! he he). Uhm…I guess I just have to request for a copy of a signed condo contract agreement from my friend to read the terms and conditions of condo investment myself. There’s been quite a number of agents who emailed me proposals of this kind of investment. Aside from considering the property location, I also just want to make sure about ROI, payback period and ownership rights. =D ^__^
Busuanga is closer to Manila and is nicer than Davao, also safer.
I’ve been in Davao several times, the subdivisions in Samal island are quite expensive, I tried to find some land for sale in Talicud island but I need to change my strategy, as soon as they see that I’m a foreigner they raise the price a lot.
I do have people in Manila, Cebu and Davao to help me with the legal paperwork and due-diligence, but not in Palawan.
I’d like to buy in Palawan as a retirement place, hopefully I’ll retire young 😉
@Dalamar: I understand about the high prices - it’s also the same for us Filipinos who are working abroad. I’m just lucky that I got trusted people who make sure that properties are within the market/zonal value before I buy them.
All of us would like to retire young. And I wish you and your family well in this endeavor. 🙂 We’re grateful to know that there are foreigners like you who express their appreciation of retiring in our country. =)
@LynLyn
Haha! That’s perfectly fine 🙂 I didn’t really “sound” convincing in the first place 🙂 Plus, I’m no expert. Not even close.
Hope you’ll have your real estate investment soon 🙂
Cheers!
wow I just slept and what a discussion we have here 🙂
@LynLyn @Dalamar
One of the Facebook groups I am with has this one discussion about why Subic and Pampanga International Airports are under utilized and that is its far from Manila. I guess it’s time for Philippines to develop other areas in the Philippines like Subic and Pampanga in the north to lessen the overcrowding in Manila. But as you have mentioned issues will be safety and accessability. I believe with companies like MPI who are investing in infrastructure in the near 5 to 10 years such will be achieve and investing in areas like Palawan or in Ilocos or as far as Davao or Mindanao areas will sure come.
@LynLyn @ Carlo
I am not also an expert on condo things I guess I have the same answer for your question sis LynLyn.
But I also have another POV on the matter. The condo building is like a corporation where unit owners are like stockholders. We as stockholder can transfer the ownership to anyone and of course the condo building like any other corporation should continually do its best to preserve it beyond 50 years(see that even the stipulated years of existence is like that of a corporation).
Now the point here is that how are we going to make money out of it?
as Dalamar mentioned as long a sit is in a good location, it is safe, its soroundings is safe surely money will come. And I guess we should treat a condo as a business in order for us to really make money out of it. That comes with advertising, maintenance, and some perks when you rent it out like semi-furnished or the rent includes the cable bill.If we dont look at it like that surely ROI wont be made.
That is why I mentioned that there is a big difference between looking at a real property as an investment and as an asset.
@Kuya Louis: check, check, check! 🙂 I’ve been doing online trainings for the last weeks regarding alternative assets, and real estate belong to this category. [Slack season kc ngaun sa audit. Hehe]
@Carlo: Yes, I was blessed to have started with real estate investing na. =) I got one when I was still working in Makati (but I consider it more personal rather than investing), and I got another one just few months ago, which nag-start na to be rented out. =D And I’m blessed na nakuha ko ang mga properties na to from people who need ready cash for their own personal reasons. 🙂 Kaya less hassle. ^__^
Better invest in real properties such as rawland and speculate on the development that are in the pipeline already. Our family own an land in Malvar Batangas and is now For sale. The area is going to be an industrial zone already after more than 15 years of us holding on to it. its a 9570 square meter lot which is a stone throw away from CALABARZON Expressway and is a walk distance from the public market on its northern side. A batching Plant actually offered to buy the land but we arent amenable to the price as we expect that they’re the one who will reap big returns on re-sale should we agree to sell on their price as well as seeing the scenario that a batching plant would’nt actually position itself in the area if it doesnt have a couple of big projects already on the list. Please check the link below to those interested to buy our land. For P15M as of today, this price is applicable within 30days. should you wish to buy this please contact me at 09186812928.
http://www.sulit.com.ph/index.php/view+classifieds/id/6579466/Deguzman-Unigo+Industrial+Property+For+Sale
Thanks for sharing!Let me know when you sell that real property and share your stories here in my blog.
Thanks for always proving valuable content like this one. I agree that investing in real estate is one of the very lucrative ways to build passive incomes.