Investments are sources of passive income that can help you boost your wealth. Passive income is “money being earned regularly with little or no effort on the part of the person receiving it”. Investments may be in the form of shares of stocks, bonds and property investments. Financial advisors advise that you first pay off your debts, or at least have them updated, and secure insurance plans before investing. This strategy can ensure that your capital and earnings are reinvested and not diverted into debt payments or unexpected expenses.
Real properties are preferable investment tools in the Philippines for a number of reasons. First, there's an unabated demand for rental properties, promising a steady stream of rent income. Second, a property for rent requires minimal monitoring compared to stock investments or a retail business. Third, rental rates in the Philippines do not fluctuate; they have been on an upward trend for the past decades. Finally, property values, similar with rates, have been consistently rising for years.
Here's your easy guide in property investing.
House, apartment or condo?
Choose a property that suits your purpose, target market and budget. Do you plan of renting out a property to students and young professionals? Do you prefer short-term leases for vacationers? Are you looking for a property that you can also use for your personal purposes?
In Metro Manila, you can buy a house & lot, apartment, townhouse or condo space. A house & lot and townhouse are generally more expensive than an apartment or a condo, and they are more suitable for long-term leases. Many investors prefer renting out in an apartment complex or condo communities because of affordability, accessibility and flexibility – you can rent it out to travelers or students staying in the city for at least 6 months.
Can I own a property in the Philippines?
As a general rule, only Filipino citizens and corporations or partnerships with at least 60% of the shares owned by Filipinos may own or acquire land in the Philippines. Foreigners may buy condos or buildings. Former Filipino citizens, or natural-born Filipinos who acquired foreign citizenship, may own up to 5,000 sqm of residential land and 1 hectare of agricultural land. Thus, whether you're a Filipino or a foreign national, you can buy a property at DMCI condo.
Explore a feasible payment plan with your broker
The best way of going into property investing is to purchase the property in cash, if possible. This can save you from paying loan interests. If you're not ready to pay entire purchase price, you can work with your broker on a payment plan that suits your budget and cash flow. Aim to place in a large down payment to reduce your costs.
Under the the Maceda Law (Realty Installment Buyers Protection Act or R.A. No. 6552), the buyer shall have the right to pay in advance any installment or the full unpaid balance of the purchase price any time without interest and to have such full payment of the purchase price annotated in the certificate of title covering the property.
Compare and contrast interest rates
One of the most important investment property tips for beginners involve financing. In an effort to help more Filipinos earn their own homes, the Pag-IBIG fund has reduced its housing loan rates. Effective February 14, 2018, the 1-year interest rate is at 5.375%, the 3-year rate is 6.375% and the 5-year rate is 7.270%. The rates are based on chosen Fixed Pricing Period or how long you want to lock-in your rates. Banks currently offer housing loans for an annual interest rate of 5.50% to 6.00%. You may also inquire about in-house financing with your real estate developer.
You can compare and contrast interest rates, loan period and charges with available information online.
Be mindful of your installment payments
Many investors would pay at least 20% of the price of their condo unit and settle the installments with the rent income. For this strategy, you may consider a long-term lease that can ensure a steady stream of income. You can also rent out your condo to several tenants such in the case of boarders. If a tenant pre-terminates his lease contract, the other tenants can ensure you don't lose expected rent income. It's also advisable that you have other sources for your mortgage or installment payments in the event that your property is unoccupied.
What is the grace period for installment payments?
In the event you fail to pay the installments for your condo, the Maceda Law shall govern the grace period and cancellation of the contract of sale:
If the buyer has paid at least two (2) years of installment:
- The buyer must pay, without additional interest, the unpaid installments due within the total grace period earned by him. There shall be one (1) month grace period for every one (1) year of installment payments made;
- Actual cancellation can only take place after 30 days from receipt by the buyer of notice of cancellation or demand for rescission by a notarial act and upon full payment of the cash surrender value to the buyer.
If the buyer has paid less than two (2) years of installment:
- The seller shall give the buyer a grace period of NOT less than sixty (60) days from the date the installment became due. If the buyer fails to pay the installments due at the expiration of the grace period, the seller may cancel the contract after thirty (3) days from receipt by the buyer of the notice of cancellation or the demand for rescission of contract by a notarial act;
- Actual cancellation can only take place after 30 days from receipt by the buyer of notice of cancellation or demand for rescission by a notarial act and upon full payment of the cash surrender value to the buyer.
Decorate your condo for rent
You can rent out your condo unit bare, semi-furnished, or fully furnished. A bare unit is preferred by families leasing the property in the long-term. A semi-furnished and fully-furnished space is a top choice among short-term tenants or those staying for less than a month.
One of the property investment tips you must know is how to earn well from your condo for rent. Consider having your furnished unit decorated by an interior design. You also include essential appliances of quality brands. This can allow you to command a competitive rental rate.
Sign up for leasing services
Do you have a full time job or business, or are you regularly out of the country? A leasing service offers solutions to investors. DMCI Homes Leasing Department sources tenants, inspects and monitors your unit, administers lease contracts, collects and endorses rent payments, negotiates renewals, extensions and contract terminations, and assist tenants move in and out of the unit. You just have to sit back and wait for your rental income.
Resell your condo
Renting out a property is not the only way of earning from a property investment. You can also resell your condo. It's preferable to buy a unit during the pre-selling period to take advantage of the lower price. You can expect that the unit price shall start to increase even before construction begins. One of the financial advantages of condo investment is the high resale value in key cities.
Continuously educate yourself
In any type of investing, sound advice is key. Get informed about economic forecasts, risks and trends. For property investment, you should be updated with laws on leasing residential units and taxes. The Internet has a wealth of information. Don't hesitate to seek guidance from a professional or your leasing service provider.
Stop timing the market. The best time to invest is when you have the money. Explore the many benefits of property investment in the Philippines with DMCI Homes.
