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With recent changes in the country, many Filipinos are looking to invest in property to generate passive income. One of the best ways to do this is by investing in real estate.
Real estate investing can be a lucrative business if done right. Real estate investing can be done in a multitude of ways with many different business models.
Some investors are looking to make a passive income while others are looking to make a full-time job of it.
Moreover, Real Estate Investing has become more popular in the last few decades. One of the many advantages of investing in real estate is that it is a passive income stream by renting out your property on a monthly basis or yearly.
With that in mind, if you are a beginner to this, this article will be your guide as you go onto the financial freedom brought by real estate investing in the Philippines.
01 of 09Rental Properties as a Real Estate Investment
Rental properties are a great way to earn a good return on your investment, and you’ll be able to get a property in a very short amount of time. If you own a condo unit around a Business District City, like in BGC or Makati, you’ll have no problem getting a lessee since most of the multinational and local offices are located in this area.
Rents tend to be more expensive in this area because of its prime location so be sure to conduct a thorough background check on your possible tenants.
It’s important to lease your property at a reasonable price and on par with the current market price so both of you win. You can offer incentives for longer tenants without increasing the rental fee for a specific period this gives a solid cash flow on your end.
But keep in mind that renting out properties means that you’ll become a landlord. So you’ll be responsible for things like mortgage, taxes, insurance, maintaining the property at its best, finding tenants, and dealing with any problems that may arise.
Now, you have a property that’s an asset that is self-sustaining and paying for itself.
02 of 09Flipping Houses
Flipping houses is a legitimate way to make money in real estate. But what exactly is flipping houses? Flipping houses refers to the process of buying a property, renovating it, and then selling it for a profit. You can also use this strategy to build your portfolio and turn them into self-sustaining assets in the future.
In order to flip houses, you’ll need to do your research. You’ll need to determine the value of the home, what you can do to make the home more appealing to potential buyers, and what you’ll need to spend. You’ll need to spend the time and money to make the home stand out from the rest of the market.
Buying and flipping a house is a time-tested way to make money in real estate. If you have the right skills and knowledge, flipping houses can be an excellent way to build wealth.
There are 2 primary approaches to house flipping;
- Repair and update. This is the most common approach. As an investor, you’ll buy a property in a good location at a cheap price. You will be needing to repair and update any necessary renovations to make it look more appealing to buyers. Once all the repairs are done, you can put the property on the market and sell it at a profitable price.
- Hold and resell. This approach is perfect for investors who want to buy a property in a very rapid market, hold it for a while, then sell it with a profit.
In the Philippines, the common flipping house strategy is the 70% rule where you should not spend more than 70% of the home after repair value and the cost of renovating the property.
You will need the following documents to start in buying your real estate property.
These documents must be obtained from the Register of Deeds:
- Certified True Copy of Transfer Certificate of Title (Land)
- Certified True Copy of Condominium Certificate of Title (Unit)
- Certified True Copy of Condominium (Parking – if applicable)
The owner or broker must procure these documents from the Assessor’s Office:
- Certified True Copy of Tax Declaration (Land)
- Certified True Copy of Tax Declaration (Improvement / Building)
- Certified True Copy of Tax Declaration (Condominium)
- Certified True Copy of Tax Declaration (Condominium parking, if applicable)
- Real Estate Tax Clearance for Current Year
- Certificate of Non-Improvement if the property is bare and without structures such as a house or a building The Property Owner should also secure the following documents.
- Certificate Authorizing Registration from the Bureau of Internal Revenue (BIR)
- Original Real Estate Tax Receipts – Current Year • Lot Plan / Subdivision Plan
Risks of Flipping Houses as a Real Estate Investment
Flipping houses as a real estate investment can be a risky business. One of the biggest risks is when you are not able to sell the investment property for the same amount you bought it for. In order to avoid this, you need to make sure you are paying yourself a good return on your investment.
Remember, you need to know that you have the skills, capital, and exposure to investing in a flip before you buy a house.
03 of 09REITs or Real Estate Investment Trusts
Real estate investment trusts, or REITs, are a type of investment that shares an ownership interest in a company in the real estate industry. They typically invest in real estates, such as apartment buildings, commercial buildings, and shopping centers.
REITs are also known as real estate investment companies or asset-backed securities. They offer investors a way to invest in real estate without having to go through the process of buying a physical property.
There are a few different types of REITs, but the most common are those that are publicly traded on the stock market. REITs are also known as equity REITs, and they typically have a dividend payment.
The following are the best REITs in the Philippines this year:
- Ayala Land REIT (AREIT)
- DoubleDragon Properties REIT (DDMPR)
- Filinvest REIT (FILRT)
- Robinsons Land Commercial REIT (RCR)
- Megaworld REIT (MREIT)
- Citicore Energy REIT (CREIT)
- Vista Land REIT (VREIT)
You can also use the following accredited broker by the Philippine Stock Exchange:
- BDO Securities
- COL Financial
- BPI Trade
- First Metro Securities
04 of 09Real Estate Investment Groups
Real estate investment groups are groups that are made up of real estate investors and entrepreneurs that pool their money together with the goal of investing in real estate in order to make a profit. The group is typically small and this works best for people who don’t want the hassle of being a profit.
In order to invest in a Real Estate Investment Group, you have to find a viable and reputable company because that’s the safest way to enter it. If you invested in a non-reputable company with no promising profit, you might put your money on the table and empty your portfolio.
To give you an idea, the following are some of the many Real Estate Investment Groups in the Philippines.
