i-INVEST PINOY! towards my financial freedom! www.i-investpinoy.com
by Johnson B. Escober
This book is intended to present competent and reliable information regarding the subject matter covered. However, upon purchase of this book, you understood that the Author is not engaged in giving any legal, financial or other professional advice. Certain Laws and Practices are often unique and different from one region or country to another, so should you need legal or any other expert support, you should seek the assistance of a professional. The Author and Publisher shall not be held liable for anything incurred from the use or application of this book.
If you bought this book from any other sources, most likely that it is stolen property or a counterfeit. If that may be the case, then the Author or the Publisher has not received any compensation for this copy. Counterfeiting is a known source of financial support for any organized crime, syndicate or terrorist group. We advise you not to purchase such copy and report any instance to the Author or Publisher.
Copyright © 2019 by Johnson B. Escober. All rights reserved. You should never reproduced, photocopy, distribute, record, transmit thru any means electronic or mechanical or store in a database without any prior written permission from the Author and Publisher.
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Introduction
What is Real Estate?
What are the Types of Real Estate Property?
What are the Classifications of Real Estate Property?
What are the Types of Buying & Selling Real Estate Property?
What are the Things that I Need to Consider?
How Do I Start?
How Do I Acquire Real Estate Property?
What are the Real Estate Transaction Concerns?
How Do I Verify Real Estate Property?
What are the Steps in Buying and Selling Real Estate Property?
Conclusion
Sample Documents and Forms
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Dear Friend and Fellow Investor,
My father was an Overseas Filipino Worker (OFW), and my mother is a plain housewife. My father started working abroad as a Mechanic Technician while I was at an early age of four years old. I was the eldest and my brother is seven years younger than me.
My mother came from Dumaguete, one of the major islands in the Visayas region. She did not finished elementary school and only attained up to Grade 1 only as I remember her telling me her own stories during bedtime when I was little. But that did not limit her ability to create opportunities for our family.
Just like any other families starting out in the 70s and 80s, working overseas at that time is slowly emerging. And for all the stories and tales of the head of the family leaving his family behind to work overseas, most of these families ended up more broke than ever. Broke in the sense of their family status or even broke financially. Some ended up as a broken family. Some families even ended up even more financially broke with more debts than their lifetime of savings.
Fortunately, our family passed through this hard trial in life. My mother being limited in her academic ability is a very simple and frugal person. I remember as a child, she would bring me to the bank and made some transactions. I ended up signing some documents as she used me literally to put up another account in order to make multiple time deposits. And this was not only one bank! My mother always puts up multiple time deposits in other banks because she always says not to put all in one bank.
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My father was a hard worker and a dedicated mechanic. He retired from working overseas just on time before the first crisis in the Middle East that brought "Operation: Desert Storm" in the early 90s took place. I was already going to college then. After his retirement, then there came an opportunity.
A few blocks away from our house in Pasig, there is a property that was for sale. The property has a 300m2 lot area, which is rectangular in shape, and it has three-door house, which occupy one-third of the lot. The front is a two-thirds vacant space, which has a perimeter wall and a gate. This is a perfect property find at that time.
My parents immediately became interested and eventually they ended up buying the property. Luckily my parents involved me in the buying process because they want me to learn from this transaction. After a year, my parents started to put up their own apartment. All my father's earnings that my mother had been saving all those times had been used to buy the property and eventually they ended up constructing a total of seven-door apartments! Wow! Imagine that! That is a very great achievement coming from an OFW and a Grade 1 plain housewife, and most of my neighbors were surprised of their own feat.
I guess I was brought up early in a family that taught me to how to save and invest money.
As I have my own family now, I already applied that learning when my wife and I finally bought our own home in Santa Rosa, Laguna. Now I am still at a point in my life where I am looking for ways to invest money and create more passive income. Real Estate is one of these opportunity.
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I remember the first time I read "Rich Dad Poor Dad" by Robert Kiyosaki. He talked about ways to invest money and to create streams of passive income in order to get out of the rat race. He talked about real estate investment but in the US setting. Then I remember reading "Think Rich Pinoy" by Dr. Larry Gamboa. This is the guy who is doing what Robert Kiyosaki is explaining in his book but only in the Philippine setting! Then it was followed by "Grow Rich Pinoy" the second series of this book by Dr. Larry Gamboa.
I even attended one of the seminars of Think Rich Pinoy Abundance Seminar on the topic "Learn How to be a Real Estate Investor Working with Real Estate Top Brokers". This seminar tells stories of top brokers who already made it in the real estate business. They encourage would be investors who are interested in real estate business to co-work and learn from these top brokers. It would be wise to have a mentor or seek professional advice from these experts in this kind of business. No doubt about that.
However, this book will serve as your guide if eventually you will decide to do it. It may come in handy to know the step-by-step method in buying and selling real estate properties especially in preparing and securing legal documents and paying the necessary taxes and fees needed to complete the transactions. Knowing such information will eventually equip you into your way of doing real estate business.
Wishing you success in your investment towards your financial freedom!
Your Friend and Fellow Investor,
Johnson B. Escober
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You might have been convinced to believe that real estate is exclusive for residential living, but it’s actually more than that. It’s a broad term that refers to property made up of land and structures or buildings on it. Real Estate also includes the land’s natural resources along with the uncultivated plants, farmed livestock and crops and mineral deposits.
Three broad categories make it up, and that’s based on usage – Industrial, Commercial and of course Residential. [Later, we’ll touch more on these.]
In the Philippines, there is a booming real estate industry at least in terms of activities. According to an ASPBI survey by the Philippine Statistics Authority released December 29, 2017), ”the final results revealed that 4,826 establishments were engaged in real estate activities, and this figure only accounted the formal sector.
Activities include renting, leasing, buying, operating and selling of dwellings, non- residential and apartment buildings. These real estate activities outdid other industries with only 43.2% or 2,086 establishments. Following is real estate buying, subdividing, developing and selling with a total of 1,455 establishments (30.1%).
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I must say that the survey alone won’t suffice if you’re about to make a decision on whether to buy or sell real estate property this year or in the future. But in a way, it indicates an ‘active’ industry that shows no slowing down.
And in the country, there is a steady growth in the real estate space, and for reasons. For one, the country has a great labor force with English-speaking and skilled people. Versus in other countries, multinational companies and firms can hire here with lower wages, too.
In this case, more foreign investors do business in the Philippines. One of the fastest growing industries in the country is Business Process Outsourcing (or simply BPO) and one of the biggest call center firms in the world, such as Convergys invest here.
Another advantage of real estate investment is rental yield from direct rental income. In addition is the property’s value appreciation with inflation. And with an increased value, it can mean a reinvestment and sale of properties at a higher value. This can also mean providing an equity credit line that can be used for other investments.
Real estate investment is also inflation proof. For example, rent can increase with inflation while the property’s mortgage payment is always stable. So without the increased expense of holding a real estate property, there is an increase in cash flow.
Without even saying, when the inflation goes up, there will also be more renters especially among average consumers who cannot afford expensive mortgage. Rents will escalate in this case due to a higher demand as well.
On the other hand is “leverage” that can offer you with a greater return while also adding risk For instance is investing P1,000,000 in “leveraged assets” when trying to buy four properties with down payments and not just one property for cash.
Another advantage of investing in real estate is on paying down loans (amortization) that can free up other investment resources. For example, if you were an investor, you can use the increased equity of a property in order to free up a fund for other types of investments.
In some cases, some investors also buy properties that need improvement or lack features intentionally for equity. Some upgrades or remodeling can result to an increased equity after calculating all the expenses and subtracting it from the total value of those improvements made to a property.
After talking about an overview of real estate, let’s talk about one of its basic components - land. It refers to a property or real estate designated or allocated by a fixed spatial
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Land is not depreciable. What’s a depreciable property? It’s an asset subject for depreciation treatment. Some examples of depreciable properties are machinery, office equipment, computers and heavy equipment. Land doesn’t belong here.
Ground refers to earth’s solid surface, which can be dry or firm land. In real estate, there’s something called ground rent or ground lease that allows you to buy a certain property except buying the land that the ‘ground’ stands on.
That point leads us to the next. Ground rent involves an agreement between a tenant and a property owner (landlord) wherein a tenant pays the property owner so that the prior can use a plot of the land.
With an agreement in place, the TENANT owns the ONLY the property standing on the land.
Another real estate term is soil; it’s often interchanged with ‘ground’ when in truth it’s different. Soil actually refers to the earth’s upper layer characterized by dark brown material, which is a combination of rock particles, clay and organic remains.
A few types include chalky, clay, loamy, peaty, sandy, saline and silty soil. In the Philippines, where there are over 7,000 islands, soil resources are diverse. It influences the agricultural potential of the land and suitability to grow certain crops.
There are nine soil orders in the Philippines, and one of which is Entisol. It can be found in provinces like Palawan, Leyte, Iloilo, Ilocos Norte and Ilocos Sur where there is rough broken land and coastal areas.
This soil order is ideal for fruit trees, coconuts and paddy rice, according to the Bureau of Soils and Water Management.
With the right kind of soil, when buying a real estate property, you can build a house that can last a long time or grow healthy crops that can result to great profit. Or else, the wrong kind of soil might lead to your house being swept away during a flood, for instance.
Rock refers to a solid mineral material that forms a part of the earth’s surface. Also called a stone, a rock is a natural substance made of a solid combination or aggregate of at least one mineral (mineraloids).
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In the Philippines, igneous rocks, which look glassy but without fossils and are formed from the magma found in the earth’s mantle, are common. For example, Mayon Volcano (or Mt. Mayon) is a rich source of andesite rocks that contain iron and silica.
