what's the reality and disadvantages of
investing in the real estate
hi everyone this is charmigan from
reddit adult philippines a channel about
personal finance entrepreneurship and
adulting how to's
i shared in a previous video my real
estate investments and a lot of you guys
have been asking for more real estate
content
i want to start off again by saying that
i'm not a real estate broker
or agent or sales person but i have a
couple of real estates
i currently have three condos with
partner owners and i also have one more
real estate property
being an architect even though i'm not
practicing i've always wanted to invest
in real estate
in the previous video i showed you how
we processed and got a condo for a shoe
and in this video i'll be running you
through the basics
of real estate so this is real estate
101 video
i know that it can be really confusing
if you don't know where to start so i
hope that this video can be for that
and without further ado let's start the
video
okay let's start with the basics how
does it work how can you earn from it
and why i like investing in real estate
real estate investing is all about
buying and owning a property with the
intention of generating profit from it
so again most investors will tell you
that your own
house is not necessarily a real estate
investment
the main reason why we can profit from
real estate is because a real estate
almost always appreciates why because
land is scarce the more developed the
area is the more people
want to live in that area and as a
result
the more demand the less supply we have
so that's basically why real estate
appreciates and price
over time so how can you earn in real
estate i've already touched upon
one way to earn from it and it's capital
appreciation
that means that you got the real estate
property at a lower price and sell it at
a higher price
so the other way that you can earn from
real estate is through rental income
there's various ways that you can rent
out a property you can even rent it out
just
bear lot or you can have structures
there
if it's a condo unit or a residential
unit you can rent it out
furnished semi-furnished or bare so a
lot of people like rental income because
it's money that comes in every month
especially if you have a long-term
tenant
so many investors treat rental income
similar to dividend income wherein
they know that there is money coming in
at a certain period
every month or maybe every year so why
do i personally like investing in real
estate
so the number one reason is i'm still
young i'm in my 20s
so by the time that i'm in my 40s and
50s
the real estate properties that i have
would have appreciated well
and hopefully i get rental income from
it over those decades
number two reason is it acts like a
forced
savings so i feel like having to pay
a certain amount every month may it be
for your down payment or your loan
it forces you to put your money into
an asset that appreciates so that's
something that i really like also about
real estate
and the number three i also touched upon
it already and it's leveraged
i mentioned this in a tech talk video
and a lot of people were curious how it
works
and basically i said that leverage is
the social version of utang
it basically means that you're borrowing
money for capital for your investments
with the intention to earn so again it's
not for your own personal property
that's for personal use
it's intended for you to earn maybe
through rental income or through capital
appreciation
the reason why i like talking about
leverage and taking out a home loan is
because a lot of
us filipinos think that we need the
entire amount
to pay for a real estate so if our real
estate for example
costs 3 million pesos we think that we
need the entire 3 million pesos in our
bank account and pay the property in
full
which i think is not really a smart use
of your money
so again if you're buying a property to
earn from it and you're not using it for
your personal use
i personally think that the best way to
go about it is by taking out a home loan
why because home loans and mortgages are
one of the cheapest forms of loans at
around six to eight percent here in the
philippines
so let me give you a sample computation
again going back to a
sample property that's around 3 million
pesos
so let's assume that you do have the 3
million pesos right now
so if you use the power of leverage
usually you only need to pay a down
payment
of 10 to 30 percent let's say you need
to pay
20 down payment that's 600 000 pesos
and for the rest of the 80 you take out
a home loan for
15 years 7 interest let's say that's
around twenty thousand pesos
if you then took the remaining two point
four million pesos that you have
and invested that let's say in the
big mp2 or in the index fund in our
stock market
and let's say that your 2.4 million can
earn around 6
per annum plus if you account for
inflation rate which is around 3
in the philippines the 20 000 pesos
you'll be paying for 15 years
won't feel as big anymore so let's say
in five years the twenty thousand plus
pesos that you're paying
is only valued at around eighteen
thousand pesos
and in another five years so ten years
from now
the twenty plus thousand that you're
paying will only be valued at around
15 000 pesos if you're getting confused
with the concept just think about it
this way
in our parents time 100 pesos can
already buy a lot right
so let's say we have a loan at 5 000
pesos a month
i don't know about you five thousand
pesos a month nothing ion as compared to
their time
around 10 15 20 years ago
so that's what i mean when i say
inflation can actually help us
