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Advantages of Real Estate Investment: Why is it BEST for YOU? Find out how you can benefit from this BOOMING Industry in CEBU....
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REAL ESTATE 101
Why do in
ESTATE?
INVEST
REAL
INTRODUCTION TO THE REAL ESTATE MARKET
Supply and Demand The Real Estate Asset Market (Property Market)
SupplyInvestors
Wanting to Sell
Demand:Investors
Wanting to BuyMarket
DEVELOPERS BUYERS
YOUR CLIENT
SupplyProperty Owners
(Landlords)
Demand:Property Users
(Tenants)Market
The Space Market
RENTAL MARKET
Supply and Demand
What do people USUALLY invest in?
- LIFE INSURANCE
- PENSION FUNDS
- MUTUAL FUNDS
- BANKS
-- STOCK MARKETS
-- TREASURY BONDS
DIFFERENT CONSTITUENCIES, EXPERTISE, LIABILITIES, REGULATIONS, SIZES
TWO MAJOR INVESTMENT OBJECTIVES
INCOME
G R O W T H
Relatively Long-term (Appreciation)
Short-term (On-going need for Cash Inflow)
The ADVANTAGES of Real Estate Investment
RISK CONTROL=
ADVANTAGES OFREAL ESTATE INVESTMENT
ADVANTAGES OFREAL ESTATE INVESTMENT
CASH FLOW = PASSIVE INCOME
ADVANTAGES OFREAL ESTATE INVESTMENT
RENTAL YIELD is more than
BANK SAVINGS RATE
MORE INCOME
Gross Rental Yields - Philippines Compared to Continent
Taiwan, 2.68
Hong Kong, 3.12
China, 3.55
India, 3.59
Singapore, 3.79
Cambodia, 4.33
Japan, 5.69
Thailand, 7.99
Malaysia, 9.22
Philippines, 10.99
Indonesia, 12.34
0 2 4 6 8 10 12 14
1
IndonesiaPhilippinesMalaysiaThailandJapanCambodiaSingaporeIndiaChinaHong KongTaiwan
10.99%
ADVANTAGES OFREAL ESTATE INVESTMENT
LEVERAGE
(CAN BE USED AS COLLATERAL)
BANK
ADVANTAGES OFREAL ESTATE INVESTMENT
HEDGE AGAINST
INFLATION
INFLATION
ADVANTAGES OFREAL ESTATE INVESTMENT
0
5
10
15
20
25
30
1st 2nd 3rd 4th 5th
Inflation
Cap rate
INFLATION VS.CAPITAL GAIN RATE
House Price Changes, 5 Yrs (%) - Philippines Compared to Continent
Japan, -15.05
Indonesia, -14.04
Malaysia, 16.01
Thailand, 17.68
Taiwan, 22.75
Singapore, 24.47
Hong Kong, 44.7
Philippines, 57.81
China, 78.69
South Korea, 20.89
-20 0 20 40 60 80 100
1
China
Philippines
Hong Kong
Singapore
Taiwan
South Korea
Thailand
Malaysia
Indonesia
Japan
ADVANTAGES OFREAL ESTATE INVESTMENT
FLEXIBILITY /
EXPANDABILITY
ADVANTAGES OFREAL ESTATE INVESTMENT
DEPRECIATION
(HEDGE VS TAX)
TAX
0
5
10
15
20
25
30
5 Yrs 10 Yrs 15 Yrs 20 Yrs
AmortizationIncome
ADVANTAGES OFREAL ESTATE INVESTMENT
POWER OF AMORTIZATION
ADVANTAGES OFREAL ESTATE INVESTMENT
0
5
10
15
20
25
30
1 yr 5 yrs 10 yrs 20 Yrs
Cap Gain rateRental Rate
PREDICTABILITY/CONSERVATIVE
ADVANTAGES OFREAL ESTATE INVESTMENT
LIFETIMEINVESTMENT
NEW COUPLE
YOUNG FAMILY
MID-LIFE STATUS
RETIREMENT
SINGLE STATUS
Different Lifestyles, Life Cycles, Personal Goals, Levels of Wealth
LEGACY
HOW TO MAKE MONEY OUT OF YOUR
REAL ESTATE INVESTMENT?
POWER OF CASH FLOW
With your investment…
• You have the Opportunity for
Passive IncomeEXAMPLE: LA GUARDIA FLATS 1
Monthly Passive Income = P12,000 / mo
With your investment…
• You have the Opportunity to Loan
More financing institutions grant loans when you have passive income
With your investment…
• You have the Opportunity to Invest
As you earn passive income, you have the opportunity to invest in another property, in effect, gives you more passive income in the future.
With your investment…
• You have the Power to use your property as Collateral
• Mortgage rate is relatively lower than rental yield
• Even assuming that it is equal, lessor pays your debt or mortgage payable
• In effect, more amount gets paid, and your equity increases.
With your investment…
• YOU HAVE THE OPPORTUNITY FOR TAX SHIELD
• CAN BE DEDUCTED AS EXPENSE, THUS LESSEN TAXABLE INCOME
• SPREAD OVER THE LIFE OF THE PROPERTY
• IN MOST CASES, PROPERTY APPRAISES
• RESALE• 30% / 70% RATIO• PROPERTY APPRAISES • FROM 1.35 TO 1.6, INCREASE OF 250T• AFTER 2 YRS (RFO), GROSS INCOME OF 60% OF INITIAL
INVESTMENT FOR RESALE.• LOANABLE AMOUNT 1M, • MINIMAL TRANSFER FEE• FOR MORE GROSS INCOME, INVEST ON MORE PROPERTIES.• MAKE SURE THAT IT IS A WELL LOCATED PROPERTY• DEVELOPED BY A REPUTABLE DEVELOPER• IF PROPERTY IS NOT WELL ESTABLISHED, HARD TO SELL).
• POWER OF EQUITY IS GOOD, BUT IT HAS TO BE A GOOD PROPERTY, WITH TRACK RECORD OF PROPERTY APPRECIATION EVEN MORE THAN INDUSTRY STANDARDS.
POWER OF EQUITY
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