Crops are referring to cultivated plants, such as fruits, vegetables or grains, crops are also a part of production agriculture that includes livestock operations, specialty crops, timber and row crops. These are agricultural products, which are mobile, so the produce is transportable across boundaries.
In the Philippines, rice is a high-yielding crop. According to this Major Crops Statistics of the Philippines, a report over the time period 2010-2014, palay (or rice) production increased from 15.77 million metric tons (2010) to 18.97 million metric tons (2014).
At an annual rate, its average production growth rate annually is 4.7%, and that figure was calculated over the last five years. After crops, let’s talk about a related term, which is vegetation. What might have first conjured up in your mind are vegetables. It is partly true because vegetation refers to the plant life in a specific region.
However, it’s a broad and general term that also refers to the cover provided by the plants, which are considered the most abundant biosphere element.
And at all spatial scales, vegetation plays significant roles in the biosphere like regulating the flow of cycles – such as those of nitrogen, carbon and water that affect or influence the climate and weather patterns.
According to the Philjournalsci.dost.gov.ph, agricultural lands are 40.1% of the 300,000- kilometer sq total land area of the country, while 25.7% are forestlands.
Agriculture in the country represents 20% total economy and 33% of its total employment based on 2002’s National Statistics Office report.
After tackling land and its components, let’s now move on to the second component of real estate, which is improvement.
What is it? At the very least, improvement refers to a permanent addition to a real property aimed at its betterment or enhancement in order to increase its capital value.
Improvement involves expenditure of money and labor, with the main purpose of making a property more valuable.
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However, it is more than repair of roofs or basements, for instance, because an improvement’s objective is to increase the curb appeal of a property and to adapt the property for additional purposes with the property owner looking at selling it at a higher value in the future.
Structure is a type of improvement that a property owner can make is a structure that refers to a permanent improvement made to a property but that’s not merely for decorative purposes.
A few examples include bathroom or kitchen upgrades, new flooring, new central air conditioning or an installation of new windows.
But perhaps you’re asking, “Is a swimming pool a structural improvement?” It is an improvement only if it’s an in-ground pool or if your property is located in a place where warm weather exist all-year-round.
Building is an improvement that is distinguishable as a structure with walls and roof. A few examples include a factory, a house, a store or a school.
You can also think of it as a temporary or a permanent structure that include all attached fixtures, which are non-removable without cutting into walls, floors or ceilings.
When it comes to real estate, I would like to note that building improvements include those changes you do to your property that can increase its value, improve/change its function or extend its lifespan.
For instance, you can renovate the lobby of your building to make it more functional or attractive by adding high-efficiency lighting fixtures. And then also considered as an improvement is performing a major repair to extend your property’s life, and an example includes installing a new roofing system.
We all live in a house. A house (a place of residence) is a type of building with a roof and enclosed in walls that is meant for human habitation. A small group of people, a single family or an extended family lives in a house.
Regarding its improvement (remodeling or renovation), it involves making additions or renovating to add value, enhance its function or extend its lifespan. A few projects like an upgrade to the cooling or heating, plumbing or electrical system is considered an improvement.
Additional goals for a home improvement include comfort, waterproofing, increasing capacity of electrical systems or upgrading rooms (e.g. an addition of a hot tub to your bathroom).
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At the very least, dwelling is a place to live or a residence (like a home). This term has an otherwise complex meaning and is distinguished based on how the word is used in context. For example, in real estate, a dwelling can refer to all the buildings connected with the house. But in criminal law, it pertains to a part of a building, a mobile home (e.g. recreational vehicle), or a tent, which is intended for human habitation.
Fences are referring to railings, barriers or upright structure made of wire, concrete or wood, fences are meant to enclose a ground area, as a mark to a boundary. However, adding a fence to a real estate property is a make or break attempt in improvement.
For example, adding a fence not complementing your home’s design or style could affect its curb appeal. It can be worse than having no fence at all.
That’s the exact same reason not to choose an ornate wooden fence if you have a modern home, as it’s totally out of place and weird at the same time.
A monument is an upright structure, a statue or a building built to honor a notable event or a famous person like Dr. Jose Rizal, our National Hero (e.g. Rizal Monument in Luneta).
But thousands of other monuments had been built all over the world. Famous examples include the Greek Parthenon or the Pyramids of Egypt, in this case, are used as a symbol of an ancient civilization.
It refers to the extent of an entity’s or a person’s rights and interests in the property that we’ll break down in the following sections.
Whoever is the titleholder is the owner of the property.
So without even saying, the property will be yours once you have the title after closing the deal for cash.
However, you must take note of something. The property can be taken away from you if you don’t pay the taxes, for instance.
Thus, the property will be yours if there is no lien or mortgage note against it and that the deed is in your name.
The right to possess the property is for a person who can either be a long-term or temporary holder of a property.
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This person will also have the legal right to use and occupy the property.
Possession can also be told to be a legal tradition stating that the person occupying and using the property for social functions has this right to possession.
Simply, this is the right disposition wherein the property owner can “sell, rent, or transfer control, use or ownership of a specific property at will.”
However, if your property has a tax lien, you have to settle that first, as a part of settlement money.
Under Philippine laws and jurisprudence, the three kinds of actions that will help in recovering possession are "accion reivindicatoria", "accion publiciana" and "accion interdictal".
One of which is the "accion interdictal", resulting from two causes - unlawful detainer and forcible entry.
But let’s not get too technical and discuss only one to provide you with a basic idea on how this right to recover is exercised due to forcible entry.
For example, you’re deprived of real property possession due to threats or force. In the forcible entry case, the defendant’s possession is “illegal from the beginning.”
Also called "jus fruendi", it is the rights to the fruits and accessories pertaining to the property.
If you have a full ownership of the property, you will enjoy this right as a part of the ‘bundle of rights’ as attributes or elements of your ownership.
For properties with co-owners, on the other hand, each of them shall have the ‘full ownership’ of fruits and benefits pertaining to the property.
In any legal manner, you have the right to use and enjoy a property under your name.
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For example, you can host a holiday party in your property, provided it’s not prohibited or restricted through restrictions documents or homeowner regulations.
Another part the bundle of "Rights & Interest" is the right to mortgage and lease.
What is a mortgage? It’s repayment of a loan that usually has ‘security’ like real estate attached to it.
On the other hand, a lease is a ‘rental agreement’ that lasts for a specific time amount.
When you’re leasing a property, you’re renting and not owning it with your name not on the deed.
If you have a mortgaged property, you own it even if the bank has an interest on it. So technically, you can sell this property because the right to do so is yours only.
In a nutshell, Real Estate refers to the land, improvements and the rights and interests that goes with the ownership Real Estate is steady and permanent asset. Every Real Estate Property is different and unique with their own distinctive technical description. Real Estate Property is validated by legal and technical documents. Real Estate Property appreciates in value. Real Estate Property is not easily convertible to cash.
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In the real estate space, a lot, also called a plot, is a parcel or tract of land owned by a person/s. It is an immovable real property that sits permanently where it is.
A type of lot is a “lot with improvement.” We’ve discussed improvement earlier and that refers to any additions to make a land or lot more useful or valuable. It also aims at adding value to the property for better functions or new purposes in the future.
For example, a building or a structure is an improvement to the land. However, improved land also refers to a broader scope or coverage because it can include some upgrades to make the land more functional or usable.
A few of these can include upgrades to the utilities found in the parcel, or it can be a construction of roadways or structures as well as landscaping.
One way to an improved land is the construction of a house on a lot.
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In the Philippines, common types of housings include attached homes, detached homes, apartments and townhouses. They are characterized with completeness of rooms, such as bedrooms, kitchen, living room or a dining area.
In some elaborative house and lot constructions, they can have at least two floors, a balcony and/or a swimming pool.
Another common type of a lot with improvement is the construction of a condominium property that is composed of a property complex further subdivided into ‘units’ and then later sold by the developer.
Strong demands for condominium properties in the Philippines are obvious in the recent years and locations, including Taguig, Pasig and Makati are top choices because of central business districts.
In terms of rental yields, however, cities like Mandaluyong and Quezon City are frontrunners due to proximity to the BPO industry and quick access to different services and new developments.
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If you’re investing in real estate property, wait until you read the following for its main classifications so that you could determine which to buy based on your purpose and future plans, to name some.
New construction or resale homes are kinds of residential real estate. Some of these include condominiums, apartments, duplexes, luxury homes, vacation homes or multi- generational homes. They’re meant for human habitation. An example is a house - an enclosed building with a roof and walls.
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But of course, a home isn’t only a shelter to live or inhabit because that’s a definition of a house. Instead, a home is where you and your loved ones can experience comfort living every waking day.
A commercial property is simply real estate property meant for business use. A few of these include hotels, malls, offices, educational buildings, medical centers, strip malls or shopping centers.
As said, a commercial property is meant for business activities, with example we’ve mentioned earlier. It houses businesses that can generate a profit.
A large residential property, on the other hand, can also be classified as a commercial business property because it generates income in the form of rent. And as a commercial property, it is covered by specific laws and tax treatments.
Manufacturing properties or businesses, including warehouses and factories, are industrial real estate. These buildings are designated and used for production, distribution and/or storage of goods. They can also be used for research purposes.
But then, there are cases when an industrial property can also be considered as a commercial property, and that’s when they’re used for goods’ distribution. Examples of an industrial property include, factory and warehouse.
Factory is an industrial building where items or goods are manufactured or created by workers using machinery or equipment or where some companies manufacture different items for sale (mass production).
Warehouse are often used by Exporters, manufacturers, importers or wholesalers. They use this building for the storage of goods. Customs and transport businesses also use this large building for storage purposes. Usually, warehouses are located in industrial parks.
