Real Estate Investment Guide for Filipino Retirees
by: Shirley Asistio
When the Philippine Retirement Authority was established in 1985, it aimed to make the global market recognize the Philippines as the retirement haven of choice. But this plan was designed specifically to target foreign investors, overseas Filipino workers (OFW), balikbayans (Filipinos who have acquired citizenship in their host countries and are planning to go back to the Philippines), and expatriates already living in the country—and not exactly Filipino retirees living in the Philippines.
Yet because of the abundance of properties today, one of the first things that still come to the average Juan’s or Juana’s mind, whenever the time for making a good investment comes, is to buy a real property. Since it has a good return, the initial thought would usually be to invest in one.
Retirees work for decades to save enough money to put into a long-term investment that they can benefit from after a good number of years.
However, something that takes years for a return on investment (ROI) may not be the best option for a Filipino retiree.
Or could it be?
Filipinos usually retire between the ages of 60 and 70. They work for decades to save enough money to put into a long-term investment that they can benefit from after a good number of years. However, investing in a property after retirement definitely would be a gamble.
So before buying a property, make a list of the things you need to take into consideration, and ask yourself the following.
What Is Your Budget?
Knowing how much you can afford to spend for a property is the first step in the buying process. There are two terms of payment: cash sale and term sale.
Cash sale is simply a financial transaction where payment is made immediately. In cash sales, developers usually give a certain discount based on the total contract price (TCP) of the property you wish to purchase. You may pay outright or spot cash within 60 or 90 days.
Term sale or installment sale is a payment term between a buyer and a seller. You have the following financing options: in-house financing, bank financing, or through the Pag-IBIG housing loan if you are a member. Each of these offer different payment schemes and discounts to make purchasing a property more enticing for potential buyers. A down payment of 20 percent is the usual requirement, with your balance payable in 5 or 10 years. As a retiree, this payment term may not be the most ideal, as you may not get to enjoy the return on investment at the soonest possible time. This is unless, of course, you are buying the property as an inheritance.
How Soon Do You Want Your Return on Investment?
Looking at the bigger picture, one’s mortality period plays a major role when purchasing a property. As a retiree, you would want to put your hard-earned money into something that can guarantee a quick return.
Unless you hit the jackpot and were able to purchase a prime property that you can immediately dispose of, you’re in for a chance of luck, because this happens rarely.
If you have a target period for your ROI, it is wise to invest in a property, which is so saleable that you can immediately realize a substantial margin from owning it within a period of 2 to 5 years. That way, you can get to enjoy the return on what you’ve chosen to invest in.
Know What Options You Have
Contrary to popular belief, there are other types of investment properties available aside from house and condos. Some developers are offering hotel-type or condotel properties, which promise good return in terms of rental yield depending on the location. A lot of these properties are located in mixed-use, leisure-focused townships that are also popular tourist draws.
Another type is office properties, which offer quite good rental income due to the Philippines’ vibrant business sector and the tight supply of offices. In fact, Metro Manila’s office real estate sector has a very low vacancy rate at 2.58 percent for the first three months of 2014, according to Cushman & Wakefield.
In real estate, there are always opportunities. But as a Filipino retiree living in the Philippines, what’s most ideal is to consider putting your money into a short-term investment that comes with a fair return, whether it be a house and lot, an office space, a residential condominium, or lot.