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

[tothevictor]

I was out for a drive this afternoon when I remembered one more very important point. When you're negotiating the purchase and it comes to the taxes.... buy my book (just kidding).

 

Have the seller deduct the BIR costs from the purchase price then you pay them on the seller's behalf. Have your lawyer manage it. The risk with doing it any other way is that the seller won't complete the title transfer and then you're... (can't use the word I wanted here thanks to the bad language filter so let's go with screwed).

[Dave Hounddriver]

Have the seller deduct the BIR costs from the purchase price then you pay them on the seller's behalf

 

This may not work with savvy sellers due to this exemption that smart people will be taking advantage of:

 

Generally, a tax of six percent based on the selling price or fair market value of the property, whichever is higher, is imposed on the presumed gain derived by individuals on the sale of real property. 

 

An exception is when the property involved is the principal residence and its proceeds of the sale are utilized in acquiring or constructing a new principal residence. The exemption, however, may be availed of only once every 10 years.  

 

There are three conditions attending the exemption: (1) the property sold must be the principal residence; (2) there must be full utilization of the proceeds within 18 calendar months from the date of sale of the property; and (3) the documentary requirements provided in the pertinent Revenue Regulations are complied with.

 

 

Read more in this article: http://www.philstar.com/business/420050/capital-gains-tax-exemption-sale-family-home

[tothevictor]

 

 

Have the seller deduct the BIR costs from the purchase price then you pay them on the seller's behalf

 

This may not work with savvy sellers due to this exemption that smart people will be taking advantage of:

 

Generally, a tax of six percent based on the selling price or fair market value of the property, whichever is higher, is imposed on the presumed gain derived by individuals on the sale of real property. 

 

An exception is when the property involved is the principal residence and its proceeds of the sale are utilized in acquiring or constructing a new principal residence. The exemption, however, may be availed of only once every 10 years.  

 

There are three conditions attending the exemption: (1) the property sold must be the principal residence; (2) there must be full utilization of the proceeds within 18 calendar months from the date of sale of the property; and (3) the documentary requirements provided in the pertinent Revenue Regulations are complied with.

 

 

Read more in this article: http://www.philstar.com/business/420050/capital-gains-tax-exemption-sale-family-home

 

In our case things were... "complicated". Interestingly enough from what I know of the seller he could have utilized this deduction but it was never mentioned. I stood firm and had him cough up. The value of the land plus improvements actually worked out to more than I paid for the place, so he lost out on the deal. Once again, the mantra of the buyer and flipper is worst house on the best street with the most desperate vendor. Consider the fact that he was asking so much initially and I lowballed him with my first offer at 800k (which even I knew was an insult) the fact he kept talking to me meant I knew I had him.

 

Perhaps there's a lesson to vendors here? One that will never be learned in the Philippines, one of the biggest problems in this country is that people tend to be overnight millionaires. I didn't come across a great many savvy sellers. It's about cash now, that's all that matters.

 

Interestingly he asked me if he could consult my lawyer on the property transfer as a part of the fees I was paying to said lawyer. Would anyone on their forum ever use the other guy's lawyer to save on legal fees? I think not.