This property, also called agricultural land, rangeland, cropland or farmland, is meant for agricultural purposes, such as production of crops and rearing of livestock in order to supply food for humans.
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Farm with Rice, Vegetable, Poultry, Swine, Herd is an example of an agricultural land where crops are planted and grown and/or animals/livestock are raised. Farmers work in the farm where tractors, supplies and equipment can be stored in a building.
This type of real estate property refers to a property used for camping, fishing, boating, hunting, four-wheeling and other recreational activities. Nevertheless, recreational lands are intended for leisure, fun, entertainment and sports activities.
Parks are public land areas characterized by trees and grass; it is a place where people relax and enjoy their time alone, with a group or with their loved ones. In the Philippines, one amusement or recreational park includes the Enchanted Kingdom. I love this place because it opens a world where our kids can enhance their creativity and imagination. One of its top features is the Anchors Away, a pirate’s themed ride that offers thrill and excitement to its visitors. The Seventh Portal and Discovery Theater are also top attractions offering interactive education. EK is also famous for its wide range song and dance performances and fireworks shows.
Another famous park is the Rizal Park located in the country’s capital city, Manila. It’s a historical park that is also a significant landmark in the Philippines and where the most famous monument is located, the Rizal Monument. It is the most photographed monument that houses Jose Rizal’s remains. The national hero was also executed in this place as well.
This property is a final resting place. In the Philippines, buying memorial property is almost the same as to any other real estate types, but then, you must know certain differences.
For example, there is no land title for a memorial lot; instead, it only has a lot title signifying the location of the memorial lot and its size. These records are taken care of by the local government unit for a public cemetery or by the property manager for memorial parks.
Because the location and size of a memorial lot varies based on the rules and regulations of the Housing and Land Use Regulatory Board (HLURB), price ranges also vary.
However, know that the upfront price is only a base price because the cost can also include facilitation fees, transfer and administration fees per developer or park owner in addition to the taxes involved. On the other hand, there are sellers that add interest that could go up to as high as 20% unto the memorial lots via installment plans but such an interest rate can also vary based on the installment terms.
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Regarding expansion of the memorial lot, some owners build a columbarium, a structure that is a part of another building or a freestanding building. It has the niche for the inurnment of cremated human remains, according to the definition of the HLURB. This structure can include an interment space containing the bones of the deceased, also called an ossuary. It’s a reason that a memorial lot is a good investment.
For a business owner, he or she can make a business out of death, but for an individual, it can be an investment that can be used by a clan or an entire family. For all other things on how a lot owner can use the memorial lot depend on the cemetery or memorial park rules and regulations.
However, those looking to develop a columbarium for business can proceed to the office of the HLURB for the “Cemeteries and Memorial Parks Rules and Regulations.”
In a Memorial Park often a Cemetery is an area that contains tombs, graves and funeral urns.
In the Philippines, there are unique cemeteries that I would like to share with you just to make things more interesting and less serious at that. One is the Libingan ng mga Bayani in Taguig City. This cemetery is for heroes, military personnel and martyrs, as well as for former presidents. Former Presidents Carlos Garcia and Diosdado Macapagal are here.
Another is Baguio City’s Lost Cemetery of Negativism at Camp John Hay. Unlike most cemeteries, no dead bodies are buried in this place – but only negative attitudes, emotions or thoughts. It has been said that negativism is man’s worst limiting factor or self-imposed infliction.
The Lost Cemetery of Negativism is a symbolic cemetery that intends to encourage visitors to bury negativism.
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Interested investing in real estate whether you’re buying or selling, there are different types of buy and sell involved in this space just like in buying or selling anything for that matter. In the following, let me give you a short overview of what each type entails.
To buy and sell as is, you find a property on sale and then sell it right away to an individual or entity that can make the best offer. While there can be a small profit margin here, you can take advantage of the buy & sell as if you’re looking for a fast turnover and return on investment.
There are certain reasons SELLERS want to sell immediately and make cash out of their property. One is a serious financial distress that needs them to sell their property in an AS- IS condition.
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If you’re the seller, to sell a home/property as-is only means you’re selling in its current condition – without doing repairs or improvements to it. It also means you’re selling it despite any issues for that matter.
Now, if you’re the BUYER know that you might have to sign an agreement stating you understand the exact terms of this particular transaction. You’ll find specific terms spelled out in the purchase and sale agreement
A typical example of the AS-IS “buy and sell type” is the “Buy Low and Sell High.” No investor wants to lose from an investment, is there? In the buy low and sell high strategy, you’re buying a property with ‘perceived or anticipated’ appreciation (increase in value).
Maximizing real estate resources, let’s say land, is a reason to buy & subdivide then sell. Using this approach offers you with benefits, including increased flexibility and profits. If you have a large parcel of land, you might want to consider this approach in ‘buy and sell’ to get more of your land property.
In fact, there is this real estate saying, “More lots may translate to more money.” So depending on the current local market conditions, land owners may have the chance of increasing the parcel of land’s total value by subdividing the lot into smaller parts, which are later sold to at least one buyer. As in essence, using the subdivision approach can make the lots more valuable than the entire parcel of land alone.
And of course, buying a smaller piece of land is more affordable than a larger one. So if you’re a landowner who can readily find buyers, with or without help from a real estate agent, you can sell smaller pieces of land to these potential buyers and eventually profit from it.
Subdivisions have certain advantages from the point of view of a buyer, including bigger spaces and increased security.
But if you’re the seller, hold your horses though and understand the market needs before anything else.
For one, you have to complete the lot subdivision before selling to save the buyers the risk, effort and time of doing the subdividing of the lot themselves. Doing so, you also increase the salability and value of your property by subdividing upfront before the selling process begins.
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Plus, you have to compare local subdivision requirements with a property survey. For a smaller parcel of land you’re dividing into two, you might have to ensure both sections, when divided, satisfy minimum lot requirements of the subdivision. On the other hand, you might also have to check minimum lot requirements per zone in the town where your land sits. So if you’re satisfying a zone’s minimum lot requirement, you might have to apply for re-zoning before subdividing your property as well.
To buy & improve then sell is basically renovating or remodeling the real estate property by making improvements to it before selling for the main objective of getting a higher return on investment after calculating all the cost of labor, materials and other things involved in the renovation process.
Renovation in full context, is that you bought a home that’s still in good condition, say AS IS, and you refurbish it to sell later for a profit. That’s buy and improve then sell.
And whether or not you intend selling the improved home immediately, you can still look forward to the profit the property will generate that might lead to a larger acquisition in the future.
Or you’ve probably bought a property but then you’re not planning to live here long-term because you’ve moving overseas in the future for business or a life change (marriage, etc). Also, you don’t want to have it rented out or hire a caretaker. So there, you want to apply some improvements to increase its value.
But renovation isn’t a simple approach. Don’t make renovation out of impulse. You must plan and list all the things you want to improve. Factor in your money and time and be realistic. You should also know what return upgrades or improvements might bring you in the end.
In addition, focus or tackle a room or area at a time, let’s say the kitchen, which is said to bring in the greatest return if you’d ask real estate experts. An improvement on it that can increase its value is going stainless steel, which can be a hot ticket item for potential buyers.
Nevertheless, buy and improve then sell is a great real estate investment approach that has potentials of skyrocketing the value of a home from its original value when you first bought it, but you should understand its pros and cons and know the potential cost of selling it in the future after calculating the cost of improving it.
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In addition to the buy & sell as is or buy and improve then sell, another type of buy and sell to consider based on your situation is to buy & build then sell. It involves a high investment because you’re not just buying lot but also building a home/structure on it before the selling process begins, but it’s another good option provided you understand current market needs and recognize several other factors including the salability of the property to develop based on its location, for instance.
Buy Lot and Build Structure which is basically, to build then sell later is suitable if you have enough funds to buy a piece of residential lot, and then build a structure/house on it for selling to prospective buyers later. On the other hand, you can also build a warehouse (industrial lot) or stalls (commercial lot) to sell for profit later.
Speaking of a profit, you might also want to focus on the buy & develop then sell wherein you buy raw or undeveloped lands where to build and develop several condominium units.
On the other hand, you might want to buy a large lot within city, and then develop it into townhouses and condominiums to sell later at a higher price.
Buy Lot and Develop into Condominium is a route taken by investors with large funds to develop condominium units that they can also have rented out or leased long-term for continued cash flow. Some also develop and then sell to prospective buyers for profits to use for other real estate investment forms as another option.
Nevertheless, buying a lot and then developing it with several condominium units is one of the most lucrative real estate investment options that promise huge profits in the end provided you know its ins and outs, including a complete documentation process, which is the essence of this book. In the later chapters, we’ll discuss this part.
For now, these are what to know about the buying a lot and developing it with condominium units for selling later.
Now, we’re moving into another type of buy and sell in real estate. I know it sounded technical, but let me simplify it for you.
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Two (or more) wallets are better than one. A joint venture agreement, simply, is a situation where at least two people are combining their resources to execute a project, in this case ‘buying real estate then entering a joint venture agreement.
Here, you’ll have to find a partner/s and then put an agreement together. For example, you’re a father with money and you have a son with construction experience. The joint venture can also be among finance professional, a builder and an architect.
It goes like this. Two or more people also combine skills with capital. Remember, joint ventures exist with the mission to pool equity capital with at least a source and also a way of bringing people that have different expertise together to the venture.
Nevertheless, a joint venture agreement can take place between or among persons that combine their skills or money to execute a (real estate) project.
So for example, you buy a lot and then you enter into a joint venture with a developer who’s an expert in developing subdivisions, townhouses or condominiums.
But as the landowner, you should consider several factors before entering into a joint venture with a developer. What are the credentials of this developer? What are his success rates and records in meeting targets? You should do your homework on this when comparing different developers and choosing among them.
