| Photo courtesy of Bankrate
A lot of people think that buying cash for a Philippine property is a no brainer. Well, if you consider the many things that buying cash affords you to having, then without question it is. It may not be for all but there are benefits from buying cash as in almost every known product. There are rooms for considerable discounts, negotiation, concessions, etc. and so they say, “cash is king.”
We are maybe on pandemic but in industries like the property sector, investors are looking at an opportunity with property purchases. Some do have the cash that has been sitting and are long overdue for investment, others are keen at taking advantage of the current discounts, seasonal offerings that are very inviting. So, if you have the cash, what can your cash buy maximizing the opportunity?
Carmen is a seasoned property investor in New York City who buys cash in all her properties. In Manila, she has a couple of units in Shangri-la and Ayala Land condo properties. For her, “Buying cash allows me to buy them at a discounted price and I don’t have any mortgages,” she quips. “I liked it when I don’t have to pay for any interests in a property, making my rental income a real income,” she added. She also commented in an interview, “It doesn’t matter to me whether its pre-selling or Ready For Occupancy (RFO), when the project is great and it is desirable to me, I buy it in cash.”
“With cash, nothing is paid towards interest payments. This makes the interest-free nature of a cash purchase more appealing, that is, when you can and when it is affordable for you.”
It may not be so obvious but when you run a deferred pay scheme comp sheet the first few years of your payments go towards the interest payments, in that you are just paying the interests of the total amount. With cash, nothing is paid towards interest payments. This makes the interest-free nature of a cash purchase more appealing, that is, when you can and when it is affordable for you.
It is common knowledge that in a marketplace where buyers exchange cash to a property, sellers understand that cash has its way ahead of others in terms of selling price. Cash allows developers to secure their capital and fund their projects. Some boutique developers require cash-only purchases. To the cash buyers, they can take as much control in the negotiation as much as possible.
I have seen cash payments in transactions whether it is land, condo, or vacation property. In my previous deals, cash deals were fast yet sometimes buyers asked for unimaginable discounts. This is the ingrained psyche of cash mentality.
I remember discussing a computation to a client based in L.A. and because he is used to paying cash, had asked for a Php 5 million discount on a Php 33 million unit in a luxury development, and I said to him that it’s not possible. He knew that he could haggle a price discount but obviously there are certain parameters to discounts. Developers have preset cash discounts and additional discounts can be offered for multiple units or Day 1 cash, as in buying cash on the spot upon purchase. As an investor, he knows that with his cash he gets as much discount but unfortunately the developer can only give less than what he has asked. Bottomline is, the client maximizes the power of his cash.
The advantages a cash buyer has over a financed buyer are: no risk of foreclosure, not paying any interest, own the property free and clear immediately, no credit checks, buyers receive a Deed of Absolute Sale upon full payment and “Title” relatively faster.”
The advantages a cash buyer has over a financed buyer are: no risk of foreclosure, not paying any interest, own the property free and clear immediately, no credit checks, buyers receive a Deed of Absolute Sale upon full payment and “Title” relatively faster.
The Sale Deed is an executed contract. It establishes a valid and lawful title over the property in favor of the purchaser. It is signed after the sale has taken place. It transfers the property to the buyer. The Sale Deed is the document that states that the sale is successful and that the property now legally and rightfully belongs to the purchaser, and that the seller forfeits any right of title to the property in return for the remuneration as agreed upon in the Sale Agreement.
A title is a certificate of ownership, a record that shows who owns the property. A transfer of title is important because it legally shows the property has been transferred to a new owner.
“A common practice for buyers from international clientele is that they get their cash from other funding instruments and they pay cash to their Philippine property purchases.”
A common practice for buyers from international clientele is that they get their cash from other funding instruments and they pay cash to their Philippine property purchases. Other sources could be from home equity in their US property, insurance money, retirement funds, cash gifts, lump sum bank loan, etc. They may continue to pay an interest from a loan source but at least the property in the Philippines is free from loan and there is no threat to a foreclosure, especially if you are based outside of the Philippines. In short, the Philippine property is not collateralized to a bank loan. By taking the lump sum amount from somewhere, they eliminate accruing interest and availed of its optimal discount.
The above-mentioned cash sources options are just suggestions however, loaning through a bank loan is also a ready option provided you meet the income requirements. Buying cash is only one of the manners of owning a property but should not be the only option if you prefer otherwise. It is a major purchase and the intents are variable, “suum cuique” or “to each his own.” The key is that property ownership is an integral asset acquisition and most of the purchases in all parts of the world is through financing which offers its own sets of financial commitment and value to the owners.
Whether it is for a ready for occupancy (RFO) or pre-selling construction, buying cash achieves its maximum price benefit and the appreciation advantages. Over-all, Investing in real estate with cash is less risky, and since it is a readily available recourse, it provides flexibility, stability, and utmost security. Why not buy cash when you can?
(Stevenson’s experience in Philippine Real Estate spans more than 15 years. He has been involved in horizontal, vertical, vacation and commercial properties. He has worked as an International Property Specialist to markets in Asia, Europe and North America with Ayala Land, Federal Land and Century Properties. Through PhilHouseHunters, he offers real estate investment opportunities, marketing, and consultancy with a key focus to Metro Manila and Mega Cebu areas. Visit www.philhousehunters.com. Email at firstname.lastname@example.org.)