You’ll be surprised at how real estate investments can transform your life. This relatively hands-off avenue may have a steep learning curve for beginners, but the potential rewards make it extremely attractive.
Real estate investments are real estate properties that generate income, or are intended for investment purposes, instead of used as your primary residence.
Investors usually have multiple properties that generate income and profits to help them build wealth, increase their income, and diversify their investment portfolio.
7 Simple Ways to Get Started in Real Estate Investing
If you’re соnѕіdеring real estate investments but aren’t sure where to start, you’ve come to the right place. Here are the simplest ways to grow your real estate investment portfolio in the Philippines.
REIT or Real Estate Investment Trust is a trust managed by a corporation which owns and operates income-producing real estate properties such as shopping malls, office buildings, hotels, and the like.
REITs can be extremely profitable over time because уоu саn invest аnd earn rental income through it without having to handle tenants. Some REITs in the Philippines you can invest to include:
- Robinsons Land REIT (RCR)
- Ayala Land REIT (AREIT)
- Double Dragon REIT (DDMPR)
- Filinvest REIT (FILREIT)
- Megaworld (MREIT)
- Citicore Energy REIT (C-REIT)
2. Online Real Estate Crowdfunding Platforms
By now, you’re probably familiar with crowdfunding. This refers to a method to raise money for businesses online.
The logic behind crowdfunding is that tons of people are willing to invest in small amounts, and when they do, a large sum of money can be raised more easily.
Real estate crowdfunding uses the same idea. By leveraging crowdfunding platforms and social media, investors can be connected to property investments, and an investor can easily buy into a property to become a shareholder.
This way, property owners can gain access to capital that they may not raise on their own.
Flint PH is currently the leading real estate crowdfunding platform in the Philippines and it is made exclusively for people who want to invest in real estate properties in the country.
This platform pre-funds real estate properties in its portfolio, and users can easily buy shares of various real estate properties. Users can quickly earn interest because the pre-funding process allows Flint to accelerate investment closing.
3. Flipping properties
This is a very fast way to make money with real estate investing. Flipping properties involves buying properties at a low price with the intention of reselling them later at a higher price.
Then, the profit will be withdrawn and invested into the next property. The investor will repeat this process to get more income.
Flipping properties is easy, but it also has a steep learning curve, and long-term success is not guaranteed. It can be very risky if the investor does not have a good eye for underpriced properties, and the high risk-reward ratio is off-putting to many investors.
You’ll be surprised at how easy it is to buy cheap foreclosed properties in the Philippines. For as little as P30,000, you can own foreclosed land. If you don’t have the capital to invest in foreclosed properties, you can get a housing loan.
You can easily find foreclosed properties in banks, SPAV companies or companies formed under the Special Purpose Vehicle Act of 2002 to help banks shed their non performing assets, lending institutions, as well as government financial institutions such as Pag-IBIG, SSS, and National Housing Authority.
You can also attend property auctions, and check online listings.
When buying any foreclosed property, make sure to inspect it first. Moreover, you must also prepare for the fees and taxes that will be charged to you such as:
- Registration fee
- Transfer tax
- Notarial fee
- Documentary stamps tax
- Monthly association dues (for townhouse and condo units)
4. Rent out a room (Airbnb)
This is a simple method of making money with real estate. If you have a spare room or apartment, you can list it on a home-sharing site like Airbnb to get extra income.
This is a great way to make money if уоu live in a place where tourists often visit. This method requires minimal work and little investment, but уоu can earn a lot of income if you do it right.
Renting out rooms is a very popular method of monetizing spare real estate because it’s easy to set up, and Airbnb makes it very easy to get started. It’s also easy to track income, and the risk is low.
The tricky thing about this method is that you need to be skilled at marketing, and you have to have a great property to attract guests. You must also invest in photos to сrеаtе a wonderful listing that will encourage guests to stay in your property.
If you don’t have a spare apartment or room to rent out, you can sublease a property. This involves renting out a property, and then sprucing it up so it will be ready to be rented by other people.
With this scheme, you can save more money since there is no need to purchase your own property. You just need to handle property renovations (if needed), and buy extra furniture.
5. Rental properties
If you have a big budget to work with, you should consider getting into the real estate market by buying a rental property.
Rental properties can be a great source of income because they can be managed by someone else while you get a monthly income.
If уоu’rе interested in getting started with rental properties, уоu must carefully consider the location, rent and purchase price, and the costs to renovate the property.
