Owning Your Own Home in the Philippines.
(Last Updated 9 May, 2017)
- 0.1 Should Bob Rent or Buy?
- 0.2 Owning Your Own Home in the Philippines — Dream Home
- 1 Renting vs. Buying Your SEO Solution
- 1.1 Owning Your Own Home in the Philippines — Numbers Don’t Lie
- 1.2 If property values only average a 1% increase over the next 30 years, he would never break even by buying instead of renting. Pretty sobering results when you look at the issue from a dollars and cents perspective rather than an emotional one.
- 1.3 You Might NEVER Break Even
- 1.4 Owning Your Own Home in the Philippines
- 2 Related Posts
- 3 Readers who viewed this page, also viewed:
- 4 Share this Article:
This post was originally published a while back. Along with Bob’s post, referenced below, I was a bit surprised at some of the emotional reactions it engendered and I was also a bit surprised at how little some of the Rent versus Buy folks really knew about the subject of financial analysis in general, and the rent versus buy decision in particular. So I am re-issuing it with some more explanations about where the figures come from and how to make your own decisions based on facts and figure … and not emotions and what “they’ say about the subject. Enjoy.
Should Bob Rent or Buy?
My friend Bob just published a pretty good article on the Philippine rent or buy subject. You should go and read it now, if this subject holds any interest to you at all. I’ll wait.
Pay particular attention to his comments about expats being unable to sell “dream homes” they have built in the Philippines. This is a big issue. More on that later in this article. I’m just about 100% in agreement with many of the conclusions he makes on the Rent versus Buy in the Philippines question, and I really wasn’t thinking of writing much more on the matter until I came across this quote a while back.
Owning Your Own Home in the Philippines — Dream Home
Now SEO (Search Engine Optimization) is a but of an arcane subject for most of the readers here … it’s something I dabble in a bit but hardly am an expert in, and it seldom has much relevance to living in the Philippines.
This lady’s article has little direct relevance to living in the Philippines either … but judging by the responses Bob got to his article (I wonder why so many Americans (and other Westerners as well) who wouldn’t dream of arguing with someone regarding religion or politics or other socially charged subject) will go so far as to even start name calling over the decision on renting or buying the home one intends to live in. Strange to me indeed. That’s one of the biggest negatives I find when I go back to the US. So many ‘experts” and ‘well meaning” folks who have taken it upon themselves to “protect” me from myself and tell me what I am doing is “smart” or “stupid”. Sad.
(Just substitute house instead of SEO Services here, and think Susan’s words through, carefully)
Posted by Susan Esparza on 11/02/2010 @ 3:08 pm
If you’re a renter like me, you’ve heard this from well-meaning homeowners: you are “wasting your money” renting instead of taking advantage of this all-time-low housing market and its super-low interest rates. You could be putting all that rent money into a mortgage and soon enough you’d own that house instead of walking away with nothing.
And okay, I get it. For a long time, owning a home was an Investment. It was meant to be not just a place to live, but also a place that you could, one day, hand down to your children. (Or at least mortgage the heck out of it for your children’s college education.) You were building equity and the home was gaining value and some day, perhaps many years from now, you would get more out of the house than you put into it.
I live in California. The average home valuation in my city, even in these times, is $463,000. Using the handy NY Times calculator and putting that housing cost against my current rent, do you know where I am at the end of 30 years? $200,000 poorer (but with a house for my trouble)….
What do you think? Does Susan sound ‘stupid”? I sure don’t think so.
Did you read Bob’s article? Does he sound “stupid”? No, I don’t think so.
Do I sound stupid (OK, you don’t have to answer that, but I really don’t think I do) … at least so far as the facts are here.
Owning Your Own Home in the Philippines — Numbers Don’t Lie
Go to the NY Time Rent or Buy calculator, please, and plug in some figures on your own, just to see what I am talking about. Not that you can change all the details used in their assumptions by going to the “Advanced Settings” tab, then just close that tab when you have made your changes.
Please realize that although this calculation tool is set up for the US and all the figures default to US dollars, you can use it directly for values in the Philippines. Just enter all the data in the peso amounts and your answers will be in Pesos as well … no need to convert or change anything in the tool to get accurate results.
I’m uploading two sample analyses. The first is the ‘picture’ of where I am, personally, with the home my wife and I just purchased in Marilao, Bulacan. The results graphic shows I may be ahead of the game by buying rather than renting in about 10 years. But this makes two important assumptions:
First, that the value of homes here in my subdivision will rise at 2% per year. This is the true, real-world average that homes have appreciated here over the past 5 years. It, of course, has no guarantee. Those of you in the US well know that real estate has gone down rather than risen, significantly in many areas.
Second, the graph assumes my rent will increase an average of 2% a year. This is a common figure, from what I can gather, across many areas of the Philippines. But it is by no means certain, either. My actual renting history, over the past four plus years is, 0% increase. My absentee landlord seemed more than happy to keep charging me the same price over the years, as he is absentee (lives in the US, actually) and I gave him no troubles, and he made no repairs at all.
Why the emphasis on the rent increase or lack of same? Simple. If my rent doesn’t increase, as it has not, so far, the calculator shows that even after 30 years I would still be better off, financially, renting rather than buying.
Now let’s look at a different home scenario. One more in line with the sort of scenario Bob might be in, He rents a much nicer, larger home in a much more desirable area .. and pays more for it … which is only fair, one would think.
I plugged in approximate figures for rent on a home like his and an educated guess at what he’d have to pay, at least around here, to buy the house instead of renting.
Bear in mind, for my limited sampling, property values in Davao City may be a bit more “mahal” than here in central Luzon, so it’s entirely possible Bob wouldn’t be able to purchase the home he is in, or its equal, for P 8 million. Might well cost more, doubt if it would cost less.
If prices in his neighborhood were to increase steadily at 2%, he might come out ahead after only “drum roll please” 26 years. Wow, what a deal he is passing up by renting, eh?
If property values only average a 1% increase over the next 30 years, he would never break even by buying instead of renting. Pretty sobering results when you look at the issue from a dollars and cents perspective rather than an emotional one.
You Might NEVER Break Even
The bitter truth is, Americans (especially) have been fed a line of pure BS now for many years, telling then that a single family home they intend to live in is an “Investment” … and that people who choose to trade fixed amounts of money per month in exchange for the use of another person’s floor space (commonly called renting) are wasting their money.
Folks, I have offered enough independent proofs on this, so I am not going to entertain a huge debate … but something you better get straight before you decide about moving to the Philippines is, you need to approach the rent or buy decision with intelligence, a clear head and actual numbers … not the clap-trap you have been being fed for the last 30 years about “making an investment” in single family real estate that you intend to operate.
Owning Your Own Home in the Philippines
It’s certainly not always a given that such a purchase is actually an “investment” back there in the US. (did any of you actually run any numbers with the NY Times rent vs buy calculator mentioned in Susan’s article? Or do you just know renting is better than buying)?
Run some numbers for yourself and you may find you don’t have as much of a “need” to buy your home here in the Philippines. Single family properties that you are going to occupy yourself are a roof over your head and a home, but an “investment”? Not so much.
Next article, I’ll wind up this series and tell you why my wife and i did purchase our home, after all these years of renting. But, just to give you a clue … it certainly was not for the financial investment aspect. Continuing to rent would have been, hands down, better for our bank account.
Here’s a current article I found pretty interesting as well …being rich doesn’t always make owning a home a good idea, either.
Owning Your Own Home in the Philippines — You’re SURE Renting Costs More Than Buying?