Real estate is a profitable long-term investment option for Filipinos. Buying, selling, and managing properties can provide excellent investment returns and generate passive income. But real estate investing involves a whole lot of process aside from that cycle. It only works for dreamers and risk-takers who have substantial financial goals.
If you have the money, time, and dedication to invest in properties, Let’s walk you through the process. Read on below to get started as a real estate investor in the Philippines:
Why Invest In Real Estate
Real estate is a thriving industry in the Philippines. It’s not just thriving; it’s also stable. The real estate industry won’t decline anytime soon. In fact, it might not die at all. Why is that? Compared to other investment options, the majority of real estate properties are low-risk investments. They are usually not affected by fluctuating markets, so the value of properties in the Philippines only goes up over time. Properties can offer endless returns and act as fixed assets for a long period of time.
How To Invest In Real Estate
We’ve established all the things you can gain from a successful real estate investment. Now, let’s move on to the HOWs. Here are the fundamentals you need to know before you seal the deal:
Know The Different Types Of Real Estate Investments
Like other modes of investments, real estate comes in different forms. You need to choose the specific type of property you want to own based on your budget, desired location, and financial goals. Here are the main types of real estate properties:
RESIDENTIAL – these are structures available for occupation. They are housing for families, friends, groups of people, or individuals. They can be owner-occupied, rental properties, or lease agreement. Since many Filipinos demand a place with comfortable living arrangements to live in, residential properties are the most common type of real estate property and asset class.
- Private residences / Houses (single-family or multi-family)
- Vacation Homes
- Villas / Huts
- Mobile Homes
COMMERCIAL – these are non-residential land and building properties for businesses that need workspaces to carry out their operations. They can be free-standing structures or buildings with multiple spaces. As rental properties, commercial real estate investments can provide capital appreciation and income through stable monthly cash flows.
- Parking Lots
- Shopping Malls
- Individual Stalls / Shopping Centers
- Office Buildings
INDUSTRIAL – these structures are larger in size and have slightly similar functions to commercial industries. Industrial properties are used by businesses to carry out more extensive operations like production, distribution, manufacturing, research and development, and storage. While not as popular as commercial and residential real estate properties because of its large investment capital, industrial properties are some of the best income-generating asset classes.
- Storage buildings
- Mining Areas
- Laboratories or research centers
LAND – as the name suggests, land real estate properties are developed or underdeveloped areas that serve as a baseline for commercial, industrial, and residential properties. They are used by real estate developers to combine with other properties, so their density and value may increase or decrease depending on the market. They can produce future cash flows if combined with a successful property.
- Land lot / undeveloped land
Choose The Best Location For Real Estate Investment
If you have a particular real estate property in mind—may it be developed or underdeveloped, the next step is to find the best location for your property. Finding a promising location is crucial to the success of your investment. Here are the best cities in the Philippines where you can own, maintain, and grow your real estate properties:
QUEZON CITY – Q.C. is the most strategic location for commercial and residential properties if you want to target people in Metro Manila, Bulacan, and Rizal. With a population of 2.9 million, this vibrant city is a melting pot of culture. Q.C is also highly-urbanized. It houses some of the best educational institutions (the University of the Philippines Diliman, Ateneo de Manila University), hospitals (Philippine Heart Center, the Lung Center of the Philippines, the National Kidney and Transplant Institute), and shopping centers (SM City North EDSA and TriNoma) in the country.
MAKATI CITY – Makati is dubbed as the financial center of the Philippines and the ‘Wall Street’ of Manila. No city can challenge those titles anytime soon. The city is home to upscale shopping malls, urban centers, casinos, and national and international corporations. Currently, it has over 60,000 commercial and real estate establishments, so it’s an excellent location to target the Filipino working class.
TAGUIG / BONIFACIO GLOBAL CITY – BGC in Taguig is a relatively new player in the real estate market. Like Makati, it has a robust financial district. Although the city is considered as a private neighborhood owned by Ayala Land and Evergreen Holdings, BGC is still open for investors interested in commercial, industrial, and residential properties.
BAGUIO CITY – away from the metro, we have the Summer Capital of the Philippines to offer cool temperatures, vibrant culture, and traditional dishes. Baguio City is always open for tourists and students who always come and go. In the heart of the city, travelers will look for the perfect location near Burnham Park, Mines View, and Session Road. Students, meanwhile, will look for dorms, apartments, and condominiums near the University of the Philippines and Saint Louis University. So, it’s the perfect location to plant your residential properties.
CEBU CITY – outside Luzon, Cebu City is the most strategic location to own, maintain, and grow real estate properties. Condominiums, leisure facilities, shopping centers, and office buildings are in demand in Cebu because the number of tourists and business people in the city is continuously growing.
Quezon City, Makati, Bonifacio Global City, Baguio, and Cebu are just some of the most strategic real estate locations in the Philippines. They are your best options, but other busy cities or metropolitan locales in Luzon, Visayas, and Mindanao are also increasing in value and gaining more interest from the market. So, don’t limit yourselves from the five main cities mentioned above.
