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Buying property to rent in the Philippines


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#1 MrIain

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Posted 27 July 2013 - 04:29 PM

Hi! I would be grateful for some advice about buying property to rent out in the Philippines.

My wife and I have developed a lot that she owns in the subdivision where her family lives in Cavite, which we are going to rent out. We are now looking at buying another property in the same subdivision for renting. The subdivision is quite old - there are many newer ones nearby, but we like the idea of her family being able to keep an eye on the place and help out if there are any problems.

I was wondering if anyone here has experience of renting out properties in the Philippines and could share some advice as to the best way to approach this.



#2 MrkGrismer

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Posted 29 July 2013 - 01:26 PM

Hi! I would be grateful for some advice about buying property to rent out in the Philippines.

My wife and I have developed a lot that she owns in the subdivision where her family lives in Cavite, which we are going to rent out. We are now looking at buying another property in the same subdivision for renting. The subdivision is quite old - there are many newer ones nearby, but we like the idea of her family being able to keep an eye on the place and help out if there are any problems.

I was wondering if anyone here has experience of renting out properties in the Philippines and could share some advice as to the best way to approach this.

 

No actual experience but from what I understand being a 'landlord' in the Philippines is 'very high' on the list of financial risk. It can be extremely difficult to evict. So only go into that type of business if you are really sure you know what you are doing.

 

IMO, of course.


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#3 rbacon

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Posted 29 July 2013 - 03:30 PM

No actual experience but from what I understand being a 'landlord' in the Philippines is 'very high' on the list of financial risk. It can be extremely difficult to evict. So only go into that type of business if you are really sure you know what you are doing.

 

IMO, of course.

I concur with Mark's response.  On paper, the numbers always seem attractive, and the expectation that relatives nearby will protect your interest seems like additional insurance.  In reality, however, based on my own experience as a landlord, renting property is a full-time job, not to be entrusted to nonprofessional relatives who are receiving no compensation for looking after your interest.  Further, managing rental properties from a distance, unless under total control of a professional property manager (who gets paid to do the job), has its own problems.

 

Most Fil-Am couples who sink a lot of money into properties in the PI n anticipation of "retirement" never follow through with the plans, or only stay in the Philippines for short periods of time.  In my opinion,buying a retirement property in Hawaii ($$$) or Florida (yuk) might make more sense as a realistic vacation and retirement location.

 

--Ray B



#4 MrIain

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Posted 29 July 2013 - 05:11 PM

Thank you Ray and Mark for your advice.

These will not be retirement properties, they are purely for investment purposes. Mostly we will be developing land that my wife bought years ago for the purpose of development. In view of your comments I think we may put off buying any more properties until we have gained more experience.

I can well imagine that managing rental properties from thousands of miles away will be a challenge, unless we have a professional on the ground looking after our interests. We learned this lesson the hard way when we developed the lot!!!

If I was doing this back home in the UK, I would use a letting agent, who would find tenants and deal with all the hassle (including reporting to the tax authorities and dealing with non-paying tenants). I will see if we can find a reliable agent in Cavite who can help us with this.



#5 rbacon

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Posted 30 July 2013 - 12:26 AM

Thank you Ray and Mark for your advice.

These will not be retirement properties, they are purely for investment purposes. Mostly we will be developing land that my wife bought years ago for the purpose of development. In view of your comments I think we may put off buying any more properties until we have gained more experience.

I can well imagine that managing rental properties from thousands of miles away will be a challenge, unless we have a professional on the ground looking after our interests. We learned this lesson the hard way when we developed the lot!!!

If I was doing this back home in the UK, I would use a letting agent, who would find tenants and deal with all the hassle (including reporting to the tax authorities and dealing with non-paying tenants). I will see if we can find a reliable agent in Cavite who can help us with this.

If I were looking for  real estate investments, I could find plenty here in the U.S. for which "cash is king."  I can't speak for the U.K., but the only benefits many of our friends have received from property held in the Philippines has been when the property was inherited and they turned around and sold it while living abroad.

 

There are two benefits generally expected from residential real estate:  positive cash flow and/or appreciation that can be converted to cash.  Rents are generally much lower in the PI than in UK or USA, and most people benefiting from rental income in the PI are doing so because the own the property free and clear and live within manageable distance.  But when it comes to realizing one's profit from selling the property, market and interested,able buyers will fluctuate drastically over even short periods of time.  In the U.S., one can almost predict to the week when a property will sell, given comparable selling experience in a given area.

 

I've seen many Fil-Am couples who sank much of their disposable income into purchasing or improving PI properties, only to see the money lost as the result of marital problems, lack of extended family assistance, or just dropping the project altogether when the realities of funding needs for domestic expenses (children, buying a new or better home, buying income or vacation property in the U.S.).

