The pandemic spared no one and taught people many things the hard way. One of which is the importance of being financially stable during a crisis. Before COVID-19 broke out, real estate in the Philippines has been enjoying a sustained upward boom. The main drivers of the market pre-COVID were multinational companies, and BPOs and families were more drawn towards urban areas.
A year after the virus hit the Philippines, the projected recovery of the real estate, especially that of the housing market, has been derailed. Like all other industries, real estate has to adapt to the people’s new normal and buying attitudes.
With or without the pandemic in the picture, another fact remains: there will always be a demand for housing. People will always need places to live in, especially in high-traffic areas like metros and tourist spots. With these facts, individual property investors must know how to maximize opportunities in a challenging time and turn the tables in their favor.
Under uncertain times, residential property owners might want to make money from their real estate ventures. Below is a roundup of ideas on monetizing their houses and lots, condo units, or apartments.
1. Pre-selling and reselling
Those who have been on a house and lot hunt before have probably heard of ‘pre-selling’ properties. Buying a pre-selling unit means purchasing a condo or a house and lot in its pre-construction stage. Properties classified as pre-selling can also be ones sold before completion of the property.
Many investors consider pre-selling properties one of the most promising and attractive forms of real-estate investment because it almost always yields high profits. Pre-selling properties cost a lot less cheap than completed properties which have already gained value over time. Investors make money out of these properties by buying them at a low introductory price and reselling them after construction. In favorable situations, investors enjoy the returns of their appreciated properties with hundreds of thousands and even millions in profit. Some factors that can influence this price increase are the property’s location and the market state.
What to consider: When investing in pre-selling and reselling, investors should mind the real estate developer’s credibility in offering the deal. Buying these properties means putting your money before seeing the physical thing. Thus, investors are advised to engage with trusted developers with established reputation in the industry.
2. Fix and flip
Flipping homes refer to the practice of buying a property, upgrading it, and selling the same for a greater price. These properties are purchased below the current market value and are usually fixed up for aesthetic purposes. Some are renovated and repaired then put on sale for a higher price. With the right strategy and skills, it often offers a quick return on investments (ROI). This type of investment is suitable for real estate investors who have years of experience behind them and have profound knowledge of the local market conditions.
What to consider: Unlike pre-selling properties that only require financing, fixing and flipping houses engage the investors in the construction stage. They will be negotiating terms with a contractor of their choice. Plus, they must be hands-on in the entire renovation process.
One of the most common means to make money from real estate properties is by renting them out. In the Philippines, this property investment type continues to be in high demand, especially within the country’s busiest metros like NCR, Cebu, and Davao. This proves to be an ideal investment strategy for residential properties near the city proper, university belts, malls, or hospitals where people’s concentration is high.
Long-term rentals are ideal for investors who are keen on having a steady stream of cash flow and can maintain a landlord’s commitments. This is usually offered at a six-month to a one-year contract, thus protecting both the lessor and lessee from possible market changes within the contract’s specified time frame.
What to consider: Investors should be prepared for the requirements and responsibilities of being a long-term landlord before listing their properties online. Everything must be considered, from drawing up a lease contract, furnishing the property with furniture and living necessities like water and electric facilities to handle tenants’ maintenance requests.
The best option for property owners in tourist-favorite destinations, short-term rentals could provide a higher turnaround in investment without the hassles of being a full-time landlord. This is a fitting choice for investors who have a knack for hospitality. The services to be provided closely resemble that of what traditional inns or hotels have.
With the popularity of online booking platforms like Airbnb and Tripadvisor, private property owners’ short-term rentals have become a well-loved alternative to hotel reservations. Unlike hotels with strict regulations in place, short-term property rentals give tenants much more freedom and flexibility.
What to consider: The income investors can make from short-term rentals varies and greatly dependent on the demand. Unlike long-term rentals, this does not guarantee stability in terms of turnaround. However, owners can also take advantage of peak seasons like summer, local festivities, and long holidays to raise their higher-income service fees.
Investing in a first or second home is one of the many rewarding investments beyond the metro. House and lot properties could easily be turned later on as a vacation rental if the owner’s preferences or priorities eventually change. This type of property investment perfectly suits those who do not want their homes to just sit idly while not currently using them and creating a passive income.
Renting out vacation homes is an ideal, less aggressive means of making money from one’s house and lot property. The earnings from this type of investment are good sources for long-term wealth-building or could simply be used to fund one’s travel expenses or unplanned lifestyle purchases.
What to consider: Like short-term rentals, the income from renting out vacation homes is not as stable as long-term rentals. One major challenge of having a vacation home is the upkeep and general health of the house. Dwellings need to be tended to regularly and be well-kept to prolong their life. That said, owners shall ensure that reliable house caretakers are looking after their properties in their stead.
The good thing about listing a property up as a rent-to-own offer is that the earnings are almost always guaranteed. These properties’ value has been appreciated over time. Depending on the sale agreement, rent-to-own provides a stable source of cash for the seller until the deal reaches a close. This could be a good option for investors looking for new or other investment forms not necessarily limited to real estate and need steady funds to achieve that goal.
Suppose the buyer decides not to pursue the sale. In that case, the owner practically loses nothing as the down payment fee, often paid upfront, is usually non-refundable, and the property rights remain with the owner.
What to consider: Because rent-to-own directly involves two independent parties, they should be bound by a lease agreement reviewed by a real estate attorney. To ensure that both the buyer and sellers’ rights are protected, a contract shall be duly drawn up and signed by both parties before engaging in this type of investment.
Are you an investor who wants to diversify their investment portfolios by venturing into real estate without directly engaging in physical properties? REITs o Real Estate Investment Trusts is the best way to go. REITs are like mutual funds that companies own and earn from with their real estate properties. These include companies engaged in residential, land, or commercial real estates such as lifestyle malls, hospitals, and apartments, to name a few. Investing in REITs means buying a share from these companies and earning through dividends, kind of similar to how stocks work.
First-time or veteran real estate investors have many options out there to monetize their properties and maximize their earnings. Aside from the choices listed in this blog, investors can also delve into the other two real estate types — raw land and commercial. Investing in these two has its own rewarding returns and set of risk factors as well.
Real estate properties never depreciate, making it one of the most sensible choices to grow one’s earnings or investment portfolio. Real estate developers have mushroomed in the past decades; thus, knowing which basket to put one’s money on is the biggest challenge.
Investors shall duly do their part, research thoroughly, and arm themselves with the essential knowledge and skills to triumph in this venture. It is always a good first step to look into reputable housing brands. These are developers who have long since demonstrated their expertise and established their credibility. One of which is the Philippines’ house and lot giant Camella. With over 40 years in the industry, Camella prides itself on building almost half a million homes to several generations of Filipinos and pioneering master planned communities in the country.
Master planned communities refer to Camella’s township properties that are a well-blended mix of residential and commercial projects – Camella Savannah in Iloilo City as an excellent sample. Master planned communities are sustainable developments where residents have everything within their reach. Here families can enjoy communal amenities like pools, playgrounds, and function halls, to lifestyle establishments like malls, coffee shops, convenience stores, and more.