With the promising opportunity in Philippine real estate, you’re probably looking for a condominium investment right now. But with the endless cascade of real estate advertisements in the market, you might be feeling lost because you don’t know how to start and what things to look for in a condominium property.
If you are this person, don’t fret. Here are guiding tips to help you get started in buying a condo investment in the Philippines:
Tip #1: Assess your financial capacity
Condominiums worth a million pesos. So before you start condo investing, assess whether you are financially ready for it.
If you will pay your condo unit on an installment basis, you must have a stable income to sustain the monthly payment.
And if you plan to pay it thru bank or PAG-IBIG financing, be sure that you qualify for a home loan.
It is important to note that lenders don’t just look at your monthly income. They also look at other factors, such as your debt-to-income ratio, to decide if they will be willing to lend you.
Lenders used this to measure your ability to pay your debts.
To get this, divide your recurring monthly loan payments, meaning the monthly amortization of the home loan you are applying for plus your other existing loans, into your gross monthly income. Then multiply it by 100 to determine how many percent of your monthly income goes towards your loan payments.
If it’s higher than 40%, then you may have trouble getting a loan.
Here’s a sample computation. A Php 3,000,000 home loan, payable for 15 years at a 6.5% interest rate, has a monthly amortization of Php 26,133 pesos.
If this property is your only debt, divide it into your gross monthly income, for example, 80,000 pesos a month. Expressed in percentage, that’s 33% debt-to-income ratio.
Since this is below 40%, the bank is more likely to approve your loan.
But, if, for example, you’re applying for the same home loan and your gross monthly income is Php 50,000 only, your debt-to-income ratio will be 52%.
Since it’s too high, the bank might deny your loan application unless you have a spouse or a co-buyer that can provide additional financial documents to add up your income.
So make sure that you consider this before applying for a home loan.
If your ratio is too high, don’t worry. There are ways to lower it. First, you can find ways to lower your debts. One way is to pay a higher downpayment on the developer to lessen the loanable amount of your condo unit. Another way is to increase your income by looking for a new source of income, such as establishing a new business.
In addition to this, banks also consider your credit score. It’s a score of your history in making timely payments. A high credit score means you pay back your bills on time, hence a higher chance of home loan approval. You can improve your credit score by making prompt payments on your loans and credit cards.
Tip #2: If you do not have enough lump sum cash for condo investing, explore preselling condo projects for a lower monthly downpayment.
Gone are the days when you need to make lumpsum payments to invest in real estate.
Developers here in the Philippines offer flexible payment terms and a low monthly downpayment on their preselling condo projects.
Here, you can buy a condo before it is built or while it is being built, and these are called preselling condos.
Imagine by just paying the reservation fee, which is usually Php 10,000 – Php 50,000. You already secure the property under your name and lock in its current price and payment term.
You can then make money if the property value goes up in the next few months or years.
If you are a real estate investor, preselling condos are a promising investment since their market value can increase by the time they are finished.
And here’s the best thing about it. Since the condo is under construction, you will pay the downpayment, usually 10% to 30% of the total price, on an installment basis with no interest rate.
For example, a preselling condo unit worth Php 4,000,000 has a required downpayment of 20%, which is 800,000. Since its preselling and its target completion date is five years from your date of purchase, then the Php 800,000 is payable for five years or 60 months. Hence, your downpayment would be 13,333 pesos per month only.
This means, by shelling out a small portion of your monthly income, you can acquire a condo investment here in the Philippines.
Since there is no interest charged on the payments you make while the condo is being built, you have time to save up money. You can pay the remaining balance either in full or with a bigger downpayment to lessen your loanable amount, which will incur interest later on if you pay thru bank financing.
You may browse our website to check preselling condos with low monthly downpayments ranging from Php 8,000 to Php 25,000.
SM Development Corporation (SMDC) is a top property developer in the Philippines offering low monthly payments on their pre-selling condominiums ranging from Php 8,000 to Php 20,000. Click here to browse SMDC pre-selling condos, and check their latest discounts and promos.
Other property developers that offer low downpayment and flexible payment terms are DMCI and Amaia Land.
Tip #3: Explore the developer’s payment terms to avail discounts.
Most developers will give you a discount if you can pay spot cash or deferred payments.
Let’s say you are looking at a condo worth Php 6,000,000, and the developer offers these payment terms:
- 5% Spot Payment – 1% discount
- 10% Spot Payment – 2% discount
- Deferred (12 months) – 3% discount
- Note: This is a sample only. Discounts may vary per developer.
This means if you pay a 5% spot payment of 6Million pesos, which is 300,000 pesos, you’ll get a 1% discount worth 60,000 pesos.
If you pay 10% spot payment which is 600,000 pesos, you’ll get a 2% discount worth Php 120,000.
If you pay in deferred for 12 months (meaning the Php 6 Million is payable for 12 months at 0 interest rate), you’ll get a 3% discount worth Php 180,000.
Such options exist, and it’s best to avail this if you have extra cash on hand.
It is a good idea to make lump-sum payments during the downpayment stage. You will have a less loanable amount, which will incur interest on your loan later.
For example, instead of just paying the 15% minimum required downpayment, you can pay 30% to lessen your loanable amount from 85% to 70%.
Tip #4 – Compare prices.
When you compare prices, don’t just look at the monthly downpayment. Instead, compare the total cost of the property.
Condominiums have different prices depending on factors like where they are located and what amenities and features they offer. For example, condos on main roads are more expensive than condos situated two blocks away from the main road.
