Real estate investment can be wise for any investor, offering greater growth and stability than stocks or bonds. As with any investment, there are risks involved. The key to a fruitful real estate investment is gaining experience and knowledge. Buying and owning property can be a great investment, but it can also be difficult for a first-time investor. Here’s a beginner’s guide on how to invest in real estate in the Philippines to help you get started.
Is real estate investment in the Philippines worth it?
Investing is seen as a smart choice because of its strong and stable nature. Here are some of the reasons why real estate investment in the Philippines is worthwhile:
- Affordability: It is quite affordable compared to other countries, with numerous well-funded developers enhancing the investment environment and licensed and unlicensed investors being allowed to participate in the market.
- Reliable safety: It offers a relatively low-risk option that provides assurance, and despite any present setbacks, the resilient real estate market in the Philippines is expected to grow in the long run, maintaining its demand even in unfavorable economic conditions
- Property value appreciation: Real estate values in the Philippines typically appreciate over time. Generally, properties in urban regions with a growing population experience a significant increase in value.
- Potential for passive income: Investing in real estate in the Philippines can produce a substantial passive income through businesses or rentals.
- Tax deductions and benefits: Investors in the Philippines real estate market can avail of tax benefits and deductions associated with property maintenance and ownership, which in return can considerably increase net income.
- Leveraging opportunities: It allows for the use of leverage. This concept refers to buying properties using borrowed money from financial institutions to amplify the owned real estate without paying full price upfront.
How can foreigners buy real estate in the Philippines?
When it comes to investing in real estate in the Philippines, laws and regulations primarily reserve land ownership rights to Filipino citizens. However, there are certain exceptions in place that allow foreigners to purchase and invest in property.
Here are three ways foreigners can buy property in the Philippines:
- Purchase a condominium unit: Foreigners can purchase units in a condominium, ensuring foreign ownership does not exceed 40% in any single project.
- Through a corporation: Forming a corporation that is mostly 60% owned by Filipino citizens, which can then own land.
- Buying a building and leasing the land: Foreigners can purchase buildings without owning land and enter into long-term leases of up to 50 years. They can also sublease the property depending on the agreement with the landowner.
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What are the different types of real estate properties in the Philippines?
Investing in real estate in the Philippines presents various investment opportunities involving purchasing, selling, or renting various property types.
Investing in residential properties offers a range of choices, from condominiums and townhouses to apartments and standalone houses. These options provide homes for individuals while potentially giving investors a meaningful return.
In addition, commercial real estate, which encompasses assets like shopping centers and retail stores, can be an attractive investment because it is closely tied to the growth of residential areas. The rise of e-commerce and on-demand deliveries has fueled an increase in demand for industrial real estate, leading to a surge in the construction of warehouses and distribution centers near business districts.
Lastly, agricultural land can be a good investment. With the right location and necessary paperwork, such investments can be converted into residential, commercial, or industrial properties, offering multiple potentials.
6 types of real estate investments in the Philippines
Investing in real estate in the Philippines offers various opportunities. Here’s an overview of the different types of real estate investments in the Philippines:
1. Buy and sell
Buying property and investment houses in the Philippines can be rewarding, as it allows you to capitalize on the growing real estate market, potentially providing substantial returns and long-term financial security. Investing in real estate in the Philippines can involve “flipping” properties, purchasing low-cost properties, fixing them up, and selling them at a higher price. Consider factors such as target market needs and the property’s surroundings when choosing a property to flip.
2. Buy and hold
Another strategy for investing in real estate in the Philippines involves holding properties long-term before selling them. Don’t let your properties sit around; rent them out to generate income while you wait for their value to appreciate.
3. Rental properties
A rental property is any residential or commercial property leased or rented to tenants. Such property could be a single-family home, a multi-family apartment building, a commercial storefront, or an office space.
4. Real Estate Investment Trusts (REITs)
Real Estate Investment Trusts (REITs) own, operate, or finance income-generating real estate. Modeled after mutual funds, REITs pool the capital of numerous investors. This makes it possible for individual investors to earn dividends from real estate investments without buying, managing, or financing any properties themselves.
5. Shared ownership properties
Shared ownership properties allow eligible buyers to purchase a share in a property, usually between 25% and 75%, and then pay rent on the remaining portion. It can be profitable but may involve complex management. The best way to invest money in the Philippines is to choose trustworthy partners and hire a lawyer to protect your interests.
6. Co-op investments
Co-op investments are a type of real estate investment in which you own shares in a corporation that owns the entire building. These shares grant you the right to live in a specific unit. This arrangement differs from traditional property investments, where you would hold a particular individual unit or property. Co-op investments offer steady cash flow and tax benefits but may require more effort than other real estate ventures.
