Buying a condo to rent out.

[Snowy79]

I was asked to give my take on this subject as it's a route I've gone down.

I ended up in this situation as I'm currently retired on an average but not great pension. The thinking being that accommodation costs are one of the biggest things any retiree will have to stump up for, and being on a moderate income with minimal increases each year I'm open to fluctuations in my pension currency and Philippines inflation which if you live in a desirable area can be surprisingly high. Think the difference between paying 250 peso for a meal out compared to 600 peso or little things like 60 peso for a beer compared to 100 peso.

We all know that buying property in the Philippines can be a bit of a mine field and once bought you could have a problem selling on or if you think you've bought in a nice area 5 years later it's a war zone so it's a matter of thinking a bit ahead.

For me my ideal retirement location is near a beach with plenty of activities, semi civilised and a decent sized ex pat community that I can blend in a bit. I'd been briefed to the hilt about buying in the likes of Manila etc as there's great facilities and plenty of condos to choose from but lets face it, it's Manila. Having done my homework I found out that most big cities are awash with condos and once bought you'll struggle to off load it, and with thousands of new ones built every year renting them out becomes harder if you want to up sticks and leave.

I narrowed my choice down to an area where tourism was the biggest earner in the area and land was at a premium. Common sense telling me that if they build more accommodation then the vacant land becomes a premium and prices will shoot up. I also picked an area where there wasn't really a quiet season but there was times of the year where rental prices went through the roof.

I looked for an International airport or great links to nearby countries via satellite airports, ferries etc. Somewhere with a World wide reputation but also a reputation inside the Philippines.. I then looked at how many I could get to sleep in the apartment, 2,4, 6 etc and checked the relevant rental costs for hotels, hostels and pension houses.

Finally I thought if the pound sterling went up the creak how much would it cost me to live there full time if I had to. In my case 2,800 php management fees then just over 1,000 php insurance per month and then property tax which I think is about 2,000 php per year. Electricity would be dependent on my usage. There's pretty decent wet markets near by and groceries are OK. 

I managed to find a bargain for just over 4m peso that sleeps six and can be rented out for between 2,800 and 4,000 peso per night. The selling point being it sleeps six. If it slept 2 or 3 I'd be looking at about 1,500 peso rental per night and the apartments that size were going for more than I paid for mine. The guy was desperate basically and I struck lucky.

So far as returns go in the last month I've made over 40,000 php after all expenses are paid and I've over 300,000 php on the books up until about March next year. The coming months I've only the odd day vacant and I fully expect the months to fill up as we approach the New Year. I'm now in the predicament of not being able to live there as the money coming in is so good. but on the bright side I'm renting in a decent area and now the apartment is covering that plus most of my monthly outlays so I'm hardly touching my pension. Realistically the apartment has the possibility of paying for itself in about 6 years by which time my forces pension will be worth almost double what it is now which should give me a safety blanket from inflation and the pound crashing.

I'm renting my property out on Airbnb which is surprisingly poor and Booking.com which has been great. I'm looking into seeing about advertising my apartment in Korea and Japan as the resort it's in is almost filled 99% from those countries and I know they pay over 5,000 php per night and rarely cancel. Filipino bookings cancel all the time but fortunately when one cancels another books.

I'll admit it's all about timing and doing your homework. It's easy to lose money on property here but if you use common sense there's plenty of bargains out there where it would be hard to lose out on. I can afford to lose 4m but I'd hate to. Next year it'll be 3.5m then 3m etc until it's paid for. Realistically if I was to try and sell it in a year I'd have gained but there's more chance of me buying another one to double my returns. At the same time I've seen 8m peso condos drop to 5m peso condos in the likes of Manila. 

[stevewool]

1 hour ago, Snowy79 said:

I was asked to give my take on this subject as it's a route I've gone down.

I ended up in this situation as I'm currently retired on an average but not great pension. The thinking being that accommodation costs are one of the biggest things any retiree will have to stump up for, and being on a moderate income with minimal increases each year I'm open to fluctuations in my pension currency and Philippines inflation which if you live in a desirable area can be surprisingly high. Think the difference between paying 250 peso for a meal out compared to 600 peso or little things like 60 peso for a beer compared to 100 peso.

We all know that buying property in the Philippines can be a bit of a mine field and once bought you could have a problem selling on or if you think you've bought in a nice area 5 years later it's a war zone so it's a matter of thinking a bit ahead.

For me my ideal retirement location is near a beach with plenty of activities, semi civilised and a decent sized ex pat community that I can blend in a bit. I'd been briefed to the hilt about buying in the likes of Manila etc as there's great facilities and plenty of condos to choose from but lets face it, it's Manila. Having done my homework I found out that most big cities are awash with condos and once bought you'll struggle to off load it, and with thousands of new ones built every year renting them out becomes harder if you want to up sticks and leave.

I narrowed my choice down to an area where tourism was the biggest earner in the area and land was at a premium. Common sense telling me that if they build more accommodation then the vacant land becomes a premium and prices will shoot up. I also picked an area where there wasn't really a quiet season but there was times of the year where rental prices went through the roof.

I looked for an International airport or great links to nearby countries via satellite airports, ferries etc. Somewhere with a World wide reputation but also a reputation inside the Philippines.. I then looked at how many I could get to sleep in the apartment, 2,4, 6 etc and checked the relevant rental costs for hotels, hostels and pension houses.