Being the landowner, you must also ensure that the project's developed area or a number of condominium units, apartments or townhouses is assigned to you, as stated clearly in the JVA. For example, 100 of the 300 units should be assigned to you and the remaining 200 to the developer.
The JVA must contain the housing unit number, floor and size if developing a housing project. It should also stipulate terms on the profit sharing between you and the developer; let’s say 1/3 to the landowner and 2/3 to the developer.
So in essence, a real estate joint venture is composed of two or more entities, example is a capital member and an operating member. The operating member, in this case a developer, is an expert on the project, while the capital member, you, finances the large part or the entire project. And nevertheless, every participant is responsible for the costs, the losses and the profits with the JVA.
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Investing in real estate is a serious business. Remember, hard-earned money is involved here, whether or not it is your years of savings or financing from a bank, a financial institution, a government funding or from any another investor.
For this reason, you don’t jump onto this endeavor without considering several factors. Or else, you won’t only lose money, time and effort but also your sanity in one go when things go wrong.
So what are the things that you need to consider if you’re investing in real estate? Check them out in the following.
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“Location, location, location,” yes, I’ve repeated it thrice, but I cannot emphasize more on why it’s so important in real estate. Consulting different real estate professionals, you’ll get the same response to the question, “Why should I consider location when buying a property?”
The answer is plain and simple – location rules and remains the MOST IMPORTANT FACTOR in terms of profitability in your investment.
Proximity to schools, amenities, scenic views, neighborhood status, transport hubs, markets and schools, are major players in real estate property valuations particularly residential ones.
The location where the property sits on is by far the first and foremost aspect that potential buyers are also looking into when investing on a land, house and lot, or condominium property, to name some. The following are some aspects of location that you might want to consider when acquiring or buying (and selling) a property.
. Is it in the City or Province? . What Barangay and Locality? . Is it inside a Village or Subdivision?
Related to location is accessibility. What makes a house and lot or a condominium unit, or any other types of real estate property a good buy is its proximity and accessibility to the most significant places, such as schools, businesses, government office, market and malls.
And there is no wonder, as all these places can give you and your loved ones convenience and ease of traveling or going from one place to another without any hassles and in minutes.
A property close to your workplace, business establishments and other places of interest and significance that you frequent should be a top factor for the things to look for when investing in real estate.
How accessible is the property from public transport, such as MRT, LRT, jeepneys, PUVs and tricycles? Do you have to walk minutes out of the subdivision to ride a tricycle? Do you need to wait long for a jeepney that only passes by every hour? Think about convenience and accessibility by public transport before buying a real estate property. Stay away from one that will make you wait forever and that is hard to access by public transport;
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Let’s say you have a car. The least thing every car owner wants is to drive in and out of his/her place for a long time because it is far from the main roads to get to work. In this case, why would you invest in a house and lot that is located in a remote place just because the cost of the house and lot is more affordable than one near the city and main roads is? Thus, accessibility by private transport is another thing to look into when investing in a real estate property if you don’t also want to waste fuel and spend too much on it because the house and lot you bought isn’t accessible by private transport.
Accessibility to the market is another thing to look for when buying real estate. Who would want to spend so much time back and forth to the market? Well, we’re leading busy lives and every minute counts. We should look for a property to invest on that is in close proximity to the market, period.
Doing bank transactions would be a hassle if we don’t have quick access to a bank. So without even saying, you should also look into this factor closely when comparing your options in buying a real estate property.
Leisure, relaxation, shopping and quality time with the family on the weekends, on days off and on any given day are what malls can offer. When buying a new house, check its accessibility to the malls to ensure that entertainment and family fun is just within reach any time.
Sending children to good schools for quality education are every parent’s goal because we only want the best for them. That is why you must check the location’s proximity or accessibility to schools and educational institutions when buying a property for sale. You won’t want to give them a hard time traveling every day just because the property you bought is located far away from their school.
From time to time, we need to do business or transact with a government office. That’s why we must also factor it in when buying a home.
Security is another consideration when buying a property in the Philippines. While you can secure your home with surveillance systems, anti-burglar locks and so on, you might still need police help in one way or another. Don’t buy a home far from police stations if you want to increase security and get immediate help whenever needed.
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Amenities are some of the benefits of real estate investment, such as condominiums. Depending on your kind of lifestyle, you might want to look into buying a residential property that has sports facilities, a tennis court or a basketball court if you’re the sporty type.
On the other hand, you might want to look for one that has function rooms or business centers if you’re an executive looking for these features in order to have a smooth business transaction or a meeting with a client or business partner without going out the premises.
Nevertheless, you may be able to buy a unit and enjoy living with additional amenities, including a swimming pool and a fitness center and that’s without additional work or cost on your part. Without even saying, investing in real estate gives you the chance to enjoy additional amenities just outside of your doors without maintenance, too.
So if amenities like the following are important for you, especially if you’re also looking to have your unit rented out or leased for continued cash flow, you might want to consider buying a real estate property with amenities that include but not limited to the following:
. Clubhouse, a Multipurpose Hall or Function Room . Parks and Playgrounds . Sports Facility like Basketball Court, Tennis Court, Swimming Pool and Gym
Remember, you’d be investing on a property that might be your new residential address. If it would be, you should also be finding a real estate property in a good neighborhood. After all, you’ll be a part of this community.
For one, look into the neighborhood class. Let’s make this simple. Class A, B, C, D & E is a scale used by some investors to grade a property. But then, these classifications are not standard but loose terms.
In real estate, a Class A property may typically mean a bigger home in a nice neighborhood, which can also be told as a Class A neighborhood.
A Class A neighborhood, as you can visualize, is a great one that has properties coming with additional features, including central air conditioning and garages. And without even saying, a Class A neighborhood has homes with higher rents compared to Class E neighborhoods.
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So if you’re planning to have your home rented higher, you might want to consider buying a property in a Class A or B neighborhood. However, you should also know that the upkeep for high-class properties also mean more attention and maintenance because tenants also have higher standards.
Another factor to look into when buying a real estate property is religion for some homebuyers because some communities are dominated by a specific religion. For example, Christianity and Islam are two prominent religions in the country, and in some cases, individuals with the same religion buy property in the same place.
Is more or less population better in real estate? Well, let’s put these two things into context. Perhaps, a high population area is good for a business, but maybe not for a family. Just imagine living in a crowded community.
For a commercial property, it might mean well because there are more opportunities to sell or do business if operating within a populated area where their target market also is.
On the flipside, residents living in a highly populated area might have to compete hard enough for transportation; thus, many of them arrive home late, wasting precious time.
At the end of the day, consider the following when looking into population as a factor when investing in real estate.
At the very least, a property’s value depreciates if it’s located in a traffic-congested area, but the good news is that it can increase accessibility and also improving its chances to be sold at a higher price. Thus, the worth of the property can go up because it can be easily accessed by public transport, to malls, to schools and to other significant places.
For a commercial property, as mentioned earlier, being located in a high human traffic area can be good because product and service sales can be higher with higher public exposure than being situated in a lower human traffic area can be.
But it’s a different thing if you’d buy a residential property with high vehicular traffic, which can also mean higher level of air pollution and hassle of traveling from one place to another with a congested location where traffic moves slowly due to high volume of vehicles.
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Weigh and compare your options well. Figure out the level of traffic in the area and determine what’s best based on your situation. You can start by reflecting on those examples I mentioned.
Dictating how a property (residential, commercial, agricultural or industrial) can be and cannot be used, zoning is a local government law to which you have to comply. The following are readily defined in Chapter 3 of this book.
. Residential Zone . Commercial Zone . Industrial Zone . Agricultural Zone
There are certain laws, rules and regulations that apply to real estate transactions and properties in the Philippines, which can be collectively referred to as restrictions.
For example, lands awarded to beneficiaries and are covered by the Comprehensive Agrarian Reform Act, as amended, previously, cannot be sold for 10 years following the date of the certificate of land ownership award’s issuance.
In addition, there are certain land ownership and disposition prohibitions, as found in the 1987 Philippine Constitution, for example. On the other hand, the local government, where the land is situated can also regulate the disposition and ownership of real estate properties through local ordinances.
Aside from usage are structural style and design restrictions. If investing on a subdivision property, the developer may stipulate specific conditions for building called deed restrictions or design guidelines, stipulating the regulations’ list that describe both the limitations and conditions that a property owner must work with when building or designing a structure.
In a case of a condominium unit, many developers do not allow altering anything beyond a unit’s boundaries, but you may be allowed to if the administration permits a certain alteration. That’s why it would be best to read the contract before signing it.
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When looking for a property to buy (or sell in the future), you should check on the utilities that also mean the convenience or inconvenience of living in a specific neighborhood. The following list is a good start when checking for the utilities available in a residential property.
. Power . Water . Street Lights . Telephone / Cellular phone . Cable . Internet
Before making an offer on a house or buying a condominium unit, you should check the safety and security of the building or neighborhood for peace of mind. Things like regular security patrol, no signs of vandalism and well-lit streets, are some things to keep an eye out for when checking for a sign of a good neighborhood and the following as well.
. Do they have Security Guard? . Is the Barangay Tanod regularly conducts patrol especially at night? . Is there a Police Station nearby?
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Upon learning about those things to look for before buying a real estate property, you should also know how (and where) to start. After all, everything has to start somewhere. So here goes.
If you’ve been renting all your life, you might want to invest for a home that you can absolutely call yours. Aside from ownership, buying a property for a home offers certain benefits.
House prices tend to appreciate over time, so selling it for a higher price in the future can give a high return on investment.
Obviously, buying a home also saves you money in the end because you no longer have to enslave yourself to pay for rent all your life.
