Buying an investment property in the Philippines

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Pasig and Mandaluyong area by Jun Acullador

The Filipino Diaspora is among the target buyers of real estate companies in the Philippines. With marketing arm of real estate firms in the Philippines setting up shop where Filipino migrants or Overseas Filipino Workers (OFW)s are, there sure is a huge market for properties in the Philippines whether in Metro Manila where the growth in real estate is concentrated, or in other cosmopolitan cities in the county.

This MANAGING YOUR MONEY series is sponsored by Western UnionFilipinos around the world have reasons to invest on real estate at this time. Bloomberg has recently named the Philippines one of the fastest growing economies for 2015, second only to China. Its growth rate, while lower than projected, is still among the highest in Southeast Asia according to S&P. The peso is the second least volatile currency according to the Philippines’ Central Bank.

See related article on Why now is the best time to invest in Philippine real estate.

There also are some sentimental reasons for buying property in the Philippines, aside from economic factors which make it a wise investment.

Filipino migrants may want to keep their ties to their motherland by owning property back home. Perhaps they want to buy a lot for building a retirement place, a condo to rent out or a house and lot as gift for family members they left behind.

Pasig and Mandaluyong area by Jun Acullador

Whatever the reason for buying property in the Philippines, Filipino migrants can gain a profit either as lessors or as owners of property which will eventually appreciate in value. Most of all, they keep their connections to the Philippines because a property gives them a domicile in the country.

Since migrants are far from the country, they should know the processes involved when acquiring property in the Philippines. Many would buy while away from home, so it is wise to be familiar with the steps to avoid being inconvenienced, or worse scammed by con brokers.

 

Steps in buying a real estate property in the Philippines when you are living abroad

As we cannot be at two places at once, being physically present when making a transaction in buying real estate properties is, more often than not, impossible. This is one reason why some Filipinos from abroad do not opt to buy a property or two in their homeland even though they can afford to.

One of the ways to facilitate the purchase of a property in the Philippines wherever you may be in the world is by hiring or appointing an attorney-in-fact. Oftentimes, if you have a relative in the Philippines, this person can perform the role of an attorney-in-fact.

There are also entities that provide such services. The role is straightforward and simple: the person will be responsible to act on some critical steps in the transaction in your stead. This includes reserving you the unit of your preference, signing needed forms (special power of attorney, reservation form, and the authorised representative form) and even be involved with the payment process.

The Philippine Property Expert Inc (www.PhilPropertyExpert.com), a real estate brokerage and appraisal company in the Philippines, enumerated the steps in acquiring property in the Philippines.

For properties to be purchased from a developer, only a few steps are involved.

  • Get a licensed broker.
  • Reserve the property. Present the necessary documents:
    • Reservation fee
    • Identification cards
    • Marriage contract
    • Proof of billing address
    • Proof of capacity to pay
  • Decide whether to pay in cash or through in-house financing or loan. When paying in cash, the property will be turned over to the new owner even as the developer processes the transfer and release of the title.

When paying through financing or a loan, the following are the steps involved:

  • Apply for a loan and present the necessary requirements as prescribed by the bank or financing company.
  • Present letter of guarantee from bank or financing institution for the turn over of the property.
  • Complete repayment of loan, which may take a few months to up to 30 years depending on your arrangement with the bank or financing institution. After payment, you will be given a Deed of Release.
  • File the Deed of Release with the Registry of Deeds to clear to mortgage annotation on your title. You now have a clean title.

When buying property from a private individual seller, the following are the steps involved:

  • Negotiate terms and conditions with the seller.
  • Prepare and sign 10 copies of the Deed of Sale and have the document notarised.
  • Present two copies of the notarised Deed of Sale to the City/Municipal Assessor’s Office and secure a certified true copy of tax declaration and certificate of no improvement
  • Secure a tax clearance from the City/Municipal Treasurer’s Office
  • Secure a Certificate Authorising Registration from the Bureau of Internal Revenue
  • Pay the Transfer Tax at the City/Municipality Treasurer’s Office.
  • Submit necessary documents to the Registry of Deeds for the release of the title.
  • Get the new Tax Declaration from the City/Municipal Assessor’s Office.
  • The property is turned over to the new owner.

For a quick guide of the steps just enumerated, check out the flowchart prepared by the Philippine Property Expert.

For Filipino migrants who have assigned an attorney-in-fact, payment for your new property may be remitted to the Philippines using secured and reputable facilities like banks or money transfer providers like Western Union.

 

Considerations for buying property

There are plenty of good reasons as to why Filipinos who have migrated to other countries should own a property in the Philippines. Apart for the obvious reason of actually owning a property you could confidently call your own, probably the most beneficial aspect of having an investment property is when it can generate passive income.

While real estate can be bought and be used for investment, not all are necessarily profitable. For this reason, it pays to know the property you are buying beforehand. Here are the things to consider before buying your own real estate property for investment:

  • Quality of the neighbourhood or surroundings
  • Quality of the physical property
  • Location
  • Accessibility via public or private transport
  • Rent rates
  • Property taxes
  • Crime rate/Security
  • Availability of jobs in the area
  • Location of schools
  • Amenities
  • Frequency of natural disasters
  • Building permits
  • Future developments
  • Listings and vacancies

Other than the issue of profitability on the property to be purchased, it takes also a good precaution not to get cheated in the process. For this reason, the following are some tips when buying a real estate property from an individual:

  • Verify whether the property you are buying is legitimately owned by the seller. One way of doing this is by getting a “Certified True Copy” of the title from the Register of Deeds. This also ensures that the “Transfer Certificate of Title” is authentic.
  • Check whether the title of the property you are buying is clean, i.e. not mortgaged (no encumbrances and liens) on the property. A “clean” title should have a blank page on its “encumbrances” at the back of the title.
  • As land titles do not contain any street name and even a number to exactly pinpoint the property, make sure that the land you are buying on the title is accurate by validating at the Register of Deeds or making a private land surveyor or geodetic engineer do the authentication.
  • Anyone can be a seller of a property he does not own. Just to make sure that you are buying from the real owner of the property, always ask for proof of the seller’s identification such as his Passport ID, Driver’s License, or even ask around the neighbourhood to confirm the identity of the seller.
  • Ensure that the yearly real estate taxes of the property are paid. You can check on this by asking for certified true copies of the Tax Declaration and original Tax Receipts. The payments indicated in any of these should be up-to-date.

Did you find this article useful? Do you have some ideas of your own that you can share to our readers? Share your own experience by leaving a comment below.

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