Build Your Philippine Home Now And Beat Inflation! — Part 2

Updated and expanded on 19 Jun 2013.  See also: Like a Kid in a Candy Store for another perspective on this path to disaster.

Here’s a cautionary tale I received from a kind reader just after my recent article on why you might want to think twice … or even three times … about building your house in the Philippines Build Your Philippine Home Now And Beat Inflation! .  Especially by "remote control".

I tried building house by remote control when exchange was 56 to 1 thinking we would save instead of waiting until we retired and was on site to supervise.

I Am still paying for the mistake.

Live in the Philippines by Remote Control?

It Is Not As Simple as You Think.

It is way, way harder than the average  person envisions to build a house and keep it in repair here in the Philippines.  And it’s also very hard to keep control of your own property when you are not here.

I even paid about local wages figuring I would get better result. Since house was built, still sending money every month to fix problems and maintain.

As Americans we often think it’s all about money.  And, of course, to some extent it is.  But Filipinos are much less motivated by money than the average American is, in my experience, anyway.
 

Spending Big Won’t Make You The “Good Guy”.

 
Paying a lot is not a way to build loyalty.  In fact, it’s often something Filipinos will ridicule in private … evidence that Americans are "rich" (which we are in terms of a huge percentage of the population here in the Philippines) as well as proof that "If he has the money, why not put it to good use”? 
It’s not the "51st State" here, guys and gals.

Like water seeping through walls when it rains because was not sealed or not enough concrete used to fill cement blocks which I supposedly paid for. Water leaking from tile roof into attic and down into bedrooms.

In addition to the fact workmanship problems can happen, most Americans fail to realize that the Philippines attitude toward water in the home is often a bit bizarre to my mind.
I well remember a few years back meeting a fellow American in the department store appliance department.  He was buying a refrigerator, washing machine and a couple other smaller appliances.
 
"New here", I asked?
"Well actually, no, I’ve been here six months ago so and bought all this stuff once already.  But our house was flooded out last week.  The first time I experienced a flood.  Turns out our rental house floods every year or so.  My wife knew this, but never bothered to say anything, because, as she puts it, "It’s the way things are here" … frankly, I’m exasperated."
Standards Aren’t the Same
 
Would YOU rent a house that’s known to flood once or twice a year?  Likely not, but to many Filipinos it’s just the way things are.  Living here is about SO much more than just the cost of things.

Did noticed that every time we went back, the outlaws had upgraded their houses with new tiles, doors and windows.

Do you think there could be any connection between the new windows and the money you sent? 
 

Trying to be Cheap Won’t Win You Friends Either

I do know one thing … asking/accusing any family member of ‘skimming’ materials would be a recipe for a disastrous relationship. 
Once you send money, it’s ‘spent”.  You may not like how it was used, but especially with family around, you can not afford to get into a “Urinary Olympiad about how it was spent.  
This is even true legally.  Unless you have a written contract, written to be enforceable in the Philippines and signed in front of a notary by all parties, you don’t have a prayer of legal help to recover money spent.
 
“But I gave specific instructions that money was to fix the roof” means nothing, legally.  You sent, you spent.
Remote control building has occurrences like this all the time.
Here, on PhilFAQS.com , where I try to answer the Frequently Asked Questions about living in the Philippines, I don’t sugar coat living in the Philippines.  I try to tell it as it is, and many people don’t want to hear about it.  Others write me "nastygrams" about how I shamelessly promote living in the Philippines, somehow for my personal gain. No way.  Sad.

My wife bought the lot from her aunt in 1985 because she needed the money and wanted my wife to have the lot.

It was titled in her aunts name, so my wife paid her outlaws to change name to hers after paying I don’t know how many thousand of peso’s and she ended up doing it herself when we were there.

Even though we had the original title and plot map they could not find it at the city hall or national gov.

Paid to have lot surveyed and retitled and paid off all outlaws who was claiming same before building.

Even now people show up every now and then claiming to be distant outlaws which the wife has never heard of wanting their share and I just tell them t
o take it to the courts.

After the aunt died, my wife let her brother live there with his ten children rent free without even paying property taxes.

The house was well taken care of when aunt was alive, had nice hardwood flooring and was livable even by stateside standards.

