September 14, 2018

A Step-by-Step Guide to Buying an Investment Property

By: Melecio Martin G. Arranz IV

Real estate presents rewarding investment opportunities with its long-term value and appreciation potential. Owning property today isn’t just about acquiring a physical asset. It’s also a path to a financially stable life and a secure future. However, the prospect of purchasing property can be intimidating if you’re a rookie investor, considering the extensive documentation and forms needed to process a property sale.

To become successful in real estate, you must be strategic when buying an investment property. Read below for a quick guide to buying an investment property in the Philippines to help you reap the benefits of real estate.

How to Buy an Investment Property in the Philippines

Investing in a property can be rewarding, especially in the Philippines, where many possibilities await as you enter the real estate market. Whether you’re an expert or inexperienced investor, understanding the buying process is vital to maximizing your property investments.

1. Determine your property investment strategy

The foundation of any successful property investment is a well-defined strategy. Your game plan can help you avoid unwanted circumstances and overcome obstacles.

When developing a property investment strategy, determine if you would be comfortable with a buy-and-hold approach or would instead adopt a more active buy-and-sell strategy. Consider your financial goals, risk tolerance, and investment horizon to develop an effective plan. 

2. Research properties for your investment strategy

How you intend to use your prospective property can help you identify the type and location most suitable for your plans. Once you have the specifics, prioritize the renovations and furnishings you will allot on your target property.

For instance, if you want to cater to office workers, you may consider investing in condominiums for sale near Makati, BGC, and Pasay business districts. You could avail of the pre-selling rates at Quantum Residences in the heart of the bustling streets of Taft Avenue and rent your unit to students and young professionals.

3. Contact a broker or real estate agent

Navigating the real estate market can be challenging. If you have difficulties looking for the right property investments, it may be best to engage with real estate brokers or agents. They can walk you through the process and find suitable properties while helping you negotiate the best deals. Ultimately, industry professionals can save you time and money in real estate ventures.

4. Double-check possible encumbrances

Before finalizing any deal, ensure your future property has no hidden issues that might affect your right to ownership and a clean title. These encumbrances include: 

• Mortgages: This encumbrance signifies that the property is collateral for a loan belonging to the previous owner. You need mortgage clearance to buy the property before you can gain complete ownership.

• Adverse claim: Your planned investment may have a third-party claim to ownership. As a buyer, you may face legal challenges or have restricted rights to the property unless there is a resolution to the claim. You may need extensive legal diligence, validation, or litigation to settle the claim. As a result, you may deal with a longer time frame and higher costs of buying the property.

• Lis pendens: This notice typically means a pending case regarding the property. It usually results in a more complex, longer, and riskier transaction, requiring due diligence and possibly delaying or restricting the transfer of ownership.

• Right of way: Some properties may have portions you can’t develop or access. This issue may restrict your use of your newly bought property, including renovation or resale efforts.

5. Secure your financing options

Buying property is a huge financial move. So, ensure you have enough capital to complete the transaction. If you prefer to pay cash up front, prepare adequately to cover the total contract price and other costs such as documentary stamp and transfer taxes, registration fees, and notarial fees.

Alternatively, you can enroll the property in a mortgage plan or avail of a housing loan. Either way, you must determine how much a bank can lend you. You can consult with reputable banks that offer low interest rates or check online for a home loan calculator.

The computation typically includes the loan amount, duration, interest, and gross monthly income. Though the online loan calculator result may not be legally binding, it can give you a general idea of how much you can loan from the bank and what property best suits your budget.

6. Make an offer

Once you’ve found your ideal property, it’s time to present your offer to the developer. Your real estate agent can guide you through the negotiation process as you try to secure the property at the best price. 

At this point, you should also inquire about payment plans that match your financial capacity or credit score. For example, you can opt for in-house financing if you can’t get a housing loan approval from banks. 

Note that most financing services require you to issue post-dated checks for monthly amortization or down payment. If you don’t have a checking account, you must set up one. Then, ensure that it has sufficient funds for the monthly amortizations.

Regardless of who finances your home loan, it’s best to request a sample computation and determine which payment plans are most practical for you. Carefully consider the pros and cons of your options before deciding. 

7. Obtain a notarized and signed deed of sale

The deed of sale is a critical document in property transactions, as it formally transfers property ownership to you. A legitimate contract contains the signatures of all relevant parties and a notarial seal.

8. Process the Certificate Authorizing Registration (CAR)

This certificate ensures the property’s legal transfer while protecting your rights as the new owner. Simply put, it validates the sale and prepares the property for registration. To secure a CAR, you must first settle the capital gains tax (CGT) and documentary stamp tax (DST) with the Bureau of Internal Revenue (BIR).

9. Settle taxes with your local tax assessor’s office

After securing the CAR, your next destination is the local tax assessor’s office. From there, request the relevant documents, like a copy of the property’s new tax declaration and tax clearance. Then, pay the transfer tax. These documents are necessary for the Registry of Deeds’ official transfer of title.

10. Secure a new title under your name

The last step in this guide to buying an investment property is to obtain a new title in your name. Besides the new tax declaration copy, the title confirms the legality of your ownership over the property. 

The type of title will depend on the kind of property you own. For example, you’ll typically need the Transfer Certificate of Title for land or house and lot investments. Meanwhile, condo investments require you to obtain a Condominium Certificate of Title.

When transferring the title under your name, you must submit complete documentation to the local Registry of Deeds. Once you have the title issued under your name, you are now the official owner of that property.

Why Condominiums are Great Property Investments

Condominiums enable you to enter the real estate market and enjoy the following advantages.

• Abundant amenities and prime locations: Typically, condos offer many amenities and are near prime locations. These factors can help attract buyers if you put up your property for sale.

• Effective marketing collaterals from developers: You’ll have readily available marketing materials when promoting your property investment.

• Low maintenance: Condominiums typically have dedicated staff for maintenance, reducing the hassle of property upkeep.

• Clear title: Since you directly deal with the property developer, your investment is free from encumbrances.

• Steady value appreciation: Condos can appreciate as time passes. As such, you can use your property as a long-term investment that can address the ever-increasing demand for housing.

Invest in Real Estate with Confidence

Real estate investing can be challenging if you’re unsure what to do. But with a solid strategy and a clear understanding of investing in real estate properties in the Philippines, you can navigate the complexities of the process. Whether you prefer a condo’s convenience or a house and lot’s spacious area, these properties can help you become a successful real estate investor.

As you jumpstart your property investment journey, Federal Land is ready to lend a hand. They are a real estate developer in the Philippines offering well-built and thoughtfully designed RFO and pre-selling condominiums in prime spots with high investment potential in the Philippines. 

 Check out their properties in Pasay, Taguig, and Mandaluyong, and contact them for more information.