BY BEN KRITZ, TMT ON JANUARY 4, 2017
Following a few basic tips can lead to a healthy return
ALTHOUGH the majority of condominiums sold in the Philippines are still bought by end-users, the trend of property being purchased as an investment rather than as a home is growing, according to property developers and sales agents.
While any investment carries some risk, the consensus among property experts is that the robust Philippine economy, a large supply of condominium property, and growing demand for rental housing makes a condo investment an attractive prospect. In order to improve one’s chances for success, the experts recommended a few basic guidelines to follow when considering a condo property as an investment.
Have a plan
There are two ways to profit from investing in condo property. The first is called “flipping,” where an investor purchases the property, carries out necessary upgrades or improvements, and then sells the property for a higher price, with the difference between the selling price and the original purchase price representing the return. The second investment plan involves keeping the condo as a rental unit, with the amount of rent charged ideally being enough to generate a small monthly profit after the unit’s mortgage payment and other expenses are deducted.
According to Joanne Almaden, founder of the local real estate services firm Phil. Property Experts, the biggest advantage of “flipping” is that it provides instant revenue the moment it is sold, but it has the disadvantage of being a very short-term investment; the only way the investor can continue to earn is to buy more property. Maintaining a condo as a rental property, on the other hand, is more sustainable over the long term, but provides a much smaller income each month, and requires sustained attention to the property and tenants alike, something “hands off” investors would want to avoid.
Know the market
One of the most basic pieces of research any property investor should do before diving into the market is understanding who the likely customers are. If you intend to “flip” the condo, who are the likely buyers? Or if renting, who are the likely tenants?
Cavite-area real estate broker Betthina Ramirez pointed out, however, that following the lead of developers can safely save a prospective investor some time. “Developers put a lot of time and energy into studying the market in areas where they want to build projects, and develop those projects to suit,” she explained.
Almaden had a similar point of view. “Established and trusted condo developers are not stupid to build their condo projects at locations where no one would be interested. So you can trust that this thing has already been taken care of for you and you don’t have to stress about it anymore,” she said.
“If you are looking to buy a condo for investment, your choice should really just depend on who your target market is,” she added.
Know the developer
Both Almaden and Ramirez stressed the importance of choosing properties from trusted developers.
“When you buy a condo unit in the pre-selling phase, meaning while the building is still being constructed, you need to see to it that your developer can deliver your unit at the time they promised,” Almaden explained, pointing out that some developers have a good track record, while others are “a headache,” prone to delays.
“Quality is also an important issue, although with successful developers, you don’t need to be as concerned, because obviously they wouldn’t be successful if their work was not good,” Ramirez added. “You don’t want to buy a place that you will have to do a lot of work on in order to make it ready to rent or resell.”
Ramirez suggested talking to real estate brokers and agents. “These people see properties from many different builders, and have a good idea of who does good work and stays on schedule, and who doesn’t,” she said.
Almaden suggested making it a habit to scan the business news from the Philippines daily to stay abreast of not only trends in real estate, but other news that would indicate opportunities, or conversely, areas one should avoid.
“If you want to keep the cash flowing, you have to offer what’s currently being asked by the market,” she said. For example, “When you hear that BPOs will be expanding to the smaller cities in the Philippines, you should position yourself accordingly.” By the same token, she explained, if there is a downturn in a particular area, one might choose to avoid that area, or adjust investment and return expectations.
“Keep track of what builders are developing,” Ramirez said. “Here in the Philippines, property development tends to cluster in certain areas, so if you see that one well-known developer is launching a project in a particular area, it’s almost sure that others will follow in the same area. Be watchful, and you can get in on the newest projects right when they begin, which will give you more options and save some money.”