The brother died several years before we decided to build on the property and the ex sister in-law with children was still living there and the house was in bad shape because was not taken care of.

We paid her one hundred thousand peso’s and paid to have house torn down and moved to her choice of place.

Exactly.  Even when you have a clear, legal right to the property, it’s a "given" that you are going to have to pay to get "Informal Settlers" out of what you already own.  And what do you do when someone dies and the widow and flock of children are living in the house.  Of course you have a legal right to toss them out, but will you?  Can you?  How many bitter enemies will you make in the family if you do throw your nieces and nephews out on the street just because of a piece of paper you hold in your hand?.
 
“Informal Settling” is a Big, Big Problem
 
It is a true definition of a “no win” situation … which never would have/could have happened if you didn’t own a house in the Philippines while you lived abroad.
 
An empty house is a huge invitation to occupancy.  In my view, it can be far more damaging to you pocketbook (and you family harmony) than the costs of inflation.

This is just short version of problems of building a house in the Philippines.

I spent $120,000.00 dollars to build this house and am still putting money into it to repair problems and maintain same.

Turned out to just be a money pit, after the wife paid only 30,000 peso’s for same in 1985.

This story can be replicated thousands and thousands of times.  Sad but true.

Let me add a couple things from personal experience as well.



This is not always a story of how the “Kano” gets taken advantage of.

A Filipina friend went to work as an OFW.  She was making money and she wanted to have a house for her retirement.  So she agreed on a plan, for a very nice house I might add, and a budget with an architect/engineer in the family.

She sent money, he supervised the house building.

Month by month, all was going well.

Finally the house was completed, pretty much on budget.

Happy story.

Until she moved in and found that here nice, American style kitchen, handsome cabinets, top quality granite countertops, really nice floor tiling, etc., was somehow so small that the door of her refrigerator wouldn’t open all the way … countertop in the way.

How could that happen?

Well the guy supervising the project for her ran into problems … inflation-based of course … and was in danger  of  having to ask her to send more money.

This would have been an embarrassment … a great “loss of hiya” (face) to him.

So, he kept the costs in line with the budget and to make things even out, he “shaved” about two feet in width off the kitchen.

Hey, good for him.

He didn’t steal any money.

He didn’t steal any materials.

He just stole a little space that hadn’t been built yet, and after all, what’s a foot or two off a kitchen the size of the one she was having built.

So much bigger than the average Filipino kitchen anyway, she’ll never miss it.

Except, of course when she opens her refrigerator door  *sigh*. 

I mean how often will she want her refrigerator door fully open?  She could always buy a smaller ref, after all.  “Filipinos don’t need that big of a refrigerator anyway, she got all those foreigner ideas when she worked abroad.”

This is something you will find often, even when not building a house.  No one wants to be the bearer of bad news.  So things will go wrong in the family and you won’t hear about them … often until there isn’t much that can be done about them.

The money you sent for lola’s medication got spent on something else, so no one will give the bad news, lola will go without her medication, and then, when she gets sick, you’ll find out she’s in the hospital and the bill is already P50,000.

There’s very little you can do about this issue except to expect it.  It’s pretty much a fact of life.

Bottom Line?

I think the idea of building a house in the Philippines before you live in the Philippines is a very dangerous to your pocketbook and psychological well-being.

Yes, if you don’t build now, but build later, building materials and labor will cost more.

But paying that additional cost may well be far, far less than the costs, both dollar costs and hidden “ill-will” costs that can add u[ if you try to build by remote control. Or buy a house now, and leave it vacant, or occupied by a family member.

Dangerous as stumbling around in a minefield.

Be careful trying to save a buck (or a peso), or so Philly opines.


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Comments

  1. Neal in RI says

    Dave
    I will be rounding up the Wife and aggressively asking her to read these last 2 articles, as she has had the urge to build purchase a lot and build a house remote control style in the past.

    Great articles.

    • says

      Yep, it mostly never pays,Neal. Inflation works tirelessly to raise the cost, but the other problems that remote building, as well as leaving a house empty … or with relatives … can be way, way more than inflation.

