Getting into real estate investing (Part 2)

Real estate investing is not for the close-minded. For those who concur to the “utilitarian” notion that real estate is there merely to satisfy the basic need for shelter; or a place to host or conduct a business or a quick collateral for emergencies. Real estate investing is also not for those who think of it as the game of the rich and landed families; or for those who always worry about its risks instead of its opportunities. Thus, real estate investing is not for someone who has a mind of a loser.

With real estate products getting more affordable these days, you could build your way to financial security if you just give it try. When I said it is affordable, I really mean it. For example, condominium developments are sprouting here and there and people are buying. They are not only buying one but are getting two or three units for investment. What makes it very interesting is that, young people are also buying. And specially surprising are the buys coming from call center agents, public school teachers, government workers, small scale entrepreneurs and of course, OFWs who comprise much of the purchases. Which means, the middle class is pushing the sales of these condos.

But my question is, if they bought a condo for investment or let’s just say that you bought a condo sometime this year, how do you exactly translate your condo into an investment in real and concrete terms? Most commonly, the first thing you’d tell me is that you’re going to sell it later at a higher price. But the question is how much did you buy your condo to begin with? At what percentage do you see the appreciation say three or four years later?

The problem with most developments and of course, the brokers or agents who represent them, is that they only say that it’s a “good investment” by bloating the future value of the property without any basis. And they usually shun discussing it a little further because they are too lazy to make a research or are simply not trained to do job. While I agree that condos are a hot investment these days, you should do your research or find a broker or agent who is diligent enough to make honest projections base on location, type of condominium and what have you. I am not saying that we should be too thorough with so many issues or factors. The basics are enough to tell you whether you should buy the condo being offered or not.

So if you’re considering a condo for investment, and want to buy it at its pre-selling price, you should start by asking your broker or agent a comparative analysis whether the condo is ideal for resale or for rent. A condo with both attributes is in my opinion, ideal because it already goes without saying that the condo is on a good location. What should be kept in mind is that there are condos that are only suitable for resale and there are those that are only good for rent. Condos that are usually suitable for resale are those types that are designed for permanent residence. They may be a little far from the city center. On the other hand, condos that are ideal for letting are those located near commercial districts. 

But let’s suppose that you’re buying a condo for future resale and a broker has offered you to buy a condo that has been recently launched at pre-selling prices, how do you know that you’re going to make money later? Ask your broker to survey the prevailing RFO prices of similar condos that you intend to buy. RFO means “Ready for Occupancy” or those that are already completed or finished. Let’s say that the RFO prices for the same condo type is P80,000 per square meter, you should have second thoughts buying a presold condo offered in the same range. The reason is obvious -- you’re buying a pre-sold condo at RFO prices or put it this way, you’re buying a condo that is not yet there for a price of a condo that’s already there!

Again, let’s say you’re buying one, a pre-sold condo perhaps, because you want to let it later. Is that a good idea?  Of course it is. But it is easier said than done. Brokers or agents pitch the idea of letting to push you to buy prematurely as if they will be still around to help you find a renter. In most cases, brokers or agents disappear once your condo is done two or three years later that’s a fact.

Therefore you need a broker or agent that is also a rent manager. I will talk about the idea of a rent manager in my next column.

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