Finally I thought if the pound sterling went up the creak how much would it cost me to live there full time if I had to. In my case 2,800 php management fees then just over 1,000 php insurance per month and then property tax which I think is about 2,000 php per year. Electricity would be dependent on my usage. There's pretty decent wet markets near by and groceries are OK. 

I managed to find a bargain for just over 4m peso that sleeps six and can be rented out for between 2,800 and 4,000 peso per night. The selling point being it sleeps six. If it slept 2 or 3 I'd be looking at about 1,500 peso rental per night and the apartments that size were going for more than I paid for mine. The guy was desperate basically and I struck lucky.

So far as returns go in the last month I've made over 40,000 php after all expenses are paid and I've over 300,000 php on the books up until about March next year. The coming months I've only the odd day vacant and I fully expect the months to fill up as we approach the New Year. I'm now in the predicament of not being able to live there as the money coming in is so good. but on the bright side I'm renting in a decent area and now the apartment is covering that plus most of my monthly outlays so I'm hardly touching my pension. Realistically the apartment has the possibility of paying for itself in about 6 years by which time my forces pension will be worth almost double what it is now which should give me a safety blanket from inflation and the pound crashing.

I'm renting my property out on Airbnb which is surprisingly poor and Booking.com which has been great. I'm looking into seeing about advertising my apartment in Korea and Japan as the resort it's in is almost filled 99% from those countries and I know they pay over 5,000 php per night and rarely cancel. Filipino bookings cancel all the time but fortunately when one cancels another books.

I'll admit it's all about timing and doing your homework. It's easy to lose money on property here but if you use common sense there's plenty of bargains out there where it would be hard to lose out on. I can afford to lose 4m but I'd hate to. Next year it'll be 3.5m then 3m etc until it's paid for. Realistically if I was to try and sell it in a year I'd have gained but there's more chance of me buying another one to double my returns. At the same time I've seen 8m peso condos drop to 5m peso condos in the likes of Manila. 

Well done.

[Old55]

Excellent information thanks for taking the time to detail you experience for the group. I have to say it's darn nice to read a regular guy was able to do well in this regard after reading so many horror stories. You earned it due diligence or not!

[Eddie1]

Good post Snowy,  very interesting reading.   A job well done, congrats.

[sonjack2847]

Thanks for putting this post on here it is very informative.I may be going down the same road so the info is well appreciated.

[RBM]

Yes good work and as one poster commented good to read a success story. Of course at times you will no doubt experience less than desirable renters but it's a numbers game.

I have to laugh at your predicament nice condo how ever with that income unable to live in it. Great position to be in. Perhaps you could comment more on Airbnb,  I had a booking with them for Sepang moto GP, was canceled by them this am without warning.

[Jack Peterson]

 For me, as some may Know/Realize  you just Got to have a Healthy Bank balance and certainly a good Plan "B". I have an Interest in a Mid range Apartment block in "Malta" with 6 letting Apartments. As a Tradesman is only as good as his last job, Owners that Rent are many times only  as good (the balance sheet) as when all rents come in. Doing some investigation Recently into my Tax Return on the island, I find that over the Year, some Rents are owed and can play Havoc with your own Plans & Tax liabilities, what I mean to say is that you can have a 100% occupancy yet only maybe a 75% yield if Rents are not Collected in Good and Due time, even worse if it is only 1 rental. If I had my time again I would not have gone into this Game but getting out is not that easy, I now find I have a problem with a Sub_Let something that can be a swine to deal with if you are an absent Landlord as I am here

Just my Thoughts on this

Jack

Morning All.

[Dave Hounddriver]

30 minutes ago, RBM said:

I had a booking with them for Sepang moto GP, was canceled by them this am without warning.

It is informative to find out that this happens, however I am reminded of a time I was at one of the best hotels in Tacloban (pre-Yolanda) and I thought I would try to get a room.  The woman in line in front of me was a filipina with money and thought she was high class so she was raising her voice to the desk clerk and speaking in English.  "But I have an advance reservation and now you tell me you have no room for me.  What is the use of a reservation if I show up at 3 in the afternoon and you already have no room available".  And the clerk replied something about "Sorry ma'am there is a convention in town and your reservation is only good if we have a room available and no one checked out so we have no room available today".

Point is:  This is Philippines.  I expect this kind of thing, but it is nonetheless frustrating when it happens to you.

[stevewool]

If i was younger as the saying goes plus maybe a family too, this is something that we would have gone into or bed and breakfast .

But i am none of the above and i have to be careful with the cash we have have, i dont want a income coming in or not coming in, i dont want to worry about this, plus i dont want family and friends to think they could have a great holiday at my expense , who knows what we will have in a few months or so, but we are all different .

Good luck to us all in what we are doing i say.

[Snowy79]

2 hours ago, RBM said:

Yes good work and as one poster commented good to read a success story. Of course at times you will no doubt experience less than desirable renters but it's a numbers game.

I have to laugh at your predicament nice condo how ever with that income unable to live in it. Great position to be in. Perhaps you could comment more on Airbnb,  I had a booking with them for Sepang moto GP, was canceled by them this am without warning.

The problem was probably with the renter. If you rent out with more than one company and both book it out at the same time you're stuffed. Airbnb website is useless. You can pair up calendars so that if say booking.com rents a certain date out the airbnb calender should instantly update as not available but it rarely does. I live with my phone in my pocket so when one company rents my apartment out I quickly block the dates on the others.