4 steps in investing in real estate in the Philippines
Here are four steps to start investing in real estate in the Philippines:
Step 1: Check your financial readiness
It’s crucial to determine your financial capability by measuring if you have sufficient funds for the down payment, emergency savings, and disposable income for potential property upgrades or if you’d like to start with smaller investments like REITs.
Real estate properties in major cities in the Philippines usually cost over ₱ 1 million ($18,000), implying a minimum ₱ 200,000 ($3,600) down payment. You’re financially ready if you can make this down payment.
However, if down payments for properties are beyond your reach, REITs are a cost-effective alternative. With as low as ₱ 5,000 ($90), you can start investing in REITs through PSE-approved brokers like COL Financial, Alpha Securities Corporation, and PhilStocks Financial Inc.
Step 2: Understand the housing market
Understanding the housing market before investing in real estate in the Philippines and thoroughly studying the local housing market through research and consultation with real estate experts in your areas of interest is critical. Working with a real estate agent in the Philippines offers many benefits to foreign property buyers.
Step 3: Determine your investment amount
Deciding on the exact amount you’re willing to invest – preferably an amount you can afford to potentially lose – to ensure diversified investments and, thus, minimize risk.
Step 4: Choose and purchase your first investment
Once fully informed, choosing and purchasing your first property to invest in real estate in the Philippines through a reputable real estate agent is the final step.
For those interested in REIT stocks, start by opening an account with reliable stockbrokers like COL Financial, BPI Trade, or FirstMetroSec, and then buy and sell REIT shares in the Philippines.
11 best locations to invest in real estate in the Philippines
Location is one of the most important factors when investing in real estate in the Philippines. Here are the 11 best locations for property investment in the Philippines:
1. Quezon City
Quezon City offers affordable properties for those new to investing in real estate in the Philippines. The city’s high population, business districts, universities, and IT hubs make it an attractive option for renters.
2. Makati City
For higher-end real estate, Makati City is the “Financial Capital of the Philippines.” This city has a thriving market of condo units for tourists and professionals.
3. Mandaluyong City
Known as the “Tiger City of the Philippines,” Mandaluyong appeals to millennials due to its central location and accessibility to amenities.
4. Pasig City
Pasig City is a prime location for real estate investors, with various condominium options and business districts that attract professionals and graduates.
5. Pasay City
This location offers a range of attractions and amenities, including the SM Mall of Asia and Ninoy Aquino International Airport.
6. Manila City
As the country’s capital, Manila is a popular place for investing in real estate in the Philippines. Renowned for its universities, business districts, and cultural attractions, Manila attracts students, professionals, and tourists alike.
7. Parañaque City
Parañaque City is a popular choice, offering a variety of condominium buildings for those starting their career or seeking a family home.
8. Las Piñas City
For those looking for a suburban escape, Las Piñas is an ideal location. It provides a buffer from the bustling city life.
9. Cebu City
Being a top tourist destination, Cebu City is an attractive place. It is home to essential infrastructures and business districts; the city offers a balance between work and leisure for professionals.
10. Iloilo City
As a flourishing urban hub, Iloilo City is a wise move, particularly with plans for a new airport. The expanding IT and BPO sectors also make it an attractive location for accommodating professionals and tourists.
11. Davao City
Lastly, Davao City offers affordable residential properties. The city boasts safety, space, and significant economic growth from established foreign and local companies.
Invest in real estate in the Philippines with Own Property Abroad
Do you want to invest in property in the Philippines? Knowing the regulations and property laws in the Philippines can be confusing, especially for foreigners. Own Property Abroad can assist you and ensure a seamless and hassle-free property journey. Thanks to our knowledge and experience in the local market, we can help with legal requirements, finding suitable properties, negotiating the best deals, and conducting due diligence.
Feeling excited already? You can drop your details below or write us at firstname.lastname@example.org. We are ready to help you turn your real estate dreams into reality!
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Frequently Asked Questions (FAQs)
Can foreigners invest in real estate in the Philippines?
Foreigners can invest in real estate in the Philippines through several ways, such as buying and holding the property, starting a property rental business, investing in REITs, investing in shared ownership properties, or holding shares in a company that owns property in the Philippines.
Is investing in real estate in the Philippines smart?
Investing in real estate in the Philippines can be smart, considering the property appreciation and rental profits one can earn on buying property in the Philippines.
How much money do I need to invest in Philippine real estate?
You can already invest in real estate in the Philippines starting from ₱ 1 million ($18,000). There are also cheaper options, such as investing in Philippine REITs.