Rental business and property value appreciation are the common ways to make money in real estate. However, realization of profit from these business activities takes a long time especially with property appreciation as it anchors on several economic factors for it to happen. Nonetheless, real estate industry is one of the current key drivers of Philippine economy. In the 2021 report of Statista, the Philippine real estate industry generated a gross value added of nearly PHP529 billion. With this, the massive values of real estate industry entail the there is a market for real estate investors – small-time or big-time. If you are new to real estate investment, you should know these ways to make money in real estate. Aside from the usual ways to gain profit in this sector, there are various short-term ways to earn in real estate. There is no need to wait for the property value to appreciate or collect rental fees by learning these new real estate investing activities. Yielding short-term profits in real estate is now possible with these new investing activities.
Why Should You Invest in Real Estate?
Real estate investment is considered the safest among investment options. It is considered the safest investment because its value grows over time and a loss scenario rarely happens with real estate ownership. Economic factors like inflation, demand, and growth of an area dictate the value of your real estate property. Still, if its value is not yet appreciating, income can still be generated through converting it into a rental business. With this, real estate is a flexible investment as you can take advantage of different ways to earn income.
Short-Term Ways to Earn in Real Estate
For investors who prefer to earn profits as quickly as possible, depending on property value appreciation or rental may not be the best investment option. Fortunately, like any other investment options, the real estate sector is now offering different ways to make money in real estate. Here are the new options that you may try if you want to start investing in the real estate industry.
Renovate and Flip
This involves purchasing a property, renovating it, and selling the property for a profit. This is mostly applicable to a house and lot property. The most common practice in this real estate activitiy is the “70% rule”. It serves as a measurement to know the profitability of a property after deducting all the necessary costs. The rule requires that the value to be paid for purchasing the property should not exceed 70% of the “after-repair value” of the property minus the estimated repair costs. Although, this rule may not always be applicable, especially when considering the market condition. So, if you are unsure of its value, consult a real estate professional. Even so, the essence of renovating and flipping a property is to raise its value by upgrading and fitting it to the needs of your target market at low cost and selling it at a high value to earn a profit.
Build and Sell
Similar to flipping renovated properties, but instead of renovating, you build a structure in the lot area then sell the entire property for a higher value with a profit. This is considered one of the most profitable activities in real estate. However, Urban Institute of Real Estate acknowledges that this is a challenging business in the real estate sector especially for new developers. It needs a extensive knowledge and careful planning before the actual commencement of the project. Maria Cristina Legaspi, the former national president of the Real Estate Brokers Association of the Philippines, backs this idea by stating that “A person driven enough can make a lot of money from real estate through build and sell. But it takes a lot of dedication, a strategy, and a good understanding of what homebuyers want.”
Earning from Pre-Selling Properties
Pre-selling properties are those real estate projects which are not yet fully constructed, meaning it is still in progress. It is marketed by the developers at a very low price. Usually, its pricing is below its market value so it is a great opportunity for real estate investors to acquire a property at a low price. Aside from the below-market value, early buyers can reap pre-selling benefits which can be used as an edge to make the property enticing to the market for easy and quick flipping process. The pre-selling benefits and below-market pricing enable investors to sell it easily at a high price and high profits.
Real Estate Investment Trust (REIT)
The Philippine Stock Exchange (PSE) defines REIT as a stock corporation established for owning income-generating real estate assets like buildings, hospitals, hotels, resorts, highways, and others. An income-generating asset of an REIT is contributed by a sponsor in exchange for equity ownership of the REIT. However, the Securities and Exchange Commission (SEC) requires that the sponsor sell one-third of its ownership interest to the investing public. This enables the smaller investors to have real estate ownership at a lower price. The investment returns are generated through rental and lease payments of the tenants and lessees of the income-generating asset. Like stocks, these returns are distributed through dividends.
Moreover, April Lynn Tann, COL chief equity strategist, believes that REITs will outperform stock investments especially in the short-term. This belief is attributed to the continuous lowering of interest rates and the expectation of getting a fixed income on this type of investment due to its operational activity (i.e. rental and leases) thus REIT prices go up as well. A higher pricing of a corporation’s ownership interest indicates a good financial standing for a company which makes it perceived as profitable in an investor’s point of view.
AVOID This Short-Term Way to Earn in Real Estate
Investing in real estate crowdfunding platform must be avoided when trying to look for a way to make money in real estate. Currently, the Philippines has no well-established real estate crowdfunding platform. There is one company named Flint. It claims to be the first approved Philippine real estate crowdfunding platform. The platform gives you a chance to invest in real estate for as low as PHP1000. With its low entry cost, a lot of Filipinos looking to invest their money were easily attracted. However, the SEC warned the public that the crowdfunding platform is operating without the necessary license and authority to solicit, accept, or take any investment amount from the public. Unfortunately, a lot of Filipinos still invested and currently experience issues with the withdrawal of their funds. With this, Flint is currently being tagged as a scam by its lenders.
But how does real estate crowdfunding works? From the name itself, a real estate project is being funded through the public. Basically, this becomes an option for a start-up real estate developer who does not have enough capital to start a real estate project. Its major advantage is the low entry cost because it needs to garner funds even from the lowest amount possible. However, putting your money in a real estate crowdfunding platform is riskier than investing in established companies like REIT, especially that the SEC has not yet authorized any real estate crowdfunding platform to operate in our country.
Funding is Easier When Deciding to Invest in Real Estate
A huge amount of money is needed to finance a real estate investment. This might be the biggest problem when thinking of whether to invest in real estate or not. Fortunately, real estate developers are recognizing this hindrance for potential investors. Thus, it enabled the purchase of real estate investment through different financing methods like bank loan or Pag-IBIG housing loan. Still, even with these financing methods, it may still not be accessible for the middle to lower income classes because their cash flows are restricted. With this, Bria Homes might be the best real estate developer to check on. The listed short-term ways to earn in real estate is perfect with the products of Bria Homes because the affordable pricing and top-tier quality make the Bria properties attractive to the market thus letting its owner earn a highly probable return from its investment. Our company offers affordable house and lots whether ready for occupancy or pre-selling. To learn more about our offers, contact us through our different media channels.
Written by Steven Hernandez