In a recent survey done by the Social Weather Station overwhelmingly, we all simply want a “comfortable and simple life”. It’s why we enjoy a pumping fiesta, it’s why family means so much, and it’s probably why we elected Rodrigo Duterte.
But, sometimes life isn’t so simple. The comforts that we all crave, a roof over our heads, freshly laundered clothes, a car for independent mobility, good food, and a drink every now and then with friends – in the current Philippine economy these often don’t come cheap.
It’s no longer enough to have a comfortable job to afford such a life and take care of a family. What is needed is a way to supplement your income to ensure a comfortable and simple life into eternity, for your retirement and for your offspring.
Real estate investment fulfills all of these qualities.
Like any investment doubts always arise. I don’t know how to budget this, it’s too complicated, I don’t know who to trust, I don’t know what’s right for me, is it a scam?
If you have been mulling over it (and I know some of you have) here are some Do’s and Don’ts that could help you finally dip your toes into the property market with full confidence that you’re on the way to that “comfortable and simple life”.
DO stick to real estate developments from reputable developers. Reputable developers are well known, have a long track record and are highly covered by the media. Reputable developers also invest in highly qualified property management.
DO appropriately plan your finances. Take stock of how much money you’re making as a family (hint: we also do that). It is financially prudent not to use more than 1/3rd of your monthly income on mortgage repayments. If you can find savings that can lead to exponential returns later. Finally plan to get a pre-approval from your bank to make sure the purchasing processing goes as smoothly as possible. Most developers are accredited with major banks, which allows you to borrow, sometimes, up to 90-95% of the value of the property.
DO plan your real estate goals. Before searching for a property find some time to sit down to figure out your budget, how long you want your money in the property for, and how much risk you are willing to take, what type of property are you after? Are you comfortable putting some effort in to add value, or do you prefer the safety of prime property?
DO research extensively. Once you’ve created a list of the qualities you are after, that should inform your choice in property. The Internet has allowed anyone to survey your chosen real estate market extensively from the comfort of your office chair. Write down a list of properties that fit your needs, compare them, and, if required, recalibrate, either your expectations or your budget (hint: we can do this for you too!). To understand the kind of return you can expect, it’s crucial to figure out what similar properties are charging for rent, as well as understand the demographics of the neighborhood (this is where an experienced agent with deep local knowledge comes in handy).
DO keep an eye on your investment. Once you have decided to purchase keep an eye on how much your money is earning as well as how much money your property is costing you to maintain. A good real estate agent can check-in on your tenant on request to make sure problems don’t fester and become a nightmare.
DON’T rush into deals that seem too good to be true. If you find a property that looks like an amazing investment, don’t forget to do your due diligence. Find out what’s really going on – probe the ROD, ask the neighbors, talk to your local real estate agent. You might have hit gold, but most of the time, others will have seen it before you and will have passed on it for a reason. A good real estate investor constructs his portfolio with reliable investments. Aiming for the spectacular is “speculating” and studies have shown speculating works about as well as picking with your eyes closed.
DON’T buy a property without visiting it. It’s vital to visit the property, and walk the neighborhood as well. While you may be able to get very reliable information from reading, the most visceral feedback will always be what you see, hear and smell when you visit the property and the surrounding areas, and the most reliable information will be the small details that your agent can point out to you, that you cannot find looking at an online listing, while on your visit.
DON’T forget the bottom line. Just because a property seems to be able to give you a great return on investment, doesn’t necessarily mean it is a great deal. Keep track of all the overheads such as property taxes, maintenance costs, repairs required, loss due to vacancy. Be realistic with your projections, this means you need to factor in “real costs”.
DON’T underestimate the value of a great tenant. When looking for a tenant remember to ask the right questions. Professionals with full time jobs, whether single, married or with kids, are the least likely to move and most likely to be able to afford the rent. Value a good tenant by responding to reasonable requests promptly, and avoid trying to jack up the rental rate even if you feel they may be able to afford it.
DON’T give in to fear or analysis paralysis once you see a deal stack up. The real estate market can move surprisingly quickly and what stacks up today, may not tomorrow. If everything stacks up, and you’ve done adequate research and ticked all the boxes, you’ve done the hard work, now we advise you to simply jump in!