Advantages Of Real Estate Investment 101

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


CASH FLOW = PASSIVE INCOME


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%


LEVERAGE

(CAN BE USED AS COLLATERAL)

BANK


HEDGE AGAINST

INFLATION

INFLATION


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


FLEXIBILITY /

EXPANDABILITY


DEPRECIATION

(HEDGE VS TAX)

TAX

0

5

10

15

20

25

30

5 Yrs 10 Yrs 15 Yrs 20 Yrs

AmortizationIncome


POWER OF AMORTIZATION


0

5

10

15

20

25

30

1 yr 5 yrs 10 yrs 20 Yrs

Cap Gain rateRental Rate

PREDICTABILITY/CONSERVATIVE


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


• You have the Opportunity to Loan

More financing institutions grant loans when you have passive income


• 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.

POWER OF MORTGAGE

http://fordfinancial.files.wordpress.com/2008/09/mortgage.jpg


• 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.

POWER OF DEPRECIATION

http://property-edge.com.au/Images/Property%20Edge/Depreciation.gif


• 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

POWER OF EQUITY

http://www.eforeclosuremagazine.com/images/home-equity.jpg

• 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

Economy & Finance

Advantages Of Real Estate Investment 101