make our payments a little bit lighter
lastly the average property appreciation
price is at around three percent
now when you live in a big city you
might argue that your property price
appreciation is much higher than three
percent
but just to generalize our entire
country and even in other countries
around the world
three percent is a safe assumption for
property price appreciation
so if you take into account these
factors your money might be growing for
six percent
the inflation rate at three percent and
the property appreciation rate at three
percent
you have around twelve percent as
compared to the home loan rates which is
around
six to eight percent on average
now let's go the other route where and
we actually pay in cash and for the
three million property that we have
that's also another way to go about it
but there's this term in the industry
that they call being house
poor when you have a property
but all your assets and all your money
is tied down to that property
yes it can maybe generate you around 20
25 000 pesos a month but that's
it right as compared to having the few
more millions to maybe buy another
property
invest in other opportunities and other
ways to
use that capital so again i'm not
necessarily against you
paying it in full especially if you're
the type of person who doesn't have the
peace of mind having that 15-year loan
i understand that you know personal
finance and investing is psychological
so
you really have to see what works for
you okay now let's move on from all of
that
and let's talk about different types of
real estate when we talk about real
estate we mostly just think about
residential properties that includes
condos town houses house and lots and
etc
but what people mostly don't consider is
that they can actually also get
commercial properties which they can use
for
retail offices or leisure
and also industrial which is for
warehouses or factories
and also just straight out empty lots
that has a lot of potential right so i
know a lot of people
are going outside the cities and looking
for
huge chunks of land so that's another
type of property
okay now let's talk about some vehicles
or
ways you can buy a property so there are
two main ways you can buy a property
first is directly through a developer
so when you buy from a developer you can
either buy it pre-selling that's when
the building or the property is not
built
yet it's not developed yet but you're
already slowly paying for your down
payment
another way is when it's already built
it's already done
and it's what we consider brand new or
rfo
or ready for occupancy and then the
third way is to just buy
a lot and build it yourself so another
way
if you don't want to buy directly from
the developer is through buy from the
secondary market so these are from
facebook marketplace from websites
from agents and other similar ways to
buy
so you can also buy an empty lot and
build
you can buy a four asshume property or
pass a lot property which i already
talked about in my previous video
where you're basically buying it from
the previous owner
and you coordinate this also a little
bit with either the bank or the
developer
and then the third way to buy it from
the secondary market as foreclosures
i'm getting a lot of requests to do
foreclosure properties
this is usually through pugibig or bank
but i need to do more research on that
so make sure to subscribe and ring the
notification bell so that you get
notified
for that future video okay now let's
talk about
what you need when you want to invest in
real estate
first you will need good credit
especially if you plan to loan or take
out a mortgage
good credit can be built in a lot of
different ways
you can get a credit card i will link my
city credit card affiliate link down
below
you can also take out smaller loans
and pay them back always in time and in
full
same with the credit cards and also
having multiple
credit cards having and filing your itr
or your income tax annually can also
help
and just really having good credit
standing meaning
if you've had previous loans before like
maybe a car loan
a personal loan a business loan don't
pay
late don't have late charges don't pay
them late because that will affect your
credit history so our credit scoring in
the philippines is
quite new and i hope to make a future
video about it
once i've particularly figured out
everything already because it seems like
every credit score website
gives you a different score so so i
promise i'll make a video about that in
the future
so once you've worked on your credit
score next is to have knowledge so
watching videos like this
going through real estate property
websites or the facebook marketplace
and just really familiarizing yourself
and getting to know the location the
type of property
and the responsibilities that come with
these can really help you in deciding if
the property is overpriced or not which
property to get
in what location and etc and the third
thing you need
is money so i think that you should have
at least
10 to 30 percent of the total property
price already
so i know that there are a lot of promos
where and you just need to pay like five
to ten thousand pesos every month until
you've paid up the down payment
but i personally believe that you should
have the 10 to 30
already saved up for you to invest
in real estate okay now let's talk about
a few types of real estate investors or
strategies
so this might not be everything but i
feel like this gives you a good idea on
what type of investor or what type of
strategy you might want to adapt
so first is the hunter the person that