  2. Kuya Ed says

    There is still a lot to be said for renting long term before building a house in the Philippines. Right now I am renting and happy with the apartment. If I get unhappy with the place I can just move elsewhere. Can’t do that with a house.

    • says

      Exactly, Ed. I’ve preached this a number of times, but I usually get a lot of “pushback” from people who feel that renting is always economically inferior to buying. In the Philippines, especially, this just ain’t necessarily so.

  3. says

    Dave,

    We have thought about this several times. But i think i couldnt agree more, we have our lot in Davao and it will sit empty till I am there to oversea constructions. Just for the fact of construction quality alone. There is no way i would trust a Architect/General Contractor (one in the same in the PI btw) with the build quality.

    Great Article Series

    • says

      Thank you, Rich. I think the undersized kitchen ‘sneak’ had to be a classic. This happens all the time.

      But even for an on-site builder there are a lot of pitfalls here. I strongly recommend readers interested in building a home in the Philippines spend some time on Bob Hammerslag’s excellent site, http://myphilippinelife.com/. Bob and Carol live down Iloilo City way and they recently completed the build of a top quality home in the Philippines.

      Bob found that even actual “givens” in the construction industry … like if you specify and pay for 9mm rebar, and the dealer sells you rebar from a shipment that he ordered and received as 9mm rebar, the steel that is packed and sold as 9mm may be much smaller in size. Bob learned to go shopping for materials armed with a machinist’s caliper … you have to measure and inspect everything, no matter how it’s labelled.

      This isn’t just a Philippine problem. It’s common all across Asia. When I worked in Japan I spent several hundred thousand US dollars buying 4 inch cplaitic conduit for a data cable project. In Japan, even quality engineers will use 100 mm and 4 inches as equal. You certainly can’t see the difference.
      But some of the connections we needed were available in Japan, so I spent another $100K or so ordering them from the US.

      As part of my non-academic master’s degree from the School of Hard Knocks, I found out that 100 mmm is really not 4 inches … it’s 3.93700787 inches. 63 thousands of an inch difference isn’t much, hardly noticeable .. unless you spent a couple hundred thousand of other people’s money, there;s no more money left in your bank account, and the pieces don’t fit. Hmmm

      Hint: That was NOT the year I won the “Outstanding Project Manager’s” award. Wonder why ….

      It’s more fun in the Philippines ;-)

  4. says

    I couldn’t agree more! Building your house remotely is a project in itself. I have a lot friends from the construction industry and they would tell me under-the-table stories or low quality materials being replaced to get some commissions. Plus the red tape for various permits and clearances! Such an investment should be properly planned.

    Honestly, real estate would be the last thing I would invest on, at least here in the Philippines. I’d rather rent, same reason with Kuya Ed. I only have to worry 1 payment a month.

    • says

      Yep, I agree also, Dan. The market here in the Philippines is totally out of whack with what many are used to. Rentals are very cheap in comparison to the cost to buy the property.

      Example … the house I used to rent would _never_ become more economical to buy instead of rent at the P7,000 rent I was paying.

      A friend rents a much larger and nicer home for about P30,000 a month. Knee-jerk reaction is that he should buy that house, renting “has” to cost him more. However, when you calculate it out, he might, just might, break eaven over renting by buying a=fter 27 or 28 years! No way of knowing if he’ll even want to live in that house 27 years from now. Renting is by far the best solution for many of us.

  5. John Miele says

    Dave:

    The only, and I mean ONLY, reason we might consider buying in the future is that Rebecca views a house as security should I croak prematurely (She cannot be evicted for not paying rent). She agrees with the financial loss. She knows the squatting risk. She also knows about the building trade here and the tricks and risks. Should we eventually buy, it will not be as an investment, but merely a place to live.

    That said, we’ve been here four years now, know a bit about the market now, and have already made a PITA foray into the real estate game. If we buy / build something, it will be several more years, and with eyes wide open… not clouded by dreams.

  6. Mike Coyne says

    There are or can be so many issues that the average American would never dream of incountering less they have the same degree of hard knocks you have experienced. What the average American sees as security the voice of experience knows is a burden. A person could rent for the rest of their life in th ePhilippines for a fraction of what it costs to build there. My Filipina wife had a hard time letting go of the idea that their is secutity in home ownership. Once you build with American features the only hope you have to sell is to another American or European if you are lucky. The family issues are a whole other article about cultural differences. When I retire in a few years we plan on going overseas but most likely not the Philippines. After 20 + years of family issues it would be to close to the hotspot. Thank you for your article you are truely trying to save people some of the head aches you have experienced. Naivety can only be cured by experience.

