Buying, Renovating And Flipping A Property In The Philippines For Profit

[tothevictor]

I just wanted to share this in case it is of use or interest to any other members as I've just been through the process. If anyone has any questions let me know.

 

Having just been through the process of buying and renovating a property in the Philippines I thought I would post my experiences here (and the lessons I learned) in case they may be of use to another expat who is going through the same process.

After spending many months (and talking to many middlemen) we finally found a property with a clean title that suited our needs. It has two buildings on it, one two story place with a store and an apartment and one three bedroom bungalow set on 266 SQM about 2kms back from the beach. Both were in need of some “TLC” (we had to gut and completely renovate the bungalow) but the price was very much right.  The owner was in a position where they had to sell due to financial issues and we got them for 1.6 million peso instead of the original 3 million peso asking price. Let me say that this was not a case of good luck, we must have viewed at least 50 properties in the area before we settled on this one.

 

That left enough in the kitty to do whatever renovations were required. The renovation included new glass for all the windows, knocking down walls, replacing large parts of the roof and a comprehensive paint job as well as installing a full western style kitchen and re-tiling the whole place. We also replaced all the plumbing fixtures.  Initially I was dealing with a local guy who works for me (he is our family driver and all-rounder). A great guy but the people he found were a nightmare (15 minutes to grout one tile unless I was standing over their shoulder).

 

I called in a friend of mine from Baguio who was in the construction industry in the US and he came down and project managed the renovation for me. He was here for a week, cost me 5,000 pesos (and about 5,000 Pale Pilsens) and saved me close to 50,000 had they kept moving at the same rate they had been.

 

If you have access to someone you trust (especially if they’re a foreigner) it’s worth the money to have them provide some oversight. I’m a computer programmer by trade who has basically never laid a tile or anything like that. His help made a huge difference and he cost me far less than he saved me.

 

I’ve gotten a little ahead of myself here. Before you get to the renovating process you’ve got to buy the thing. This can be a very complex process in the Philippines. Keep away from Tax Declaration property, buy something titled if you can. Also I made the decision to hire a lawyer to take care of everything for me, again I saw spending 15,000 pesos on his services as no major when I was looking at the level of investment I was looking at. There are plenty of people who will suggest you do it all yourself and that it’s easy enough. Let’s put it this way, as I read recently in a forum. “Property fraud is just about a national pass time in the Philippines”. If you’re planning on spending a couple million peso and you’re not prepared to spend 15k on a lawyer then to my mind you’re extremely clever with your pennies but very dumb with your pounds!

 

Not all titled property is created equal, you’ve got to make sure that you get a certified true copy of the document from the register of deeds.  If there is a lien on the property you’ll inherit it with the title. In our case there was an open lien on it (the title documents had been lost and reissued in 2008 so there is a notation on the title stating that anyone who wishes to lay claim to a lien can do so). I had this removed. We then purchased the property in my girlfriend’s name and had a lien in my name annotated on the title. The reasoning behind this was that an annotated lien takes precedence over any older claimaints that are not annotated.  This also means that she can’t sell the property without my approval.

 

Anyway, back to the renovation.  We’re just in the final stages now of finishing up the bungalow (basically housekeeping stuff). To strip, gut and pretty much rebuild the thing has cost me about half a million in materials and labor.  That also included about 150k in appliances.

 

I could have saved a lot of money if I’d gone for cheaper materials but for me renovation is more about longevity that it is about economy.

 

The final outcome? We’ve separated the two properties onto separate titles and already have an offer on just the bungalow at 3.2 mil. The two story blue building is being taken up another two levels and will contain a store plus three apartments above it which we will rent out then go and repeat what we've just done with another run down property.

 

I wanted to post this because so often expats post horror stories about investing in the Philippines and also a lot of people (who usually have no experience of the process) posting negative comments about bringing money in here. I will say that it was all money I was prepared to lose and I wouldn’t suggest anyone does anything here unless it’s on that basis. That said, you can do it and do it well and make a little money if you do it right.

 

If anyone who is about to go through the process has any questions about potential fish hooks I’ll help as much as I can. I’m not saying I’m an expert but I’ll help if I can as I’ve just been through it.

 

If there is any interest I can post some photos of the property so you can see what we did with it.

[scott h]

Great documentary Tovic....., JGF....anyway to take this as a stand alone post for reference? This should be a must read!

Edited July 9, 2015 by scott h

[intrepid]

Sure, post some photos.  Love to see them.

[tothevictor]

Great documentary Tovic....., JGF....anyway to take this as a stand alone post for reference? This should be a must read!