Investing in property through rental properties can be a long-term investment and it can be very profitable if done properly. Here are some rental properties you should look into:
The most profitable apartments are usually located in large cities and near major transportation systems. The rent for an apartment unit comes from multiple tenants, and it’s usually less expensive than a single-family home.
These are residential units that are located close to malls, schools, hospitals, and other places where people go every day. The benefit of townhouses and condos is that you don’t have to micromanage tons of renters similar to apartments. This property is also very easy to rent out if it’s in a prime location.
House and lot
If you want a more stable property, you should invest in a house and lot. Although it is more expensive, you can rent it out for a higher price.
Commercial properties are located in popular business and commercial hubs. Through this property, you can earn a lot more than residential properties. It’s also very easy to rent out because many businesses use them for office spaces and as showrooms, among other uses.
Condominium units are very popular rental properties especially in major cities. When you rent out this property, you can just focus on getting a monthly income instead of worrying too much about property maintenance.
If you don’t have the budget to build a property, you can simply rent out land. For example, if you inherited a ten-hectare property in a rural area, you can lease out half of it for agricultural purposes.
Investing in a rental property has many advantages, and it can be a great way to earn passive income without having to do most of the work. The monthly checks you will receive are relatively stable, and it’s also easy to collect rent.
6. Build and sell
This is a quick way to get started with building properties. For this investment, you goal is to build a property and sell it for a profit.
If you’re considering building and selling, you should be sure that the market has enough demand for the property you want to build. If you’re building a two-story house, for example, you should be sure that people want to live in the area.
For this investment, the importance of working with reliable professionals cannot be understated. You’ll need a good contractor, architect, engineer, interior designer, suppliers, and real estate broker, among others.
7. Buy and hold
You can build or purchase a property and hold it for a long time, or until its value appreciates.
Usually, this type of investment involves renting out the property until its value increases to generate income. This makes it an awesome investment avenue for people who want to gain short-term cash through rent, and potential long-term rewards once the property is sold.
Ways to Fund a Real Estate Investment
Real estate investing is a lucrative investment. But just like other investments, you need capital to start. Here are the best ways to fund your real estate investment in the Philippines.
Finance with cash
If you have savings, you can pay for the full price of your property with cash. This allows you to get properties at a discount, as well as save on interests that come with loans and lenders.
However, paying for a property in cash also has its disadvantages, especially when it comes to risk. Although paying in cash is cheap, it can put a damper on your potential rewards.
Think about it: If you built 5 apartment units for Php5 million, and you plan on renting each unit for P25,000 per month, you’ll have to wait a significant amount of time before you can pay off your initial investment.
Pag-IBIG fund housing loan
If you’re employed, you probably have monthly contributions to PAG-IBIG. This government agency is best known for its housing loan offers that have a relatively low interest rate (5.750% for 1-year and 6.375% for 3-years minimum as of January 2022), and long loan terms (up to 30 years at a 10% interest rate).
Through this scheme, you can own a property without being financially burdened by heavy costs.
To know more about PAG-IBIg loans, check out this in-depth guide.
Borrowing money from banks & other lending institutions
Because real estate is an attractive investment, you have the option of getting an interest-bearing loan with a great deal of flexibility.
However, banks and lending institutions usually have more restrictive terms and conditions, such as high interests and short loan terms of up to 5 years.
In recent years, many digital banks and lending institutions have challenged traditional banks in providing loans that are more accessible, especially to Filipinos who do not have a credit history.
However, expect the loan amount to be significantly lesser than the amount granted by banks.
In-house financing involves taking out a loan directly from a property developer to acquire a house and lot, condominium, or townhouse.
This loan is less restrictive compared to bank loans when it comes to the approval process. This makes it an amazing option for those with an unsatisfactory credit card payment history or those who have an existing unpaid loan from any financial institution.
Another real estate investment you should consider is rent-to-own properties. This involves an agreement where you commit to renting a certain property for a specific time, with the option to buy it before your lease ends.
Mortgage brokers are intermediaries between borrowers and banks. Because mortgage loans can be extremely challenging, especially for first-timers, brokers simplify the entire process by guiding you.
When you work with a mortgage broker, you’ll have a higher chance of getting approved for a loan.
Some of the most popular mortgage brokers in the Philippines include:
- Nook PH
Jason Acidre is a serial entrepreneur and the co-founder of Grit PH – one of the fastest growing online publishing platforms in the financial & business space in the Philippines. Follow him on Twitter @jasonacidre.