    • says

      So true, Mike, so true. It’s not that you can’t live here happily … I am proof you can, along with thousands of others. But it’s proof that you better worry about something more than just the price of a sack of cement. There is more to building or buying a home here than cost, that’s for sure. Godspeed and thanks for the kind words.

  7. Martin Oxley says

    Just seen your web page. It is sooo true.
    I have 5 lots (joined) in a nice sub division sitting in Angeles for the last 6 years. I have no intention of building until I retire, which at the current rate of school fees in Hong Kong could be another 5 years at least. I brought the lots off plan and they have made money, that’sassuming we could ever sell them again if we decided to.

    notwithstanding all the above, we have just embarked on the expected money pit, by agreeing to build mum a new home in Isabela. Dad passed away, she is close to 80 and can’t do the stairs anymore. Also the house is collapsing under the usual termite invasion.

    So far we are being quoted around 4M for single storey 200sq/m 4 bed house, The Barangay is in the middle of nowhere surrounded my rice fields. The cost includes knocking down the old house, all that it entails, New deep well, new septic, high wall and fence around the lot.

    My only luxury is ‘our granny annex’ will have A/C and hot water when I visit 2-3 times a year. I know it doesn’t make financial sense, but, just occassionally family comes before brains. I’ll update this post if it all goes pearshaped!!

    • says

      @ Martin Oxley

      Thank’s for the update. Hope all turns out well for you. Many people have done alright with “remote control” house building, just as many have made out alright with buying bare land in advance. BUT by far the majority of the cases turn out like the lady whose builder “shaved costs” by shaving space off here kitchen, and the almost inevitable squatters on vacant land.

      Again I do NOT recommend doing either of these practices, it’s hard enough to get your house construction and repair work done right even when you are there on site, sadly.

  8. says

    Hi philly. Pittsburgh randy here.I am retiring there in another year. I guess I am lucky. My future wife has been a teacher for 16 years and owns home, although simple the Philippines allows condos to be expanded it make additions, or the one where she live at in Onus does anyway. Which is good, since she has owned it ten years, and I would bigger more comfortable rooms with more ammenities such as hot water heater. Ac. Units and a private bathroom larger bedroom with a balcony. She and I can nice forward and backwards in building but not to the sides. I contemplating this or renting the condo out and buying. Money should not be an issue,since I will have a modest social security of 1500.00 a month but will have 250,000.00 have cash to invest and or buy.. either way unfilled I arrive I ain’t do anything money is hard to come by and I don’t wanna see my balcony on some neighbors house. What would you suggest. Remodel or start new and buy or build

    • says

      @ Randy

      Thanks for writing in. My suggestion is always the same, rent (or in this case, live in the existing home for at least a year before you make any sort of decision about either buying or building. Have you read all my articles in this series? they explain my thoughts in much more detail.

      You can buy and have hot water heater installed and working in one day, for well under $200 … and take it with you if you leave. Air conditioners, same idea. Make yourself comfortable right where you are and learn to live here before you go plunging in with money. The Philippines is full of “Cano Castles” built by foreigners who used their savings up to build a home “just the way they wanted it”, and then found they couldn’t live here, or worse yet had their neighbors start a pig farm under their window.

      Resales here are slow and difficult especially if you have a Western style house. Majority of Americans here have no money to speak of, average Filipinos can’t afford what Americans consider an “adequate” house, and rich Filipinos are not going to buy what some American leaves behind.

      That’s what I think, anyway.

  9. alexander says

    hi philly,

    was thinking getting a home over in the Philippines (those townhouse) with my phili wife.

    than the typhoon haiyan struck……..was wondering, is it a good idea to get home there? I mean if we get a home, and a disaster struck, and home gone, is not as if the gov will help n pay to get your home up again. we have to pocket out another sum to get it done over again.

    i guess back to the same question, is it a good idea to get homes there?

    tks

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