- Manila Investors – Real Estate, Stocks, and Other Assets
- Highground Financial Education Meetup
- Manila Stock Traders Group
- Real Estate Investing Meetup Group ESME Philippines
05 of 09Real Estate Limited Partnerships
A real estate limited partnership (RLP) is a type of investment that has the same legal and tax benefits as a general partnership. While the partnership only exists for a certain period of time, it is still considered to be a form of partnership.
The partnership is required to have at least two members, one of which must be the general partner. The general partner is the one who manages the day-to-day operations of the partnership, while the limited partner is the one who invests in the partnership. The limited partner has a stake in the partnership. The limited partner also has the right to receive a share of the profits and losses of the partnership.
Real Estate Limited Partnership in the Philippines to look out for are:
- Ortigas Land
- Robinsons Land Corporation
- DMCI Homes
- Ayala Land
Benefits of Real Estate Limited Partnerships
Real estate limited partnerships are a way for people to invest in real estate without having the personal liability associated with owning the property outright. It also offers the same benefits as the Real Estate Investment Group where you can forget to be the landlord and manage the hassle day to day maintenance of the property.
Now that you are aware of the different real estate investments you can put your money into, let’s now talk about the benefits of investing in real estate.
06 of 09Benefits of Real Estate Investing
Real estate investing is an asset class that is an attractive option for both investors and consumers in the Philippines. In fact, it is an industry that gather an increase by 2.4% for the first quarter of 2022, while it is said to continue receding up to 2.7% by the end of the year. This article will outline the benefits of real estate investing and will focus on its benefits of it for investors.
- It offers a diversification of portfolio
The benefits of investing in real estate, especially as a beginner investor, can be hard to find. Most beginners make the mistake of taking a risk on a particular type of investment in the hopes of maximizing their returns.
- Strategy for diversification
The best way for beginners to develop their real estate investment portfolio is by investing in a variety of property types. Diversification is key to success. This means that if possible, invest in the different types of real estate mentioned above – this is so you can have diverse profitable opportunities.
- Hedges the inflation
Investors who want to benefit from inflation should consider investing in real estate. When inflation increases, real estate prices go up as well. In this case, it is beneficial for investors to purchase real estate before inflation and sell it after.
However, it is important that they do research before jumping in and make sure they are not putting their money at a loss. Investors should not be blinded by the market but should take a step back to understand the market better and see where the opportunities are.
- Offers passive income
Passive investing is investing with the goal of making money without having to actively manage the investments. This means you don’t have to be in constant contact with your investments and you don’t have to constantly check on them. When you invest in passive investments, you are investing in companies that are doing well. You are basically investing in the future of these companies. This is a great way to make passive income through real estate investments.
- Provides tax advantages
When you invest in real estate, you can write off your investment on your taxes. You are able to deduct the cost of purchasing the property, improvements to the property, and the property’s value. You can also write off expenses such as travel and relocation costs, as well as depreciation on the investment. The savings can be substantial, especially when you are in the early stages of investing in real estate.
Read More: Online Cash Loan & Payments In The Philippines 2022
07 of 09Foreclosed Properties
Knowing the right opportunities is one of the best investments you can make. And one of these is foreclosed real estate that is available for sale at a discounted price or auction. Be on the lookout from time to time since the listing of foreclosed properties are updated without prior notice.
Different real estate types are for sale like House and Lot, Condominium, Townhouse, Commercial Space, Lot only, and Apartment.
You can check the lists of several foreclosed properties in the following government agency and local banks:
- SSS Foreclosed properties
- Pag-IBIG Foreclosed properties
- BDO Properties for sale
- Security Bank
- BPI Properties for sale
It’s important to do your due diligence and schedule a site visit with one of the real estate agents to make sure that the property listed is the same property that you visited. Make sure that all important documents are verifiable, especially the estate title and any outstanding estate tax or currently has a tenant.
08 of 09Step-by-step plan to invest in Real Estate as a Beginner
First, line up your capital and financing options
Investors often need to line up capital for a down payment for a property. That can be done in one of three ways: credit cards, loans, or the investor’s own savings.
Next, invest slowly and consider passive income investments like REITs
Real Estate Investing is a long-term investment and not for beginners. If you are interested in investing in real estate, it is important to do your research and start with a small amount of your money.
To get started, you should try to use low-risk investments like real estate investment trusts (REITs) or Real Estate Mutual Funds.
Become a Real Estate Expert to move on to active roles in Real Estate
Becoming a real estate expert is a tough job. It takes more than just having a couple of courses under your belt. Remember, if you want to learn about investing in property, you can’t do it alone.
You will need to learn from others in the industry, or you can get started by taking courses, watching videos, and reading real estate investment books to give you a head start.
Once you have a passive income and are confident to invest in an active role such as flipping houses, buying and selling, and going through Real Estate Investment Groups – that’s where the real challenges and risks begin.
Know the risks in Real Estate and talk to industry professionals
Before you make any investments, you should speak to industry professionals. They will be able to tell you the risks associated with investing in real estate and give you advice on what you need to do to minimize the risks.
They will also be able to help you figure out what level of experience you should obtain before investing in real estate.
09 of 09Conclusions
It is true that investors are sometimes tempted to invest in real estate with the hope of a quick profit. However, that isn’t always the case. It can be difficult to determine whether real estate investing is a profitable investment or not – especially if you didn’t do any research.
Real estate investing is a profitable investment when done right. However, it is important for you to know what it takes to be successful in real estate investing. It takes a lot of hard work, dedication, passion, and knowing the basics.
But once you got it right and you are confident with the knowledge you have, the benefits of real estate investments are well worth it.
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