hunts for
foreclosed properties again going
through banks or bug ebay
foreclosed properties are a really good
deal
because the previous owner already paid
for a good chunk of the amount
that you were going to pay but also the
banks and pagibik
just really want to liquidate these
assets to cash so that they can loan it
out to people again
so it's very similar to how repossessed
cars work
number two is the flipper the flipper is
the one that
buys a property that's not necessarily
in the best condition
renovates it and sells it for a profit
so this is also what we call real estate
flipping basically when you put in the
time and the effort and the money to
renovate and make the place
look good because maybe it already has a
good potential
all around with the location and with
the surroundings
then you can have a bigger profit margin
so i've heard
this quote before where and don't buy
the best property in the neighborhood
buy the worst property in the
neighborhood
because if you buy a not so nice
property
in a good neighborhood there's so much
more potential for you to earn from that
property
so the third type is the builder and
they usually buy lots so this is
build and sell so a lot of small
developers also build a row of
townhouses or a compound or even just a
single
detached home and sell it for a profit
later on
so similar to flipping you can also make
a lot of money from this
because lots without a structure don't
necessarily go for that much
but when you have a structure there a
nicely
built house then that really increases
the value of your house and lot property
and again giving you higher margins
next is the swing seller and if you
notice i've just been making up these
names but the swing seller is someone
that
buys a lot of pre-selling properties
mostly
in subdivisions or condominiums and
right before
the community or the building gets
turned over
maybe a few months before that they sell
it
for a shroom so this is what we got
actually
from the previous video that i mentioned
but
a lot of real estate brokers and agents
do this where and
they know that a property is so cheap
right now or quite undervalued because
it's just empty lot right now right the
foundations really take a while to be
finished so what they do is that they
take advantage of the easy payment
terms of like five to ten thousand pesos
a month
and then when it comes time that the
property already appreciates maybe in
one to three years time
they then find buyers like myself
who is looking for a property and
doesn't want to wait that
long but also they want to sell it under
the current market value so again if you
haven't watched my previous video
the property was pre-selling at 2.7
i got it at 3 million when the price was
already 3.3
so this is a very interesting concept
because it's a win-win situation
for the previous owner and the new buyer
lastly is the landlord so the landlord
it's very straightforward
they really acquire real estate
properties
to rent it out so maybe they have
apartment units or they have a row of
townhouses
and it's all usually meant for rental
income
or maybe condo properties as well so
being a landlord also comes with
other sets of responsibilities that we
can talk about in another video
but basically you are in charge of
maintenance and property taxes and
insurance and all of that so that's
actually the route that i want to take
for my real estate investing
okay i feel like i've been talking a lot
about the pros and all the glory and the
niceties of
investing in the real estate now let's
talk about the cons
what's the reality and disadvantages of
investing in the real estate
number one is a huge chunk of your money
is tied to a real estate
even if you don't pay it in full around
10 to 30
is tied down to your property and that's
big considering real estate properties
can cost millions
next is the upkeep and maintenance
especially if you are a landlord
if you live in a house right now maybe
with your parent
and it's quite an old house you might
have noticed nahallus every
it may be the roof the pipes the toilet
the sink and electricals and just
anything really
i live in like a 30 year old house and
we always have these problems almost
maybe every two weeks every month
so yeah that's really part of being a
property or real estate owner
and lastly i've mentioned this earlier
and it's being house poor
so if you don't manage your investments
properly
and you directly go into real estate
which is a higher form or
a higher risk investment then you might
be what they call house poorer in
menon kang real estate but when it comes
to emergencies or where it comes to
having to need big chunks of money you
can't easily sell your property right
and it's also not going to be bringing
enough in the short term to cover
your capital so again that's the reason
why i
like using leverage when it comes to
investing in real estate
and yeah that's it for our real estate
101 video for today i really hope that
you got to learn something from this
video
and i hope that you enjoyed it enough to
share to your friends and their family
if you like this video then don't forget
to hit thumbs up
and subscribe to my channel ring the
notification bell so that you get
notified
every time i upload another video and i
know that a little tag is already hard
and real estate is overwhelming
but that's the reason i make these
videos for you guys and again this has
been charm from reddit adults
philippines and i will see you
on the next video
mortgages more more mortgages
mortgage mortgages
why because i why because home loans and
mortgages
mark mortgage