How to Invest in Philippine Real Estate When You Don’t Have Huge Capital

You’re probably a little sceptical right now after reading the title. I can’t say I blame you – that’s because no one ever told you the truth about real estate investing.

Contrary to popular belief, you don’t need a huge capital to acquire a property. Gone are the days when you need to make lump-sum payments to be able to invest in real estate. Developers here in the Philippines are offering flexible payment terms and a low monthly downpayment on their pre-selling real estate projects.

What does “pre-selling” means? Well, pre-selling properties are those that are offered for sale before its construction. Hence, the prices are on their introductory price or the lowest possible price in the market.

Of course, it has its risk as the finished unit may not be the one you have in mind. But if purchased with thorough study and research, the risks outweigh the benefits because pre-selling offer lower prices and flexible payment terms. Perfect for those who don’t have a huge capital to be able to acquire property investment.

Here are the facts about pre-selling properties:

For as low as ₱15,000 reservation fee, you can secure a property, its current price and payment terms.

Most of the reservation fee of developers are very affordable. The amount is usually ranging from ₱15,000 – ₱50,000 (depending on the property and developer), and it is deductible from the selling price.

With the reservation fee, you had been able to secure three things:

a. The property. With a ₱15,000 reservation fee, you had been able to secure a 3 Million Pesos worth of property under your name. It will no longer be offered to others because the property is already reserved under your name.

b. The current price. Property price increases as time go by attributed to its construction development, economic growth etc. Here’s in the Philippines, usually price increases quarterly, sometimes, even monthly. By reserving early, you had been able to secure its current price. Pre-selling price is the lowest possible price in the market. 

c. The payment term. Payment terms change monthly or quarterly. If you purchase a property two years before its completion date, the monthly payment will be 24 months to pay. Hence, your monthly payment is lower compared if you purchase it 12 months before its completion date.

Downpayment is payable on an instalment basis and can be as low as P7,000 monthly.

When buying a property, payments are divided into downpayment (sometimes referred to as equity) and the loanable amount.

The required down payment depends on the agreement between the developer and the homebuyer. Here in the Philippines, the typical down payment is ranging from 20% to 40% of the total purchase price of the property.

If you purchase a property that is already ready for occupancy, you are required to settle spot downpayment, ranging from 5% to 20% spot downpayment depending on developer terms. But once you avail the property on its pre-selling stage, you can pay the down payment on instalment basis – 36 months to pay, 24 months to pay etc. The months to pay depends on the completion date or the time that the property will finish its construction.

One famous developer who offers low downpayment on their condo projects is SM Development Corporation. Currently, it is the #1 property developer in the Philippines based on reservation volume. It is a subsidiary of SM Prime Holdings Inc. which operates 70 malls in the Philippines. They successfully integrate their SM supermalls to their condo units. You can own an SMDC condo unit for as low as Php 7,000 – Php 20,000 monthly. Click here to check-out SMDC condos for sale.

With these facts, we can say that real estate requires smaller capital compared to big businesses like shops and restaurants. It’s just like saving a portion of your money monthly, but it doesn’t go into your bank account where it earns a very low-interest rate. It goes to an investment that can give you a higher yield than banks because of property appreciation and rental yields.

Have a direct control on the property even though it’s not yet 100% paid.

This is the best thing about real estate investment. You can have direct control over the property even though it wasn’t 100% fully paid. Imagine – after paying the required downpayment (for example, 20% of the total purchase price of the property), you may now accept the unit. You can fully maximise its benefits by residing on it or make it generate profits by renting it out.

For the remaining balance, you can pay it via lump-sum or thru bank loan or PAG-IBIG loan (for PAG-IBIG members). You can pay it five years, ten years, fifteen years or even twenty years.

If you are worrying that the interest rate will consume you, take note that property value and rental income also increases over time.

Also, if you are planning to rent it out, take note that real estate is a self-liquidating asset. It is an asset that generates adequate income to return the total amount of its cost. There are many investors who don’t shell out money after the downpayment stage because the property earns enough rental income to pay for itself.

These facts I’ve shared to you proves that you don’t need to be a millionaire to invest in real estate. But it will make you a millionaire as it will increase your net worth because a property is an asset that can give you high returns over your lifetime.

As the saying goes, do not wait to buy real estate, BUY REAL ESTATE, AND WAIT!

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