PhilFAQS

Most anyone knows that the expression I love to hate about the Philippines is, “If Only”.  Recently I tried to help a reader of this blog find a home to rent here in Marilao.  Wow!  I failed.  It was tough.  There were some homes to rent … Mita and I looked at a number of them.  But everything we looked at was horrible … several didn’t even have a working bathroom.  The person showing the unit would say something like, “Oh, the owner plans to fix that, after the lease is signed.”

Hello!  Most people want to move in after the lease is signed.  And most people expect to move into a house that at least has a working toilet.  A common cry heard hereabouts is, “if only someone would offer some decent rentals”.  Well, who might that someone be?

My friend Bob recently made a post that tied in with this thought … Bob was thinking about some  non-Internet related investments that might provide an ROI now and something for a family legacy in the future.  This has been on my mind a lot, also.

Things aren’t all as bad as the houses without toilets, though.  Here’s an investment made by a local fellow who is related to my across the street neighbor.  he picked up three lots at a nearby corner , razed the dilapidated single family homes that were there and built an investment property.

As you can see from the pictures, it isn’t bad.  What’s more, all the units were leased before the contractor was finished with the build … I did mention there was alack of decent rental units here, didn’t I?

I can’t tell you the actual cost of the lots … I believe the man owned at least two of them for many years.  But let’s say he started from scratch with the investment.  Because two of the lots fronted on a main road (Jeepney route, very convenient) they would have been worth more than the average lot around here.  the third lot was what they call a ‘key lot’ in US real estate terms …the first lot on a side street, very undesirable in the Filipino mind set.  So let’s say PhP 4,000,000 plus about PhP 9,000,000 for the first-class construction you can see. PhP 14,000,000 to allow for incidentals, let’s just figure.  About $333,333 USD at today’s exchange rate.

We don’t have those sub-prime, “never-never” loans that have broken the back of today’s real estate market in the US … here in the Philippines you need a healthy down payment and you can expect to pay a hefty interest rate, especially for commercial property.  Conservatively you could do, $83,000 USD down (~25%) and $2,750 USD a month (about PhP 115500 for monthly amortization on a 12%, 20 year loan.  I am no expert, nor wheeler-dealer, one might do much better, but these figures are ones I know would be attainable.

If I have my ducks in a row, there are 8 rental units total, and the total gross monthly income is in the PhP 140,000 range … about $3,300 USD … so there’s close to $600 USD per month positive cash flow.  I have no idea what the insurance would run, but insurance here is generally cheap … and the taxes aren’t enough to bother with, probably 3 to 5,000 per year, total (that’s 5 times the taxes on our single-family home nearby), so even with an allowance for occasional vacancies, this is a pretty good deal.  If you had more money to put down, found better loan terms, etc., it would be really great … if this were my property I would be working on the second one already.

Related posts:

1. It Can Be Done —Part 2

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