So be sure to compare everything: from the list price or the asking price in the market, down to the applicable taxes and fees.
Also, do not forget to compare prices within the condo project. It is important to note that some developers offer different prices on their units based on floor level, layout, and unit orientation. Usually, condo units on a higher floor offer a higher price because of the provided view.
Now, it is noteworthy that expensive condos do not mean that it is better. Because the best type of condo for you will depend on what you really need and your personal preferences. So when comparing prices, think about the things you can and cannot compromise with the price.
Lastly, don’t forget to ask if the applicable taxes and fees are tucked in on your monthly downpayment.
If you buy directly from the developer, the other charges are usually 6% to 10% of the unit selling price.
Other charges are not hidden charges. Because what comes after a purchase is the applicable government taxes and fees such as the registration fees, documentary stamp tax, transfer tax fee, notarial fees, and other administrative fees to transfer the title to your name.
Some developers also include miscellaneous charges such as the water and electricity installation and turnover fees.
Tip #5: Looking for a lower price? Look for owners who are reselling their properties.
Some condo owners resell their condo units below market value to dispose of their condo units quickly.
But the payment terms are different from a property developer.
They do not offer installment payments, since their payment terms depend on the payment status of their condo unit.
For example, if they already fully paid their condo unit, then they will require an up-front spot cash payment to have their capital back as soon as possible.
On the other hand, if their property is currently on a mortgage, they can offer a sale with mortgage assumption (also known as pasalo in tagalog). The buyer pays the seller a certain amount for the property, and you, the buyer, will assume the mortgage and is now responsible for paying off its debt.
This is a practical option, only if you have lump sum cash on hand because the asking cash-out is usually not less than Php 100,000 and can go up to millions of pesos, depending on how much the owner already paid his unit. Plus, there are also fees and taxes involved in transferring the property to your name.
You may click this link to browse pasalo condos or condos with assume balance: https://www.investateph.com/pasalo-assume-balance/
Tip#6 – Do your due diligence.
In every investment, there’s a risk involved. Therefore, you must do your due diligence.
If you’re buying directly to a property developer, then be sure to check the developer’s track record and if the condo project has a license to sell.
On the other hand, if you buy from someone who already fully paid the property, ensure that it’s clear from any liens and encumbrances or any claim against the property. You can easily verify this on the Registry of Deeds.
And if the condo is currently being offered as pasalo or with assume balance, then make sure to double-check the payment status on the developer’s office or the bank.
As for the condo’s ownership, you can easily verify this by going to the condo’s admin office.
Tip#7 – Research the property’s location & future development in the area.
You probably heard the saying before … that ‘real estate is all about location.’
It’s because location significantly affects the property value and its potential rental yield.
It determines the proximity and accessibility of your condo unit to transportation, hospitals and universities, etc. It also determines if you reside in areas that are prone to calamities such as floods and earthquakes. That’s why it is crucial to do thorough research on the location.
The good news is, we can easily do this right now because of our advanced technology.
There’s Google Map to see the actual neighborhoods of the condo project. And there’s Phivolc’s Faultfinder to determine the actual location of active faults in the area.
Suppose you intend to purchase a condo for leasing purposes.
In that case, its neighborhood is crucial because tenants are very particular to the property’s accessibility and proximity to specific destinations like malls, offices, and universities.
Furthermore, if you’re an investor, then researching the area’s future development is a must. New roads and infrastructures will lead to property appreciation and can give you substantial capital gain.
Tip #8 Choose your unit wisely.
After you make a reservation, it may cost money to transfer to another unit. So make sure you choose your condo unit wisely.
If the condo is ready-for-occupancy, it is best to see it in person before making a decision.
And if it’s preselling, then check out the developer’s floor plan to see the unit’s proximity to elevator and fire exits.
Also, don’t forget to consider its orientation or where it is facing, especially if you plan to lease out your condo unit. Some tenants, such as vacationers, prefer accommodation with a good view.
Lastly, do not forget the layout and size of the unit. You should choose the right size that suits your needs. Of course, bigger condos will be the best for starting families, but smaller condos have a higher chance of being leased because of the low rent.
Tip#9 – Know the condominium’s policies, features, and amenities.
Condominiums have different policies and restrictions.
For example, there are condos that allow pets, and there are some condos that prohibit them.
Therefore, you need to research if the condo’s rules and regulations are aligned with your needs.
Also, don’t forget to research the condominium’s features and amenities.
Here in the Philippines, you may notice that developers build condominiums meant for particular groups of people.
Condominium for starting families usually have bigger unit areas and amenities such as playgrounds, barbecue pit, and kiddie pool. On the other hand, condos meant for students have facilities such as a study area and library.
Suppose you are looking for a residential condo, then I’m sure that you’ll want it to have kid-friendly amenities and not amenities meant for students.
It would be best to go over it to ensure that the condo has amenities that suit your needs and doesn’t have rules you can’t live with.
Tip#10: Transact with the right people.
Here in the Philippines, you are only allowed to offer properties if:
#1 – You are the owner selling your property,
#2 – You are granted by the owner a special power of attorney to sell his property,
#3: You are a PRC licensed real estate broker, or a PRC accredited Salesperson
Republic Act 9646 prohibits unlicensed brokers and unregistered salespersons from selling or leasing real estate properties here in the Philippines.
Therefore, you should only transact with the right people for a safe purchase and avoid having future problems.