A time to pay rent

by Steve Van Derodar

High-rise buildings | Photo via SV Derodar

When it comes to renting, it is always a different case for everybody. One chooses to rent an apartment or a condo for the flexibility to change addresses anytime and be not tied to the maintenance necessary to upkeep home overtime. Or one does not confine assets to homeownership rather put them into other investments. For others, renting is better off than buying to avoid the complexity of financing and the long-term commitment to a property purchase. Also, some occupations as well require housing that does not need to buy. Others dread the idea of home updates, repairs, landscaping, property taxes, etc. Whatever the case is, renting allows you to settle down where you find most comfortable getting to areas of business and work and have gladly considered your rented domicile a residence. What do these tell you? There is a market for rental business!

In the Philippines, most Central Business Districts (CBD) have the desirability to wider demographics. As a result, you can find numerous residential buildings that have high rental occupancies. Not only that it drives people to locate, but also you will find an attraction to students, corporate employees, and even city dwellers gravitating to a certain compass. In short, there is a strong market for tenants.

The focus of this article is to highlight the business of rental and how it can be truly sound for investors to put investments for the sole purpose of cashing in by renting out units. Others’ “A time to pay rent” is a propitious time to benefit your business at every single opportunity. According to Jones Lang Lasalle (JLL), the increased demand for residential units mainly comes from young local professionals, upgrading families, and High-Net-Worth-Individuals (HNWIs) overseas. In a market report, around 20,000 condominium units were completed in the second quarter of 2019 alone, with most of the supply allocated to Taguig and Makati. Pasay City has had an increase in inventory as well with the development of Bay City.

“The focus of this article is to highlight the business of rental and how it can be truly sound for investors to put investments for the sole purpose of cashing in by renting out units. Others’ “A time to pay rent” is a propitious time to benefit your business at every single opportunity.”

I remember renting out a few units from the last decade, a 1-bedroom unit to a French national in Makati City for Php 40,000. He worked in a power plant in Laguna. I also rented out to a Korean national in Bay Gardens for Php 100,000, to name a few. My clients who owned an apartment could rent their units for Php 25,000, Php 75,000, Php 150,000, representing studio to three-bedroom units in varying locations and buildings, etc. Surprisingly up to today, the market is still robust, accommodating students, employees of top corporations, and multinational companies seeking a place on rentals on a continuous cycle.

When you have a unit, it opens opportunities for a passive income, and while you pay the mortgage, it can be self-liquidating in the process. Just make sure you have a steady flow of tenants year after year to meet your financial obligations; otherwise, you will still be paying your mortgage on your own if you have not paid it in full yet.

After having been in Philippine real estate for some years, I have always opined that it would be wise to invest in a considerably high-end market if you can, especially in high zonal values. Due to its niche market, it tends to attract dwellers willing to afford the experience and the needed security. In the same category, a Php 70,000 to Php 100,000 per month, rental is becoming very affordable to some, depending on the unit mix. Obviously, there are ultra-luxurious options, but they are very well received too in the market.

Rental income can be straightforward to collect, especially with digitalized monthly collections, and sometimes you get the rental fees in advance. In fact, in the Philippines, by experience, all checks for the entire year are being pre-collected to the extent that rent payments are every year. Therefore, it is normal in the Philippines for some tenants to pay the whole rental amount for the whole year in one singular check if required by the landlord.

“Rental income can be straightforward to collect, especially with digitalized monthly collections, and sometimes you get the rental fees in advance. In fact, in the Philippines, by experience, all checks for the entire year are being pre-collected to the extent that rent payments are every year.”

When it is time to pay rent, it goes towards your income or can go directly to your property’s mortgage payments. Isn’t it much of a financial advantage? Perhaps, if you are based abroad, it must be more appealing for you to own a property adhering to the business trends. I have seen many investors gladly embracing the rental yields from their hard-earned investments.

My brother-in-law and my sister invested in a property in Dubai, and luckily, they collect rent regularly. And as of late, I would say, “Oh, the tenant just signed a renewal for 2 more years.” For more than 10 years now, they are still delighted with the yields and are looking for additional investments. Though they have migrated to Australia, they have maintained their property investments in Dubai. Rental activities can be exciting in different parts of the world, and the Philippine rental market outlook remains promising.

There will always be risks to investing, but you can prepare your investments by studying market trends, appreciation values, and really finding the right tenant for your property. For sure, unlike stocks or other investments, property investments may not be as ‘’skyrocketing’’ as to financial gains, but it is steady and consistent. For example, according to Colliers, the average price for 3-bedroom luxury condominiums rose by more than 15 percent in 2018, to USD 4,371 per square meter.

I am one to say that within our network of sellers, brokers, and property specialists in the Philippines, there is a growing list of landlords who own properties by mere acquisition of several units in different buildings, at least within the Makati-Taguig-Pasay properties or multiple unit ownership to certain property developers.

The beauty of owning a property in the Philippines is that it enjoys appreciation of your property while having the maintenance and upkeep done by others for you. Also, expect that after more than 15-20 years, you must have either paid off the property, went on to several price appreciation, or surpassed property values increasing the resale value of the properties.

“The beauty of owning a property in the Philippines is that it enjoys appreciation of your property while having the maintenance and upkeep done by others for you.”

“A time to pay rent” is as constant, cyclical, and a necessity so long as it is desired. The feeling of belonging, affording the right of use, and the acknowledgment of the exchange of privileges are what rent is for. Every rent “due” is an income-generating avenue by offering a home experience, earn income and make money work for you. Isn’t it? To the investors, seizing the property rental business, it might be more appropriate to say “A time to collect rent.”

As there is time for everything, a time to enjoy the property use with all the terms and conditions, the limitations, and the full advantages of what comes with it, there is also of course. “A time to pay rent.”

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(Stevenson’s experience in Philippine Real Estate spans more than 15 years. He has been involved in horizontal, vertical, vacation, and commercial properties. In addition, he has worked as an International Property Specialist to markets in Asia, Europe, and North America with Ayala Land, Federal Land, and Century Properties. PhilHouseHunters offers real estate investment opportunities, marketing, and consultancy with a key focus on Metro Manila and Mega Cebu areas. Visit www.philhousehunters.com. Email at derodarsales@gmail.com.)

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