25/01/2019
W H Y I N V E S T I N R E A L E S T A T E
(This is a must read)
“Real estate is an imperishable asset, ever increasing in value. It is the most solid security that human ingenuity has devised. It is the basis of all security and about the only indestructible security.” Russell Sage
Why invest in condominiums?
Investing in condominiums for sale is the best real-estate investment because of their relative affordability, ability to acquire income through rents, and high property appreciation.
***Affordability for a new investor
However, for the new investor, real estate may seem to be out of reach or too expensive. This first time I talked to a real estate agent, I was dumbfounded by the terms he used while pitching his developer’s condos as an investment opportunity. However, compared to other investment vehicles, investing in condominiums is actually very affordable for you to acquire an assured profit.
The secret lies in the investment of studio units or affordable condominiums. It gives you the option to have the lowest monthly amortization and down payment, while getting the best return of investment. Studio units right now, located in high demand locations such as Makati and Ortigas costs usually around 12,000 to 15,000 pesos monthly amortization, especially if you invest early in the pre-selling term. Stable fixed rates from banks will also give you a low monthly rate. This is good especially for higher middle income investors who already have a home and would like to start putting something away for their retirement.
***It is all about rental income
Something unique about investing in condominiums is that it can gain monthly rental income. There is significant demand for rentable condominiums especially for young professionals, expats, and businessmen in the central business districts. Most of them are typically single and without a family, and usually with a significant amount of disposable income for renting.
For example, if you invested in a studio unit in Makati, the minimum rental income you are likely to expect is 15-20 pesos a month. If you invested in one 2 million studio unit (which is still achievable in given today’s inventory) you would have an annual return on investment of 9% less taxes. This makes it a very good investment and you can use your rental income to add more condo units to your assets, giving you more opportunities to earn more each month.
Of course, this rental income is an added bonus as your property acts as a hedge against inflation. Historically, the real value of real estate goes up at least proportional to the rate of inflation which means your money is secure. Properties however have the propensity to perform better, particularly in prime locations. This is where price appreciation comes into play.
***Prime locations mean higher price appreciation
Every developer seeks to establish that the location of their development is a prime location. This is the goal of most real estate investors, to invest in areas where there is a high chance that people will live there, due to a lot of different reasons: being an accessible location, near their places of work, near shops, malls, and other retail, being near good schools and churches, and so on. Your job is to do your homework, and analyze the offers laid out by different real estate developers. Usually, the law of momentum is at work in developing real estate, and therefore, if you see the presence of three or more developers in one area, then there is a higher chance of price appreciation.
Your typical price appreciation for a condo today in the Philippines is roughly 7-8% annually, and that is a very conservative estimate. By the time the unit is turned over to you, you would roughly have a 30-40% price increase in your property. Thus in a span of four to five years, you can actually net a significant profit, and let another buyer assume the balance (in case you opted in for bank financing to pay for your unit).
These are the reasons why you should invest in a condo. If you are still unsure, you may contact us for more details.
