Financial Advise

29/09/2010 23:14

Most of the Overseas Filipino Workers (OFWs) are sinking their money into real estate investments. However, as the food and fuel prices are going up and as the US economy is getting gloomier, most of Filipino investors are getting worried.

Are we likely to see the same worsening scenario in the US to the Philippines?

The answer of some major players in the real estate sector is that they have locked in prices of materials so the construction will be finished on time without much hassle. This is good news.

Let us talk about inflation which is the highest in 17 years because we are basically net oil importer and therefore any increase of fuel in the world market will greatly affect the Philippine economy. Notwithstanding the impact of inflation is going up but people see real estate as hedge against further inflation. Philippine is now having a phenomenon amidst crisis worldwide.

Why?

This is because more and more Filipinos working overseas are joining the middle class. And it is because of this 11 million Filipinos working abroad that the remittance of $16 Billion a year becomes possible. 30% of this remittance goes to real estate investment.

Major Banks are now are getting cautious... shall I say strict? in lending. But this is good too on the other hand because it disciplines the market. We don't want to join the queue on credit crunch the US market is experiencing and the UK which is now also on the verge of real estate collapse. I am very amazed and happy when I heard that 80% of Filipinos buy on full equity and only 20% rely on bank lending. You will never believe me when I had my first UK mortgage 5 years ago that I initially had it for 40 years! I then cut it into 25 eventually...phew!

Most Filipinos now are getting wiser on their finances. They know that one day they will be coming home. Even celebrities like Pilita Corales, Vina Morales, Diether Ocampo, Martin Nievera have began thinking beyond: have started building income-generating business.

The question I have got for most of our Kababayans is this: "Do you have what it take?"

Say for example you have a P2M to start-up a business (e.g. grocery store, restaurant, computer shop or water refilling station). You worked abroad for 20 years and managed to save this P2M. Don't get me wrong here, ok. I just want to emphasize something... but most of us OFWs were not trained to do business abroad. With businesses we are not familiar with and we are bound to fail due to lack of experience and business know-how.

We were trained to work to earn money. In Business Management, we call it "Earned-Income". This is where people work the hardest but save the least. Oftentimes, this scheme is a No Work, No Pay. It is hard to become rich working for money. If you really want to become really rich, learn how to build, buy or create assets. Working hard for pay raises is very risky. It is because people often get deeper into the rat race of life working for pay raises and secondly other people get ahead financially faster than you. Remember this: Money that comes from compensated labor is the highest taxed of all incomes.

The other form of income which I am going to unleash today for you is the so-called "Passive-Income". This is the income (rentals) you gain from your property portfolio such as condominiums or house and lot. You collect rentals from your tenants and you still own the property which can later be sold at a huge gain. The beauty of this rental business is that you don't need an office or a secretary. No overhead cost. You can even buy one unit during pre-selling which doesn't require you for a big cash outlay. When the development is finished, there are many quality property managers and leasing department who will just charge a small fee for looking after your property, vetting your tenants and making sure that rental payments are deposited into your bank account while you are on holiday or enjoying life to the full. What do you think?

If you want to retire, you will need passive and portfolio income, in most cases. The sooner you learn to acquire passive and portfolio income, the sooner you are on your way to retiring young and retiring rich!

To summarize, Philippines is still one of the "hottest places" in Asia to invest our money on. Philippines have been tagged by the global investment banking and securities firm Goldman Sachs as part of the N11-the Next 11 countries with the highest economic potential in the world.

Forming part of the N11 are Bangladesh, Egypt, Indonesia, Iran, South Korea, Mexico, Nigeria, Pakistan, the Philippines, Turkey and Vietnam.

All 11 countries demonstrate population growth rates above those of Western developed economies, indicating greater consumer market potential over the medium term. Large populations represent a wide potential pool of consumers for businesses to target; while high growth rates mean that this market will expand rapidly, providing proportionally more potential customers.

by: Don Magsino MBA 

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