Real Estate Investment in the Philippines
Real estate investing is one of the best forms of investment opportunities that Filipinos can pursue. Real estate appreciates over time, which means that investing in property now can give you double or triple that investment’s value in a few years. Real estate investments in the Philippines also allow you to earn passive income, such as in the case of renting your property for residential or commercial use.
This guide will walk you through the process of choosing the best real estate investments and how to maximize this opportunity for wealth-building.
Types of Real Estate in the Philippines to Invest In
There are several types of real estate properties worth investing in. You can choose from any of these properties but do take note that the earning potential for each type of property varies. Here are the common types of properties for you to consider:
- Residential – Residential properties are the most common forms of real estate investment in the Philippines. This category includes house and lots for sale or rent, condominiums for rent, apartments, townhouses, and other types of multi-dwelling units.
- Commercial – Commercial properties for lease are those that are used by individuals or businesses for a storefront, office spaces, and other types of commercial purposes.
- Industrial – Industrial property investments are the type of real estate properties used for the storage, building, and distribution of various products. Warehouses and pieces of land for agricultural use are good examples of this type of real estate property.
- Land – This type of real estate investment can be a raw piece of land or lot that can be used for farming, ranch, or other purposes. This type of real estate property is underdeveloped.
Real Estate Investment Ideas in the Philippines
The main advantage of real estate investing in the Philippines is that you don’t need to reinvent the wheel. You can rely on the same old formulas that have worked for years. This is also what makes real estate investments a suitable option for new investors because it is easy to learn and there is always a market for real estate properties.
If you plan on investing in real estate, the following are the most profitable ideas that you have to consider:
1. Residential Property
One of the most profitable real estate investment ideas involves residential properties. The obvious choice is to buy and sell house and lot properties. You can check for foreclosed properties through Pag-Ibig or SSS wherein you can purchase house and lot properties for a fraction of the average prices in the housing market. You can either flip these houses or fix them up to use as rental properties, which provides you with a steady stream of monthly income.
Another option is to invest in preselling units. There are plenty of new housing developments (house & lots or condos) in the country. You can take advantage of the lower cost of acquisition for these preselling units. Upon the official turnover of the units, you can sell the property or rent it out. The demand for residential properties for rent or sale is growing at a rapid rate in major cities due to the influx of people from surrounding cities or regions.
In the past decade or so, there has been a noticeable increase in condominium developments in the Philippines. Condos are a good investment option for Filipinos considering real estate investing because they have a high rental potential. Most of these condo buildings are located in business districts, which give potential renters easy access to major establishments and workplaces.
Condo units are also ideal for short-term rentals, such as for tourists booking through Airbnb. Like residential properties, you can also invest in preselling condo units to acquire the property for a major discount.
Another suitable investment opportunity involving real estate in the Philippines is dormitories and apartment units. The main advantage of investing in an apartment is that you can rent out a space or unit for a cheaper price (versus an entire condo unit). Therefore, the vacancy rate is potentially low, especially if you live near schools, hospitals, malls, etc.
The downside to investing in apartments is that the acquisition is high. If you own a piece of land and you want to construct an apartment building, the cost is considerably high, too. Make sure you have adequate capital investment to buy or build an apartment.
4. Low-Rise Commercial Buildings
A low-rise commercial building is another one of the most profitable types of real estate investments in the Philippines. This type of property can be made available for businesses looking for a space to rent. This property is ideal for small businesses such as retail stores, laundry shops, mini-marts, and other food businesses. It is a potentially profitable real estate investment, especially if the building is located in a major city center.
Most commercial space leasing has a longer rental contract than residential properties. The rental contract can range from 1 to 5 years. Therefore, it is a good source of passive income if you can get good tenants for your commercial spaces.
5. Raw Lot
The sale of raw lots is another one of the fastest-growing real estate investing opportunities in the Philippines. The raw lots can be sold directly by owners or through a real estate company. Raw lots are pieces of empty land that are unused by their owner.
Most Filipinos who buy raw lots use it for farming and agricultural purposes. Some also develop the lands into resorts and vacation homes. When buying raw lots, make sure to check the legitimacy of the papers to ensure that there is a clean title before you pursue the sale.
The growth of the ecommerce industry has led to a growing demand for storage spaces like warehouses. Therefore, a warehouse is an excellent real estate investment in the Philippines so you can meet the demand of the logistics market.
Selling a Real Estate Property in the Philippines
Aside from renting your real estate properties, an obvious way to make money through real estate investing is to sell the property. Selling property transfers the right to ownership of that property to the buyer.
When selling a property, make sure that you worth with a real estate broker to ensure that there is legitimate paperwork involved. You will sign the Contract of Agreement and the Issuance of Authority to Sell (to the real estate broker). The property will undergo an assessment to appraise its market value.
The real estate agent will promote the property for sale in the market. They will also be responsible for showing the property to interested buyers. If the buyer is interested, they must present a Letter of Intent to Buy. If you, the owner, accept the offer made by the prospective buyer, you can proceed to the payment of the agreed value of the property.
The real estate agent will help you process the essential documents to finalize the sale such as the following:
- Certified True Copy of Transfer Certificate of Title (from the Registry of Deeds)
- Certified True Copy of Tax Declaration (from the City Assessor’s Office)
- Certificate Authorizing Registration from the BIR
- Real Estate Tax Receipts
The next step is to prepare the Deed of Sale and the Notarization of the Deed of Absolute Sale. Both parties will also settle additional payments such as the capital gains tax, documentary stamps tax, transfer tax, and registration fees.
In the Philippines, it is possible to sell a real estate property without hiring a real estate agent or broker. However, working with real estate professionals will make it easier to handle legal documents during the process.
Real Estate Investing Tips
The real estate market in the Philippines is exponentially growing. You can expect the demand to rise in the coming years, which is good news for those property owners looking to capitalize on the money-making potential of their properties.
Here are additional tips to keep in mind to make money through real estate:
1. Buy and Sell
If you have a good cash reserve, you can invest in depreciated properties (such as foreclosed properties) and then fix them up. You can sell the property for a higher price to gain your profits. To become successful in buying and selling houses, you need to be informed about current market prices for houses in your area. Make sure you keep track of your renovation expenses and take that into account with the final pricing of your property. This will ensure that you can offer competitive pricing and ensure a faster turnaround for your sold properties.
2. Buy and Hold
Buying and holding a property is a more traditional method of real estate investing. Whereas the buying and selling method is suited for aggressive investors, this one is for those looking for a moderate risk approach.
The idea is to buy depreciated properties with the intent of selling the property later. Time is your friend here. You are banking on the appreciation of the property over the years to help double the investments you’ve made on the property.
3. Renting for Special Events
Another option for real estate investors is to make the property available for rent for special uses like special events. This real estate investing approach allows you to recoup any expenses you’ve put towards renovating the property with short-term leases at a higher price.