What is Real Estate Investing?
Real Estate investing is the act of using real property, like land or buildings, to generate income from rent and profits from price appreciation.
How can you earn from Real Estate Investing?
Glad you asked!
Unlike most financial products, there are many ways to be “into” real estate investing. One of the things I love most about it is that you get something tangible for your money. Something you can see and touch, unlike personal asset investments like bonds and stocks.
Essentially, there are four ways you can earn from investing in real estate. I’m going to list them below in order of least capital, time, and attention required to the most:
#1: Capital appreciation by waiting for the value of your property to increase over time
Capital appreciation is one of the most common ways people can earn from their real estate properties because this method requires the least investment of money, time, and attention before you can start seeing a profit.
Let’s say you were able to purchase a condominium unit at BGC for the pre-selling price of Php10 Mn. “Pre-selling” means that the construction of the building has not started yet.
One year later, construction has started on the building. You learn that the same type of unit you purchased a year ago is now being sold by developer for Php11 Mn.
The value of your condo unit has increased by 10%, and the building isn’t even built yet! If the city and community it is built in is constantly being improved, the value of all land in the vicinity will increase with it. In this situation, it would be safe to assume that once the building is complete, your condo unit may be worth even more than the Php11 Mn asking price.
Purchasing pre-selling units is one way to see profits on your real estate investment through capital appreciation. This is commonly referred to as “flipping”.
Another way to “flip” your real estate is to purchase a property that may need a lot of repairs and is selling cheaply on the market because the owner doesn’t want to deal with fixing it. After purchasing the property, you will have to take some time and extra cash to restore and improve it. Afterwards, you will have a beautiful property you can sell or rent. At this point, because of the repairs and improvements, the property will definitely worth more than what you purchased it for.
Remember: just like any investment, profits take time. Plus, not every property is guaranteed to increase in value when it’s turned over since it will largely based on actual demand from buyers. It’s important to not believing do your research before making any purchase.
#2: Rental income by leasing your property
Another way to make money through real estate investing is to rent out your properties for other people to live in.
In exchange for fixed, periodic rental payments, you will allow a 3rd party to live in and use your property. You retain ownership of the land or unit, so you can continue to earn through capital appreciation too.
The best example of this would be AirBnB, a website which lets people (usually tourists) book your place for as short as a day to as long as several months.
Technically, it’s easy to apply and become an AirBnb host. But in order stand out, you have to get high ratings from people who have stayed at your unit. Usually, this means investing in furnishings for the unit, keeping it clean before every new tenant checks in, and being on-call for tenants in case they need help with any appliances or security.
AirBnBs are commonly rented for only a few days, so if your listing does become popular, you’ll likely have a lot of tenants constantly checking in and out all the time.
#3: Combination of #1 & #2
Like I mentioned earlier, it’s possible to still see capital appreciation on your property while renting it out. You’ll never guess which company earns as much as 35% of their top line from rental income: McDonald’s!
Remember that most McDonald’s branches are run by franchisees. Now McDonald’s purchases large pieces of land in areas that are about to be developed. Once a franchisee becomes interested in the developing area, McDonald’s will already have a location for the franchisee to set up shop, bundled into the franchise fees. McDonald’s will retain ownership of the land, which will appreciate over time, and also see profits from the franchisee paying monthly rent.
#4: Build & Sell
Think you already know what “Build & Sell” means? Think again!
Build & Sell is slowly getting popular in the Philippines as more areas outside the Metro are being developed.
The concept of Build & Sell is simple: while a piece of land is still cheap because the town isn’t as developed yet, buy a big chunk of it. Then, break up your big lot into smaller ones and build houses on them, which you can sell in the future.
So, there you have it! Now you know how you can make your money grow through real estate investing.
Want to start investing today? Like I mentioned earlier, the easiest way is to purchase a property and wait for its value increase over time. I have a few properties for sale that you might be interested in, so reach out once you’re ready to start exploring available properties.
Disclaimer: This material, which is strictly for information purposes only. The views and opinions expressed in this article are those of Juan Patag’s and do not necessarily reflect the position of RE/MAX Capital, or any other RE/MAX franchise. Any information is subject to change without prior notice. No liability whatsoever is accepted for any loss that may arise (whether direct or consequential) from any use of the information contained herein. Information Each RE/MAX franchise is independently owned and operated.