From purchase to profit: Property ownership made simple

(First of two parts)

Real estate investment in the Philippines remains one of the most reliable ways to build lasting wealth.

While the journey involves costs—from acquiring to managing and maintaining—the potential long-term rewards can be considerable.

The country’s rapid economic growth, expanding middle class, young labor force, and flourishing outsourcing and tourism sectors create a fertile ground for real estate investment. Whether you’re eyeing properties in bustling central business districts (CBDs) or seeking opportunities in emerging tourist destinations, the Philippine real estate market is full of potential.

Understanding the landscape

The Philippine real estate market offers diverse investment opportunities.

Residential properties—whether condominiums, townhouses, or single-family homes—are solid investments that can appreciate over time and deliver steady rental income. Meanwhile, commercial spaces such as office buildings and shopping malls are thriving in the country’s growing business climate, particularly in business hubs like Makati, Bonifacio Global City, and Ortigas Center.

Recent trends are reshaping the market, with niche investments like self-storage facilities, cold storage warehouses, solar farms, and agribusiness ventures gaining popularity. These offer investors access to unconventional yet profitable sectors in real estate.

Maximize your first property investment

Real estate isn’t just about flipping properties for quick profits.

To make your first investment work in the long term, it’s essential to approach it with a well-thought-out strategy.

Here’s how you can ensure success right from the get-go:

Location: Foundation of property value

The mantra “location, location, location” remains true for real estate. Where your property is located will directly impact its rental income potential, appreciation value, and overall return on investment (ROI).

Properties in CBDs like Makati, Ortigas, and BGC command premium prices but offer consistent appreciation and demand. As of 2023, prices in these areas range from P300,000 to P450,000 per sqm, with the more premium properties even surpassing those rates.

However, emerging cities like Laguna, Pampanga, and Iloilo are seeing rapid development as businesses and infrastructure expand. These areas offer excellent long-term growth potential at a lower entry price, typically ranging from P40,000 to P100,000 per sqm, depending on the location.

Interest rates, financing options

Interest rates play a crucial role in property investment, affecting both the cost of financing and potential returns.

In the Philippines, mortgage rates typically range from 7 percent to 9 percent a year for housing loans. Securing favorable rates can significantly reduce your cost of borrowing, so shopping around and comparing loan options are essential.

With the BSP cutting interest rates down to 6.25 percent, this will encourage more borrowing from individuals and businesses alike. This will bring more economic activity for the Philippines as borrowing will spur spending while bringing in employment opportunities and of course, capital formation.

If you’re planning to finance your investment with a home loan, pay attention to the loan-to-value (LTV) ratio and monthly amortizations.

Ideally, aim for a manageable repayment schedule that fits well within your budget and doesn’t strain your cash flow.

Typically, I’d recommend considering fixed-rate loans, as they shield you from fluctuating interest rates, providing more financial stability, but with the BSP signaling more rate cuts to follow, it might be better, at least for the first year, to consider annual repricing.

Beyond immediate gains

Real estate investment is a long-term game. Rental income and property appreciation are your two primary streams of income, but patience is key.

For instance, holding onto your property during economic downturns and waiting for market conditions to improve can often result in substantial gains instead of just giving up and looking elsewhere.

In addition, while renovations and upgrades can take up a considerable amount of money, they can also significantly increase both the rental value and market price of your property.

Simple improvements like modernizing kitchens, bathrooms, or communal areas can make your property more attractive to potential tenants or buyers, thereby increasing your returns.

(To be continued)

The author (CIS, CSR, CTP, CUSP and CFMP) has 19 years of experience as an entrepreneur, real estate investor, stock broker, financial literacy advocate, educator and public speaker. He is the vice president and head of Business Development and Market Education Departments together with the OFW Desk of First Metro Securities Brokerage Corp. and is a member of Metrobank’s Financial Education Editorial Advisory Board. Email the author at andoybeltran@gmail.com