 

--Ray B



#6 MrIain

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Posted 31 July 2013 - 03:48 AM

Thank you, Ray, for the warning. It may not be nice to hear, but perhaps it is necessary to hear!!!
 
What is at the bottom of this for me is an interest in making some small investment in the Philippines. GDP growth is good (especially compared to our countries!), property prices are going up, it looks like some real effort is finally being made to tackle corruption, and my Indian colleagues out here tell me that India has been losing outsourcing business to the Philippines for years. 

 

I thought that real estate would be a suitable way to invest, and we already have land sitting idle. Plus any profit we make from renting would go towards the various expenses that always arise out there with my wife's house, car, school fees for my stepkids etc.

Maybe it would be better for me to focus on investment funds that include a Philippines portfolio, and just leave the land to accumulate in value?



#7 Fritz

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Posted 31 July 2013 - 06:10 AM

Keep looking for businesses that you have some experience with and asking for advice about those ideas from those who have been there/done that.

 

Sharecropping is an idea that has worked when the family has farming experience.   You own the land and the farmer rents the field for a fixed amount or more commonly for a share of the crop.  The important thing is that either you are there to manage so you see problems as they start or work with family members who are already in the business.

 

The rental problems stem from the rules protecting the tenant in place (including squatters).  The protections for the tenant are much stronger in Phils than they are in UK or US.  In addition you have the problem of local courts favoring the local citizen over the foreign absentee landowner.

 

With family management by people who do not have experience in the business...well you are putting inexperienced, untrained managers in place...  I'm sure you know how well that works in UK :P

 

Remember, you will be starting a business.  Make sure the onsite management is qualified to run the business and has a solid interest in the success of the business.   Hiring a Letting Agent to manage the properties is an excellent idea.  Just make sure they have a good track record with the type of operation you will be funding and be prepared to change agents if things go rwong.

 

Basically the same as what you would do with a business opportunity in Ipswich, but the distance you will cover for the unannounced visits to keep them honest are a bit more difficult.

 

The adventure continues

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#8 rbacon

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Posted 31 July 2013 - 04:36 PM

Keep looking for businesses that you have some experience with and asking for advice about those ideas from those who have been there/done that.

 

Sharecropping is an idea that has worked when the family has farming experience.   You own the land and the farmer rents the field for a fixed amount or more commonly for a share of the crop.  The important thing is that either you are there to manage so you see problems as they start or work with family members who are already in the business.

 

The rental problems stem from the rules protecting the tenant in place (including squatters).  The protections for the tenant are much stronger in Phils than they are in UK or US.  In addition you have the problem of local courts favoring the local citizen over the foreign absentee landowner.

 

With family management by people who do not have experience in the business...well you are putting inexperienced, untrained managers in place...  I'm sure you know how well that works in UK :P

 

Remember, you will be starting a business.  Make sure the onsite management is qualified to run the business and has a solid interest in the success of the business.   Hiring a Letting Agent to manage the properties is an excellent idea.  Just make sure they have a good track record with the type of operation you will be funding and be prepared to change agents if things go rwong.

 

Basically the same as what you would do with a business opportunity in Ipswich, but the distance you will cover for the unannounced visits to keep them honest are a bit more difficult.

 

The adventure continues

Fritz

I concur with Fritz' advice.  In addition, however, I often hear guys discussing the same subject...investing in real estate or in a business in the PI while they are still in home country (US or Europe) with no intention of settling in the PI.  This generally suggests there is "disposable" income or cash available and the guy wants to "put it to work."  In my opinion, sometimes the best way to "put money to work" is to do nothing but keep it in an account or conservative mutual fund family until it is really needed.  Once you hand your money to a third party "to put it to work," that money is gone forever.

 

--Ray B



#9 GregOry

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Posted 02 August 2013 - 03:05 PM

Renting out properties in the Philippines I find is very similar to the USA.  Just pick carefully on the tenants and things will go well.  You will likely be asking for trouble if you put in relatives, financially challenged or otherwise lowly people that will have higher priorities than paying the rent.  Of course there are exceptions.  I've had those painful tenants and good ones too in the USA.  I have lived here in Cebu City for 15 months and considered getting rentals here, but decided against it because I can make more money elsewhere.  The current price tags here are also prohibitive to buying merely to rent out a property.  Do good cost, profit analysis and leave room for vacant times, repairs, etc in your estimates.


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#10 MrIain

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Posted 02 August 2013 - 05:44 PM

Thanks Fritz, Ray, Gregory and Mark for your comments. This has been a very useful discussion for me, and has generated quite a lot of discussion at home as well!

Next step: a lot more research and planning!






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