Look For Real Estate Investments Online And Offline
Newspapers, magazines, and classified advertisements are still a reliable source of for-sale real estate properties. But technology has provided agents, brokers, and investors a new way to market their properties. You can now look for investment deals online and offline:
ONLINE REAL ESTATE MARKETPLACES
There are real estate-dedicated websites that can help you look for properties anywhere in the country. You can check out Lamudi Philippines, Property 24, Dot Property, Hoppler, or My Property. These sites have search tools and engines to filter your selection based on your budget, preferred type of property, and preferred location. Some of them even have a catalog for for-sale foreclosure properties.
Bank-foreclosed properties are reputable investment options. People who failed to pay their mortgage payments have left some promising real estate properties at their banks. Banco De Oro (BDO) and PSBank are two of the best banks in the country with an online database for the properties they sell. They have online features that let you search for properties based on location, lot size, type, and price range. For your convenience, see if you can download the complete list of properties available on the day you accessed their websites.
ONLINE SKILLS MARKETPLACES
If you can’t find the property that suits your budget and standard, you can hire licensed Filipino real estate agents to help you. Online skills marketplaces like Rakuboss.ph can connect you to local real estate agents in the Philippines online and offline. Just browse the marketplace’s category and look for reputable agents on the directory. If you found someone who meets your standard and budget, you can send them a message or meet them personally.
Aside from Rakuboss, there are websites with an entire network of licensed real estate professionals, such as RealEstateDirectory.org.ph, Point2Homes, and GreenHuts. You can jump from one website to another to find the best candidate. For a more detailed list of other real estate online marketplaces and options in the Philippines, you can check out Grit.Ph’s ultimate guide to real estate investing.
Follow The Legal Process Of Buying And Selling Properties
If you plan to buy a real estate property and turn it into an asset or investment, you also need to understand the legal process surrounding the real estate industry in the Philippines. Properties are not simple commodities that can be bought within minutes. The whole process can take months. Here’s a step-by-step guide on how to buy and sell properties in the Philippines:
1. Buyer-And-Seller Agreement
When you seal the deal as a buyer or seller, both parties can process the papers needed to transfer the property. The seller can produce a Contract to Sell (CTS) to seal the agreement.
2. Notarize The Deed of Absolute Sale
The transfer of the property’s Deed of Absolute Sale should be executed by and between the seller and buyer and should be signed by a lawyer. As a buyer, make sure that the seller is the registered owner in the land title and the tax declaration.
3. Secure The Land Tax Declaration
Both the seller and the buyer should secure the Land Tax Declaration, a certificate that specifies the market value of the property for the computation of real estate tax. The Land Tax Declaration is obtained at the Bureau of Internal Revenue (BIR) and should be submitted to the Office of the Municipal Assessor.
4. Pay All Fees And Taxes
The buyer will need to pay the real estate tax of the property at the Office of the Municipal Treasurer so the Municipal Assessor can determine the property’s market value. When that’s settled, the buyer will pay the transfer taxes at the Assessor’s office.
Both the seller and the buyer have to go back to BIR with the completed documents and pay the Documentary Stamp and Capital Gains Taxes. Both parties can shoulder their respective payments.
5. Finalize Transfer And Ownership
After paying all fees and taxes, the Registry of Deeds will finalize the transfer of property. The old title will be voided so that the buyer will get a new one.
6. Request For A Tax Declaration
The new owner needs to bring a photocopy of the new and original title at the Assessor’s Office and request a tax declaration.
Determine The Best Way To Grow Your Money
It’s completely fine if you want to occupy your real estate property. It’s still an investment even if the owner’s utilizing it. But if you want to have a stable cash flow and passive income, here are some of the best ways to grow your money using your real estate investments:
You can rent out your commercial or residential properties at marked-up rates to get a monthly rental income. You’ll never run out of renters if your property is located in a busy, residential area. So, it’s best to buy, sell, and rent out properties near schools or financial districts.
Another passive way to generate cash flow through your investment is to turn your residential property into a vacation rental. Properties located at cities with top-rated attractions can attract crowds in peak seasons. Short-term rentals work best at tourist locales like Baguio, Bohol, Boracay, Cebu, Palawan, Batanes, and Tagaytay.
FLIPPING / INCREASING PROPERTY VALUE
Some options under this category are risky. Increasing the property’s value means that the investor needs to be a buyer and a seller. Here, you’ll look for a promising property to buy and sell it for a higher price. Here are some examples of property flipping:
- House Flipping – involves buying a run-down property, renovating it, and selling it for a higher price. Attractive houses in perfect locations have the potential to generate more profit. So, if you plan to flip houses, you can hire skilled Filipino interior designers and architects.
- Contract Flipping – a wholesaling strategy used by real estate investors to buy and sell properties. Here, you won’t have to shell out a huge capital. You just need to serve as an intermediary between buyers and sellers. Contract flipping is less risky than house flipping if done strategically.