How to Make Money in Philippine Real Estate
With the current bullish state of the Philippine real estate market, many people are eager to enter this business and make serious money through property investing. Real estate is a huge industry, and there are many ways to make a profit.
If you are considering to buy properties as a form of investment, it may be useful to study first your options and figure out what best suits your situation. Here are some ways to earn in real estate:
Buy and Hold
This is long-term investing, meaning you buy a property, hold onto it, and sell it many years after, reaping the benefits of capital growth. Capital growth, or the asset’s price increase over time, can generate income for property investors through reselling and refinancing. However, appreciation depends on several factors, such as market condition, location, home improvements, property size, and neighborhood.
Best Suited for
This type of investing is usually for people who have too much money and need a place to park it. They use the property as storage of equity and as lines of credit.
What to look out for
Instead of letting your property sit for a long time not generating income, wise investors should look for ways to monetize it. Read below for more ideas on earning while waiting for capital growth.
Buy to Rent
If your property is in strategic locations, near central business districts or universities, you can make good money renting your property. In setting of your rental rate, take into consideration the monthly mortgage and budget for maintenance and property management.
Best suited for
This is for investors with properties in good locations. There are different options for renting out your properties:
- Long-term rental. Long-term rentals are a guarantee that there is a continuous stream of profits for the rest of the tenant’s contract.
- Short-term rental. There is also an option to lease the property out for shorter time periods. This ensures that there are returns, especially when the market condition is not as favorable for you to sell your property.
- Vacation rental. Nowadays, businesses like AirBnB make it easier for property owners to rent out properties for holidays. Rental rates are usually higher than short-term or long-term rentals, although risks are also higher. For example, unlike long-term tenancy agreements, there are limitations in doing background checks before letting “strangers” use your property.
- Rent-to-own. This option gives tenants the opportunity to buy the house from the owner after a certain lease period, but with a higher rental price. In case the tenant does not push through with buying your house, you have earned more than your usual rental price.
What to look out for
Becoming a landlord requires time and effort. Landlords are in charge of repair and maintenance costs. You will be covering the costs of fixing and maintaining all property-related. That is why landlords should always have an emergency fund.
Flipping Houses: Buy-Fix-Sell
Flipping houses is when property investors buy a property below market price, renovate to increase its value before selling it for a profit. (Read: How to Effectively Flip Houses for Profit).
Some factors to consider when buying a property for flipping include your target market’s needs, surrounding developments (distance to schools and universities, shopping centers, healthcare facilities, etc.), and future growth (future roads and commercial establishments).
Best Suited for
Investors with a large cash reserve, have a good eye for design, and great negotiation skills can make serious money flipping properties.
What to look out for
Calculate how much money you can spend on renovations and still make a return. Purchase properties sensibly and don’t spend too much on renovations.
Development Investing
This is when real estate buyers invest in pre-selling properties with the intention of leasing or selling the unit when it is ready for occupancy. Condominium units are available for sale even before constructions start. Developers do this to raise money to finance the actual building of the property. While buying off-the-plan entails risks, the contract prices of the units are lowest during this period. Investors may grab this opportunity to purchase at a low price and sell it in the future at a higher value, depending on its appreciation.
Best suited for
Development investing is savvy investors who can easily spot good deals. Overseas Filipino workers (OFWs) can also choose this investment path as a way of “forced savings” while they are still earning.
What to look out for
Deal with trusted developers and real estate professionals only to minimize the risk of shady agents collecting other fees and eventually running away with your hard-earned money.
These are just a few of the ways one can earn in real estate. This is a huge industry, and there are countless ways to take advantage of this booming market. Take time to evaluate your options and choose the path that is best suited to your situation.