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Finally, peace of mind is another reason to buy a home, as at the end of the day, you have a place that you own and that you can live for as long as you want to.
Another way to determine how to start in real estate investment is to reflect on is if you’re buying for an investment. Why is real estate a good investment if you would do it right?
Obviously, I must say that a real estate property, after factoring in the location, accessibility and security, among other factors, is a valuable investment. But what makes it so? It’s a good investment for the future especially if you want to live in the home for a long time. Its value also increases, offering you a substantial investment return.
In addition, investing in real estate helps you build equity. Paying your monthly mortgage will reduce the loan amount. And as your home increases in value, it also builds equity.
Regarding bringing money into your pocket, owning a home is also a great option, as it offers you tax deduction and some loan discount points, which are tax deductible, along with certain closing cost.
Another benefit of owning a real estate property is when applying for loans. For example, you’re a good payer and you don’t miss monthly payments. It will show lenders your excellent credit history, increasing your chances of getting loan approval in the future.
In addition to the above, I’d like to note that investing in real estate could be for you if you’re looking for continued cash flow from a rental yield. At the time of this writing, a source reported that rental yield is an average of 7.51%, which is higher than in other Asian countries like Cambodia where the gross rental yield is only 5.33%.
There is also a high demand for housing in the country, as the population continues to boom especially in urban areas. For investors that want to take advantage of this, they venture into real estate investment due to the high demand for housing that has been showing a steady growth in the recent years.
Cash flow is also more predictable and stable over the last years than other businesses are. With a real estate property, you can also look forward to the cash flow that might even help you float through the bad times so that you can live well when the good times come.
Are you buying commercial real estate? What are its benefits? For one, it can give you substantial current income and regular income stream secured through leasing your property. You can also look forward to appreciation of asset value that equals or even surpasses other investment forms.
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Plus, through leverage, you can accumulate significant equity. It also allows you to buy other assets with less money. And speaking of cash flow, you can also multiply it through leverage.
Commercial real estate also offers owners security advantage because it is a hard asset with a great value. Finally, there is also pride of ownership with real estate used for business.
Before investing in real estate, you should also ask yourself – what do I want to buy? Assuming you have the funds ready, the next thing you want to figure out based on your goals, situation and future plans is the type of property to buy. Think about it and reflect before going out there and finding lot to purchase, for instance. It will save you a lot of resources, effort and time, anyway.
. Do I want Lot Only? . Do I want a House and Lot? . Do I want to line in a Condominium?
Let’s say, you already know what you want to buy. The next step now is to figure out when you want to buy. For example, do you want to buy a property in two years time once you have gotten married? Or do you want to purchase right away with your money you saved for housing after working overseas?
Would you want to buy when a certain property, let’s say a car you own, is disposed? Just like in buying anything, you should also determine the right timing when to buy real estate based on your goals and plans, such as in the following conditions.
. Can I buy Immediately? . Is there any certain Timeline when certain Conditions are met? . When Funds are Available? . When Certain Property is Disposed? . When Something Is Completed or Done?
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Market prices, depending on the type of property you want to buy, vary. For example, a condominium property can cost an average of Php1.5M (or less), but that also depends on the location of the building. It can be higher in highly urbanized areas like Makati City.
For the land value, it also varies. It can be cheap in some places but not in others. For example, in Fort Bonifacio, land prices are valued by an average of Php523, 000 per square meter, as of Q1 2016.
So depending on the funds you have on hand, you might have to narrow down your choices that meet your budget. But if you require financing, you have several options to help you fund a property that has a cost exceeding the amount of money you have at the time of purchase. So aside from your capital or cash, you can also apply for a loan through government agencies like GSIS, PAGIBIG FUND or SSS or through any of the unmentioned funding sources.
. Is it thru Cash / Capital? . Is it thru In-House Financing? . Consider getting Loan thru Bank? . Can I used my PAG-IBIG / SSS / GSIS? . Are there any other Financing Company?
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There are different ways to acquire a property in real estate, and these are what we’re going to discuss in the next sections.
It’s a method of a real estate property acquisition that involves valuable consideration trade. You may acquire a new property (e.g. house and lot, condominium unit) thru a sale.
You may also consider foreclosed property. This property is recovered by the lender from a borrower that stopped making the housing loan payments. It is another type of property to buy thru sale. It may need repairs, but it can make you money. The repairs can add more value to the home, which can later be sold at a higher price.
When entering into buying a property you need to consider your Capital Gains Tax. It occurs when one sells a real estate at a higher price than what he/she spent to buy the
Buying & Selling Real Estate Property Even If You Are Not A Real Estate Broker! Page 37 i-INVEST PINOY! towards my financial freedom! www.i-investpinoy.com property. The CGT is equal to 6% of the fair market value based on the Bureau of Internal Revenue’s zonal value. It can also be based on the fair market value as being appraised by the city/provincial assessor.
Another way of acquiring a property is obtained through inheritance. For example, a house and lot may be given to an heir through a will.
When you acquire a property through inheritance, you should need to settle Estate Tax, also called inheritance tax. At the very least, it’s imposed on the privilege of transferring a real estate property upon the owner’s death to his/her lawful heir/s. Filing the estate tax return and paying the estate tax is required. Otherwise, ownership cannot be transferred to the heir.
When a property is gifted by the donor to a donee that accepted it, the property is acquired thru donation. A voluntary property transfer is called a gift, but a conditional gift if there are conditions to meet before it could be transferred.
Donor Tax is one of the requirements to meet before a property could be transferred to the donee. This tax on a gift is imposed on the property’s free transfer among at least two strangers or related persons living at the time of the transfer. At the time of this writing, the current rate is 6% under the new TRAIN Law.
In this book, we will tackle the topic of acquiring real estate property whether you are on the buying or selling side. The next series of this book will discuss the topic of acquiring real estate thru inheritance and thru donation.
You may have a property that belongs to your deceased parents or grandparents but has no clue on how to acquire the property and eventually using this property to create passive income. This is typical to a Filipino family especially the real estate property in the provinces. Often times, it may create tension and conflict as there are too many people already involved in the process.
Or you have a property that you want to pass on to your relative or to someone who is very dear to you. Or maybe you want to give your property to a charitable institution for a just cause. You can give the real estate property thru donation.
The next series of this book will expound more details of this kind of real estate transaction.
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Another thing to consider when investing in real estate is the transaction concerns. A few to look into include knowing the owner, reasons for selling and the background and history of the property. Without even saying, you should do your homework and find out as much about the property to buy. Let’s talk more about these concerns in the following section.
Before you buy, know the owner, who is legitimate and willing to sell. One can be a couple, an individual or an organization/company/corporation.
. Is the Owner Legitimate? . Is the Owner Willing To Sell? . Is the Owner an Individual, a Couple or an Organization / Company / Corporation?
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After knowing who the owner is, the next thing to do is to learn about the background and history of the real estate property.
Who is the Previous Owner? Is he/she/they an individual/s or organization/s who is/are willing to sell and legitimate owner/s of the property?
What is the Manner of Acquisition by Present Owner? Find out how the property is acquired. Is it a foreclosed house and lot? Is it a new condominium unit?
Sellers have a host of reasons for selling their property. A few of these include the desire to move into a smaller/bigger house, job relocation, conflict, life change (spouse’s death, birth of a child, marriage…). Knowing why the seller is selling the property will give you an idea on how much room there is for negotiation.
For example, the seller may be moving out immediately. In this case, he/she can accept a lower offer. But it is a different situation if the seller isn’t in a hurry to sell or dispose the property. For this reason, a lower offer might not work because the seller is willing to wait until a higher offer is available from different potential buyers.
. Is it a Personal Reason? . Is the Owner Migrating? . Is the Owner going through a Separation? . Are there any Conflict? . Is there any Unpleasant Events & Circumstances? . Is the Owner having Financial Difficulty? . Is this for Payment of Debt? . Is this for Payment of Treatment or Medication? . Is it for the Payment of their Children's Education? . Are they opening up a Business? . Is this for Profit Gain only?
The selling price or sale price is the final amount that your house sells. It can be determined in different ways. For example, it can be priced based on comparable properties in your community or neighborhood that were sold within the last months.
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This price can also indicate the current value of your home. It is what a willing buyer paid for a similar property in the neighborhood and is the final amount that both the seller and buyer agreed upon when a house and lot or any other type of property sells.
Usually, the recent comparables are what a real estate property appraiser is using to estimate the value of a single family home at an exact time. However, it’s not just the selling price or final price involved in a real estate transaction but also other fees for the following.
. Is the Selling Price VAT Inclusive? . Does it requires Reservation Fee? . Any other Miscellaneous Fee? . Any other Processing Fees? . Who will pay for the Documentation? . What about the Utilities? . Check Other Expenses to be shouldered by Buyer or Seller
For Notarial Fee, you have to pay this fee in order to notarize the Deed of Absolute Sale. Usually, it is between 0.1% and 0.15% of the selling price.
If you applied for a housing loan to acquire or buy a real estate property, then the Loan Processing Fee is the additional cost to settle aside from the appraisal fee and insurance.
Before moving into a home check for Utility Connection. You should apply and subscribe for utility connections, including cable, internet, electricity and water, for convenience. All these require a certain connection fee, which varies from one provider to another.
The documentary stamps tax (DST) on any sales or mortgage is a kind of tax charged on loan agreements, documents, instruments or papers. It indicates the assignment, acceptance, sale or transfer of obligation, property or right. In real estate, the DST is required on the Deed of Absolute Sale if the property is transferred thru sale. In the Philippines, DST is P15 per P1000 of the selling price (1.5% of PHP1000).
Capital Gains Tax (CGT) is imposed on the profit or earnings gained from selling a property. As said earlier, CGT is determined either as the fair market value as assessed by the city/provincial assessor or 6% of the BIR’s zonal value, whichever is higher.