 

Thanks Scott, I know when I was looking for information before I headed into the process real information was pretty thin on the ground. So I figured it was worth sharing what our experiences were.

 

Sure, post some photos.  Love to see them.

 

No worries, it's bucketing down with rain here at the moment but I'll get some over the weekend and put them up.

[Thomas]

:thumbsup: :thumbsup: :thumbsup:

I know when I was looking for information before I headed into the process real information was pretty thin on the ground.

I'm not into flipping properties myself, but when I researched buying one for my OWN use, I found these, which some flippers use:  

http://www.lamudi.com.ph/journal/guide-buying-foreclosed-properties/  (Foreclosed Guide)

http://www.foreclosurephilippines.com/  (Different things.)

 

NOTE!   If buying Foreclosed, it can be bought back by others within a year for a STATIC price UNDEPENDING of if the buyer have improved much   :th_unfair:    I don't know what happen if the buyer have cut down forest in between  :)

[tothevictor]

:thumbsup: :thumbsup: :thumbsup:

 

 

I know when I was looking for information before I headed into the process real information was pretty thin on the ground.

I'm not into flipping properties myself, but when I researched buying one for my OWN use, I found these, which some flippers use:  

http://www.lamudi.com.ph/journal/guide-buying-foreclosed-properties/  (Foreclosed Guide)

http://www.foreclosurephilippines.com/  (Different things.)

 

NOTE!   If buying Foreclosed, it can be bought back by others within a year for a STATIC price UNDEPENDING of if the buyer have improved much   :th_unfair:    I don't know what happen if the buyer have cut down forest in between  :)

 

I wasn't comfortable with buying newly foreclosed for the exact reason you highlight. Another important thing that I forgot to mention in my post relates to Tax Dec property that you plan to title (one of the reasons I said to stay away from TD). If you take a Tax Dec property and buy it, then put it onto a new title that title can still be called into question by pretty much anyone. There are many cases of multiple people paying the BIR taxes on a particular piece of Tax Dec land then selling it to an unwitting buyer. When these cases come to court the buyer *usually* wins in the end but the costs of the court case and the time involved make it pretty risky.

 

For our next purchase we're probably going to buy a lot and build on it. Once again though, I'll make sure we're not the first holders of the title.  I was offered a foreclosed property when we were looking for this one. 5000 SQM of land with a basic local style house on it for less than a million. I reminded myself of two old adages. "That which is too good to be true usually is" and "a fool and his money are soon parted". When we're looking at prices of upward of 5000 pesos per sqm in most of this area I figured it wasn't worth the risk.

[Dave Hounddriver]

Very nice article.  For those willing to take some risks, it appears quite do-able.

 

Thanks for starting the thread.

[tothevictor]

Very nice article.  For those willing to take some risks, it appears quite do-able.

 

Thanks for starting the thread.

No Worries Dave, thanks for reading it. You're right about needing to be prepared to take some risks. To be honest, I was ready to kiss all the cash goodbye and you need to be in that position before you even contemplate it. I'm also very lucky with my girl. To top it all off we found out that she's pregnant with my first child about two weeks after we bought the place. It's been a good first half of the year for me, touch wood it keeps rolling.

[tothevictor]

I just want to add one quick thing. Don't expect things to be done to western standards here, but make sure they get done properly (sand to cement mix is a prime example of what I'm getting at). There are plenty of homes here built out of hollow blocks and if you're expecting to walk in to this country and see what you'd see at home then you'd best book a cab to the airport. As much as we all roll our eyes occasionally (or regularly) about the way things are done here - this is the Philippines - and the sooner you accept that the happier you'll be.

[Thomas]

When these cases come to court the buyer *usually* wins in the end but the costs of the court case and the time involved make it pretty risky.

Not much use of winning years later, if the scamer don't have any assets we can get to cover the loss...  :boohoo:  :) 

"That which is too good to be true usually is"

Yes, sure in "hot" locations where flippings better be done,

BUT not necesary in the provinces where there are much demand for land but almost no one have money to buy for = Many want to sell, but almost no buyers...

(E g at Palawan many small land owners, who lived elsewhere, rushed to Palawan to sell, when they heared a big company bought land a few years ago, although a common price was 40 000p/hektare  = only 4 pesos per m2...)

 

So there can be bargains in provinces specialy if the seller need money URGENT of some reason.

(sand to cement mix is a prime example of what I'm getting at). There are plenty of homes here built out of hollow blocks

Yes. It's a problem to know which are made of GOOD hollow blocks. They are uncommon, but excist. It's easy to check quality before building when the hollow blocks are lose, but harder when they are in a wall  :)