Withholding Tax is imposed on the consumption levied on the barter, sale, lease or exchange of properties or goods and services in the Philippines.
According to the BIR, Transfer Tax is the a tax imposed on any real estate property transfer – through sale, barter or donation, and any other mode. For the rate, it ranges from 0.5% to
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0.75% of the property’s selling price or zonal value, whichever is higher. The rate also depends on the city/province where the property is.
Registration Fee should be paid for the Deed of Absolute Sale’s registration or exchange, conveyance, transfer, partition or donation of a property. You settle this to the Land Registration Authority or Register of Deeds where the property is.
Aside from those that I mentioned earlier, I would also like to note other property details that you have to check and verify.
. Who Are the Present Occupants?
You should check the present occupants of the property –a single family, an individual or a couple when buying a property. Are they willing to sell and the legitimate owners?
. Are there any Liens and Encumbrances?
I also advise checking for encumbrances and liens. For example, see if there is a lien, a type of encumbrance, or a legal liability on the property that won’t hinder in the title transfer, but then it reduces the property’s value.
It is the encumbrance on a person’s property to obtain a debt that the owner owes to another individual (lender, etc).
On the back page of a title, you will find annotations if any for encumbrances and liens. Some of these may include an adverse claim or a mortgage. On the other, this portion is empty in the case of a “clean title.”
. Any Other Fees and Dues?
There are many fees involved in a real estate property transaction. If you’re buying a residential property, homeowners’ association dues (HOA Due) like in a subdivision is a common fee to settle.
. Any Other Existing Contracts?
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Ask about any current contracts before buying a property. It can affect your buying decision especially if you have to shoulder it once you have taken over and moved into the home.
. Any Restrictions & Limitations?
Once you have moved into the property and planned making alterations/modifications to your unit, in the case of a condominium, are there limitations/restrictions on what you can and cannot change? Ask about it.
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Verification is probably one of the most challenging in real estate investing. As you may know, someone can easily claim ownership to a property. It is not just one or two cases when a buyer bought a property from an illegitimate or fake seller who poses as the landowner or property owner. That shouldn’t happen. It is why you should learn how to verify things like the owner’s identity. Let’s talk more about it below.
Check and verify the Owner’s identity to prevent falling into the trap of someone posing or acting as the property owner. Ask for valid and current photo IDs to help you check that the person is the registered owner of the property.
But then, it’s a different story if the seller’s parents are still the registered owners.
In this case, there can be several heirs who have claims over the property. Some of them may be willing and ready to sell, while others are not. For this reason, you should deal with the real and registered owner of the property to prevent the problem.
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In addition to these points, I’d like to note the following to verify the owner’s identity.
. Is the Owner an Individual or Couple? You can verify it thru Barangay or thru HOA or thru Condominium PM
. Is the Owner a Corporation? You can verify the Corporation thru SEC.
. Is the Owner a Developer? You can verify thru HLURB.
Find out where the property is specifically located (Block, Lot, Phase, Town, Barangay, City, Province). As we’ve talked about earlier, location matters. It can mean convenience or the opposite.
That’s why you have to determine if the location is ideal for your kind of lifestyle, work, travel and other factors. Two ways to check are map and boundaries.
. Use Subdivision Map to check the specific location of the property. . Identify Boundaries by looking for any concrete markers or cornerstone
Another important aspect in verification not to miss is verifying the title under the Register of Deeds. Check for the authenticity of the title. For example, if you’re the buyer, you should verify the TCT’s authenticity through this office, which must be able to provide you with a Certified True Copy of the certain title. You can find this office in the city/municipal hall where the real estate property is located.
But before going to the Register of Deeds, you should ask the seller for a photocopy of the title, as you’ll be asked for certain information, including the owner’s name and the title number.
Original Certificate of Title (OCT) is the title issued on the land for the first time under the name of the owner.
Transfer Certificate of Title (TCT) is an ownership proof of a subdivision issued by the Registration of Deeds where the project is located.
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Condominium Certificate of Title (CCT) is an ownership proof of a condominium that the Register of Deeds issued where the project is located.
Certificate of Ownership is simply an ownership proof or a title to an asset that a certifying agency has issued.
Moving forward, another verification process to complete is checking on the Tax Declaration under the Assessor’s Office where the property is located.
What is it? Also called the Declaration of Real Property, the tax declaration is a record or an assessment document kept by the city, municipal or provincial assessor that assessed the property’s value and using such to collect Real Property Taxes. The tax declaration is valuable when it comes to monitoring prior property ownership and when trying to research on the background and history of the property to buy. The tax declaration must be updated every three years to ensure taxes are settled to the local government’s office.
There should be a separate Tax Declaration for the Land, for the Improvement which is the structure or building or the house and for Machinery if there is any.
You must also check that the real estate taxes have been paid – and that’s why you should verify the Tax Receipts under the Assessor’s Office. Go to the Assessor’s Office and check that the property taxes have been paid by the seller/owner.
If there are back taxes or arrears, you should coordinate with the owner of the land or property on how to settle the amount. This amount must be a part of the price of the property. For this step, you should have notarized agreement on the back taxes’ payment.
The Deed of Sale from the Previous Owner is another document needed and executed when the property buyer has paid the developer in cash or in full through borrowed funds or owned funds. You can verify this thru the Register of Deeds.
In this document, the developer (in the case of a condominium for instance) will transfer the property ownership to the buyer. However, its transfer is subject to the buyer’s compliance with all the Master Deed with Declaration of Restrictions or Deed of Restrictions that govern the entire project and other sales’ terms and conditions.
The Contract to Sell with Developer / Company is another real estate document that contains terms stating that the developer is promising to transfer both the physical possession and ownership of the property to the buyer once the latter has fulfilled the sale terms.
It also states that the buyer is obliging her/himself to pay the purchase price and follow all the other sale terms and conditions. And once the property has been settled in full and all
Buying & Selling Real Estate Property Even If You Are Not A Real Estate Broker! Page 46 i-INVEST PINOY! towards my financial freedom! www.i-investpinoy.com the terms and conditions of the sale have been complied with, the Deed of Sale will be executed by both parties – the developer and the buyer.
The Certificate Authorizing Registration (CAR) which can be obtain from the Bureau of Internal Revenue is another aspect of the verification process. The CAR is a certification both the property’s transfer and conveyance were reported and that all the taxes have been paid.
Lot Plan & Vicinity Map is an illustration plan showing the lot plan and vicinity map at a defined scale.
Floor Plan or House Plan is an illustration or scale diagram of the arrangement of the rooms in the house or floor.
The property developer obtains the License to Sell (LTS) from the HLURB. It’s a proof that he/she’s a legitimate business that is also financially stable to complete the housing project. The license to sell also ensures that the building specifications and plans meet the HLURB standards.
Before buying a property, you should do a background check and one of those things to do is to check the LTS to prevent any future problems. It is also to ensure that the developer from whom you’re buying a property can complete a quality project.
You can check the LTS in the nearest HLURB office, which holds the property’s jurisdiction where the property’s located. Alternatively, you can do it online by checking out project lists with authentic Certificate of Registration or LTS.
Subdivision Plan can be obtained from the Developer. It’s a legal document showing the exact surveyed dimensions and boundaries of lots on which the houses are going to be built. Check it with the developer.
For Investors looking to set up partnerships, associations or corporations in the country should register their business with the Securities and Exchange Commission (SEC). Check the business’ registration with the SEC.
The Secretary's Certificate for the Corporation , which is delivered at the transaction’s closing, is signed by the company’s secretary or the managing member or manager if for an LLC. What does it contain? Usually, it contains certified copies of the transaction’s authorizing resolutions or the certified copies of the company’s organizational documents.
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In addition to the above-mentioned documents, you must check for Annotations on the Title, which occurs when a bank or a loan provider writes specific entries on the title showing that the real estate property is loaned but the title is under the name of the legal owner.
Another part of verification I’d like to highlight is the Tax Clearance, which is an official document to get from the BIR. This document is requested by the businesses or taxpayers and is used as one of the verification tools to the clients/investors that the business is complying with tax obligations or has a good standing. It’s a document required when applying for render particular services or government tenders.
A Condominium Certification is a proof of ownership that is a legal document showing ownership over a condominium unit issued by the Land Registration Authority. This document is also stating the name of the condominium and the specific unit number. It also includes the name along with his/her citizenship and civil status.
Clearance or closing letters are requested from the Homeowner Association (HOA) that serves to provide information with the homeowner’s account with the association.
It’s a no-brainer that a buyer must obtain or ask for copies of updated utility bills, such as electricity, cable and water.
Lastly, you must ask for the latest statement of accounts from a financing agency, bank or developer when buying a property.
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Let's admit it. Whether you are getting into real estate investment or just buying your own real estate property, it is no easy task. It is not enough entering into an agreement and bringing out your cash and eventually acquiring your new space. The most crucial step in real estate investment is the transferring of the title (whether it is land, house and lot or condominium) from the seller's name to the buyer's name - that's you! The ultimate goal of real estate investment is having your name on the title. It is the ultimate proof of ownership. Nevertheless, it's not yours until the title is under your name right? And please do not take this for granted! If you fail to do this, it may possibly mean facing any technical, legal and maybe additional financial issues in the future.
So, where and how do I begin? Before buying or selling any real estate property, make sure to plan ahead and be ready to face the challenge and hassle of going into the process. This
Buying & Selling Real Estate Property Even If You Are Not A Real Estate Broker! Page 49 i-INVEST PINOY! towards my financial freedom! www.i-investpinoy.com process will eat up your time and possibly your patience knowing you will be dealing with government agencies such as the Bureau of Internal Revenue. If you cannot do it personally, it would be better to seek the help of a professional like a trustworthy Real Estate Broker or Lawyer or hire a duly registered company to go to the process on your behalf. Although, there might be instances that you need to go personally to these government agencies for follow-up and status updates.
Remember that when you are already in agreement both the buyer and seller and you have already signed the Deed of Sale, the moment that this document is notarized, time is already running and deadlines for tax payments are already in effect. Consequently, it means that failure to meet these deadlines would mean incurring penalties and surcharges which is a true pain to your wallet! In many cases, if the payments are delayed for several years, the total amount of penalty may even be greater than the value of the real estate property during the time of your purchase.
Acquiring your desired real estate property is a very tedious, arduous and long process and it may take several weeks even months to complete especially if there are problems arising from the existing property's documents or records. You may possibly go back and forth several times into government agencies and it extreme patience and positive attitude is required.
The following are the steps and guide that will help you in buying and selling your property:
1. If you are the buyer, you need to do all the due diligence before buying any real estate properties. Ask the seller to provide the Certified True Copy (CTC) of the Land Title whether it is Original Certificate of Title (OCT) or Transfer Certificate of Title (TCT). For condominium, you need the Condominium Certificate of Title (CCT). Check for any liens and encumbrances on the title. The seller may obtain this document from the Register of Deeds.
2. After thorough checking, you may now enter into an agreement by preparing the Deed of Sale (DOS). While you have an option to prepare your own DOS, it must be executed before and notarized by a Notary Public. They can even draft the DOS before conduction the entire process on behalf of both parties - seller and buyer. It is important that this document shall be notarized.
If one or both of the party is a Corporation, then they should also submit a Notarized Secretary Certificate that contains the approval of the Board of Directors for this
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transaction. They should also obtain a SEC Certificate containing the information of the Incorporation Articles to show that the company is SEC registered.
Normally the cost for this transaction is 1.5% of the property value including the amount for the notarization. A common practice is that the buyer is the one who shoulders the cost of this notary fee.
The Deed of Sale shall clearly specify the terms and conditions of the sale including who will shoulder the cost for any liability like real property tax arrears, association dues, any broker's or any lawyer's fee, etc and the payment for any tax involved like the documentary stamp tax and/or the Capital Gains Tax including the Transfer Tax and the application for registration in the Register of Deeds in which the title will be on the name of the buyer.
The buyer actually can haggle the price of the property if ever the buyer will the one to shoulder expenses. In effect, the seller may charge more if the seller will be the one to shoulder the expenses.
Again as a reminder, once you are in agreement and signed the Deed of Sale, the moment that it is notarized, time is already running and deadlines for tax payments are already in effect.
3. The buyer must ask the seller for the Certified True Copy (CTC) of the latest Tax Declaration for both the land and improvement (if the property is house and lot). If the property is a vacant lot or lot only then you must secure the Certificate of "No Improvement". Both documents can be obtained thru the City Assessor's Office.
4. The Buyer or the Seller, depending on their agreement shall file and pay the Documentary Stamp Tax (DST) Return and the final Capital Gains Tax (CGT) Return at the Bureau of Internal Revenue (BIR) and the Authorized Agent Bank (AAB). This should be done within five (5) days after the close of the month when the taxable document was signed or within thirty (30) days after the sale whichever is earlier. These taxes should be paid at the AAB to the account of the BIR.
Normally, the Documentary Stamp Tax is 1.5% of the selling price or the fair market value, whichever is higher. The Capital Gains Tax is 6% of the selling price or the fair market value or the zonal value, whichever is higher. A common practice is that the buyer is the one who shoulders the cost of the Documentary Stamp Tax while the seller is the one who shoulders the cost of Capital Gains Tax.
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Before making the payment, both parties should checked with the taxing authority in the BIR to properly assess and compute the Documentary Stamp Tax and the Capital Gains Tax to ensure the correctness of the amount of the taxes due. Applicant shall accomplish the following BIR Forms:
. BIR Form 2000 OT - Documentary Stamp Tax Declaration / Return . BIR Form 1706 - Capital Gains Tax Return
Note: These forms are for Capital Asset in which the BIR classify them as general real properties that are not used in trade or business of the taxpayer. These are the personal real estate property owned by certain individuals.
The other classification is Ordinary Assets in which they are real property assets that are used in trade or business or primarily held for sale by the taxpayer. These are for Real Estate Dealers or Developers. If you fall into this category you still need to pay Documentary Stamp Tax but instead of paying Capital Gains Tax you need to pay Creditable Withholding Tax (CWT) instead using BIR Form 1606. This range from 1.5% to 6% of selling price or the fair market value or the zonal value, whichever is higher. Aside from CWT, consequently they are subject to Income Tax and likewise to the 12% Value Added Tax.
The following documents are needed to be submitted: . Original Copy and at least two (2) photocopies of the Notarized Deed of Sale . Owner's Copy (for presentation only) and Photocopy (for authentication) of the Land Title or the Certified True Copy of the Land Title or the Condominium Certificate of Title . Certified True Copy of the latest Tax Declaration on lot and/or the improvement . Certificate of "No Improvement" for lot only . Photocopy of the Official Receipts showing evidence of payment of Realty Tax . Request Letter . Valid government ID of the person requesting . Tax Identification Number (TIN) of the seller and the buyer
Before paying the applicant shall properly fill-up the BIR Forms and coordinate with the BIR One Time Transaction (ONETT) Team. The applicant shall file the DST and the CGT returns and pay the proper and correct taxes at the AAB of the BIR Revenue District Office. Aside from cash you may also pay using Manager's Check or Cashier's
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Check. Upon receipt of proof of payment for the taxes required, the BIR will issue the applicant a Claim Slip.
5. Next step is to obtain the Certificate Authorizing Registration (CAR) from the BIR. This certificate issued by the BIR states that the transfer and conveyance of the property was reported and that the taxes due to the transactions have been fully paid.
For this transaction you need to submit the following documents including two (2) photocopies to the BIR: . Tax Identification Number (TIN) of the seller and the buyer . Original Copy and photocopy of the Notarized Deed of Sale . Certified True Copy of the latest Tax Declaration on lot and/or the improvement . Certificate of "No Improvement" for lot only . Owner's Copy (for presentation only) and Photocopy (for authentication) of the Land Title or the Certified True Copy of the Land Title or the Condominium Certificate of Title . Official Receipt issued by the Notary Public who notarized the Deed of Sale
The BIR will released the CAR together with the following documents: . Original Copy of the Notarized Deed of Sale stamped received by the BIR . Original Copies of the BIR Form 1706 for Capital Gains Tax and BIR Form 2000-OT for Documentary Stamp Tax all stamped received by the BIR
6. Next step, depending on the agreement on the DOS, the buyer must ask for the Tax Clearance Certificate. After settling any arrears on real property taxes, the seller should obtain a Tax Clearance Certificate from the Land Tax Division of the City Treasurer’s Office. This is a certification that all the real property taxes are paid.
7. Depending on the arrangement, the next step is to pay the Transfer Tax at the City Treasurer's Office not later than sixty (60) days from the date of execution of the Deed of Sale or the date of notarization, whichever is earlier. The documentation shall include the following: . CAR from the BIR . Tax Clearance Certificate . Official Receipt of the BIR for the payment of DST
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A common practice is that the buyer is the one who shoulders the cost of this transfer tax.
8. Next step is the application for the registration with the Register of Deeds for the issuance of the New Title in the name of the buyer. In this part of documentation, you should submit the following: . Original Copy and photocopy of the Notarized Deed of Sale stamped received by the BIR . Official Receipt showing the payment of Transfer Tax . CAR from the BIR . Official Receipt of the BIR for the payment of DST and CGT . Tax Clearance Certificate . Owner's Copy of the Land Title or the Condominium Certificate of Title . Certified True Copy of the latest Tax Declaration on lot and/or the improvement
If one or both of the party is a Corporation, then they should also submit a Notarized Secretary Certificate or a Board Resolution stating the authorized signatory(ies) and their scope of authority with the approval of the Board of Directors. They should also obtain a SEC Certificate containing the information of the Incorporation Articles to show that the company is SEC registered.
A common practice is that the buyer is the one who shoulders the cost of this application for registration.
9. Obtain a New Tax Declaration for the land and improvement in the name of the Buyer from the City Assessor's Office. The documentation shall include the following: . Original Copy and photocopy of the Notarized Deed of Sale stamped received by the BIR . Certified True Copy of the latest Tax Declaration on lot and/or the improvement (in the name of the Seller) . CAR from the BIR . Tax Clearance Certificate . Official Receipt showing the payment of Transfer Tax . Owner's Copy (for presentation only) and Photocopy (for authentication) of the Land Title or the Certified True Copy of the Land Title or the Condominium Certificate of Title
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It is very important to accomplish this last step, as this step is often missed out. Remember that the ownership of the Tax Declaration should be done after the transfer of the Title. It is important that the name of the Title should be the same as the name indicated on the Tax Declaration.
A common practice is that the buyer is the one who shoulders the cost for this New Tax Declaration.
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Step by Step Summary Tabulation:
Procedure What Documents? Action Taken Where to Get? Certified True Copy of the Land Check for any liens Register of Title / Condominium Certificate and encumbrances Deeds Step 1 Title
Deed of Sale 1.5% of the property Notary Public value Step 2 Signed and Notarized
Certified True Copy of the Tax For House and Lot City Assessor's Declaration for both Land and Office Improvement Step 3 Certificate of "No Improvement" For Lot only
Documentary Stamp Tax (DST) 1.5% of the property Bureau of value Internal File and pay Revenue - necessary taxes Revenue District Office BIR RDO Step 4 Capital Gains Tax (CGT) 6% of the property and Authorized value Agent Bank File and pay (AAB) necessary taxes
Certificate of Authorizing Obtain this Bureau of Registration (CAR) certification Internal Revenue - Step 5 Revenue District Office BIR RDO
Tax Clearance Certificate Settle any arrears on City Treasurer's Real Estate Taxes Office Step 6
Transfer Tax Pay necessary City Treasurer's Step 7 Transfer Tax Office
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New Title Registration Apply for registration Register of and issuance of the Deeds Step 8 New Title in the name of the Buyer
New Tax Declaration Obtain this New Tax City Assessor's Declaration for Land Office and for Improvement Step 9 in the name of the Buyer
For those buying real estate property thru a Real Estate Developer:
1. If you are buying a real estate property thru a Real Estate Developer, normally you need to fill-up the Reservation Application Form and pay the corresponding Reservation Fee set by the Developer. By reserving, you are ensured that the property you are planning to buy will reserved exclusively for you and the seller normally takes out your property in the market so that the seller can't sell it to other potential buyers. It is important to know how long you can reserve the property. In the event that you won't be able to pay the reservation fee on the agreed date, inform the agent or the broker and submit a promissory note to avoid cancellation.
2. After paying the reservation fee, you will now enter into an agreement thru a Contract to Sell. This document is the written agreement between you and the seller detailing your transaction purchase. It also details the sales provisions for both the buyer and seller before the full payment of the transaction. This Contract to Sell is issued to buyers who will pay a downpayment and pay the rest of the balance via financing. This document is also the basis for the execution of the Deed of Sale later when all the conditions are properly met. It is important to read through the contract especially the cancellation and default of payment clauses. Also check for any provisions in the contract for any right of the seller to increase the price or imposed any changes in the specifications of your property.
3. Payment of the Downpayment shall follow. Normally your Reservation Fee shall be deducted upon payment of the downpayment. In some cases, the Developer may have a promotion of staggered downpayment. Do you computation first. Look for additional interest rate when they offer you staggered downpayment. You may need to issue post dated checks for this staggered downpayment option. Normal practice
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is that downpayment may range from as low as 5% up to 20% of the total property price. For foreclosed property, sometimes the downpayment will go up to 30% of the property price. It is also advisable to increase your downpayment amount so that your monthly amortization for the remaining balance shall be lighter. Important thing is to ask for the Official Receipt when making payments and Acknowledgement Receipts for your post dated checks payment.
4. If the balance shall be paid via financing, a Letter of Guarantee from the bank or any financial institution (like Pag-ibig, SSS, GSIS or any private company) to the Developer. This document is a written guarantee by the financing agency to the Developer that you have taken out a loan to cover the payment for the remaining balance. It contains detailed information like the specific amount that will be loan out and the date of released.
Applying for home loan may take time. It is better to ask around different banks and financial institution. You need to compare their interest rates and know if the rates are fixed or if its flexible rate depending on economic situation. Some banks may offer fixed interest rate for a duration of time then the rates will be flexible after that. Important note is that banks will give you lower interest rate if you have a shorter payment term. It would advisable to do the math first and compare what these banks have to offer. You can drop by any bank branches and inquire about their home loan. They can give you a quick assessment but normally you will be ask to submit some requirements first then they will officially give you a final assessment.
For financial institution like Pag-ibig, SSS and GSIS, they usually offer a fixed interest rate and they offer a longer terms of payment up to thirty (30) years. Again it would be better to do the math first. Often times the longer the duration of the payment terms the lower the monthly amortization is. But if you do the math, at the end you may be paying more than you expected. These financial institutions requires you to be a member and you should have at least a minimum total contributions like 24- months contributions or 36-months contributions in order to be qualified for this home loan. Often times they require you to attend their free seminar on their home loan and a free assessment afterwards. These are very helpful in order for you to know how much you may loan, the computation of the monthly amortizations and the required documents that you need to submit.
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Also the Developer is also offering an in-house financing option. Advantage of this type of payment is that the application is more flexible and faster to process but this option has the highest interest rate compared to banks and financial institutions.
5. Mortgage payment shall follow and depending on the computed monthly amortization, it is very important to be up to date with your monthly payments. Default in payment shall incur penalties depending on the provisions stated in the Contract to Sell.
You may know occupy or make use of the property that you have purchased. In some cases, Developers offer a promotion that you can move as early as you have made the down payment. However, it is important to check and know if there are any Deed of Restrictions on the property. Most of the private subdivisions have restrictions especially in the outer appearance of the improvements like the color theme of the house, design concept of the house, restrictions on perimeter wall and gate and/or any modifications. This Deed of Restrictions is for the right of the Developer to maintain the subdivision while they sell the whole development and is usually within a certain duration until the Developer turn over the whole care of the subdivision to the recognized Home Owner's Association.
6. After full payment of the property, then a Deed of Sale will follow. This is the final document needed for the transfer of the ownership from the seller to the buyer and shall be the basis for the Certificate of Title or the Condominium Certificate Title. This document should be executed and notarized by a Notary Public (same process as mentioned in the previous steps).
7. Once the buyer finalized the payment for the property, a Certificate of Full Payment, Release of Real Estate Mortgage and Deed of Release Assignment will also be given to the buyer stating the fullness of the payment. Simultaneously the Buyer will be given the Certificate of Title. This title is the final document that proves the ownership of the real estate property and that it is normally transferred to the buyer's name. For house and lot, you need to secure the Transfer Certificate Title (TCT) and for condominium, the document shall be the Condominium Certificate Title (CCT). Make sure to double check all the descriptions including the full and complete name of the Owners or in the name of the buyer, specific address of the property, technical descriptions, etc.
These above-mentioned documents are needed in order for the buyer to clear the annotations made at the back of the title under the Memorandum of Encumbrances
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during which the property was under mortgage. The buyer may request to clear the annotations upon submission of these documents to the Registry of Deeds. It is important that the Certificate of Title should be issued in duplicate. One copy goes to the buyer and the other copy to be kept by the Registry of Deeds. Again do not forget to double check all the descriptions including the full and complete name of the Owners or in the name of the buyer, specific address of the property, technical descriptions, etc.
8. In case of new development, the City Assessor's Office usually performs a yearly assessment of properties within their respective assigned areas. You will received a notification that you need to pay the realty taxes on the land and its improvement.
If you are buying a real estate property thru a Real Estate Developer, the legwork of transferring the title is mostly covered by the Developer. This is much easier process instead of dealing directly with the Owner. However, the price of the property is already fixed and the buyer cannot negotiate or haggle directly.
Again as a smart real estate buyer and investor, it is very important to conduct a thorough due diligence. Make sure to keep all the documents, all the copy of all the papers and documents that you have received during and after the whole process to protect your real estate property investment.
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Step by Step Summary Tabulation:
Procedure What Documents? Action Taken Where to Get? Reservation Application Form Fill-out the form thru the Real Step 1 Estate Agent / Broker of the Reservation Fee Pay the Reservation Developer Fee
Contract to Sell Signed and Notarized Notary Public Normally the Real Estate Agent / Broker of the Developer will take care of Step 2 this document including payment for Notary
Downpayment Pay the thru the Real downpayment Estate Agent / Step 3 Broker of the Developer
Letter of Guarantee Submit all documents thru Bank or any required Financial Complete the Institution that qualification and you have applied Step 4 assessment for home loan or Get the Letter of thru Developer if Guarantee in-house financing
Start of Mortgage Payment Pay the monthly thru Bank or any amortization Financial Institution that you have applied Step 5 for home loan or thru Developer if in-house financing
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Deed of Sale After making the full thru Bank or any payment of the Financial remaining balance. Institution that Signed and Notarized you have applied Step 6 Needed for the for home loan or issuance of the Title thru Developer if in-house financing
Certificate of Full Payment The Bank or any thru Bank or any Financial Institution Financial Release of Real Estate Mortgage shall release these Institution that documents together you have applied Deed of Release Assignment with Certificate of for home loan or Step 7 Title thru Developer if Certificate of Title whether in-house Transfer Certificate Title (TCT) or financing Condominium Certificate Title (CCT) in the name of the buyer
All of the documents mentioned in Clear the annotations Register of Step 7 at the back of the title Deeds Additional under Memorandum to Step 7 of Encumbrances
Real Property Tax Pay the necessary City Assessor's (normally you will be given notice taxes Office Step 8 from the City Assessor's Office)
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If you are planning to involve yourself in selling real estate properties, you can make huge amount of money with almost no capital to start with. As with just one transaction, you can make thousands or possibly millions in earning potentials. This possibility of hitting the jackpot is what draws so many people in the real estate business.
But unlike most of the products being sold, it also takes some qualifications and a great deal of effort to be able to sell in the real estate business.
Because of this economic impact and the large sum of money involved, the government now regulates selling real estate. In fact, selling real estate is now being considered a profession and with licensing and under the Professional Regulatory Commission (PRC). In order to sell real estate, one must be a licensed real estate broker or salesperson working under a real estate broker.
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As of this moment, one cannot be a qualified real estate broker if you have not finished a related bachelor's degree. To become a real estate salesperson, you must at least complete two (2) years of college and have some real estate related trainings.
Aspiring to be a real estate broker, one must pass the regulatory exam conducted by PRC. There is already a college program in Real Estate Service, and in the future, they might be the only ones allowed to take the real estate broker's exam.
If you are already licensed, you can go into project selling or realty brokerage. The majority of people getting into the real estate business go into project selling, which involves selling properties of Developers that include a new development project like a condominium or a subdivision. Project selling is an easier path since most of the other functions are being executed by the Developer.
On the other hand, realty brokerage is dealing with a property owned by a certain individual, not from a Developer. This requires more responsibilities like verifying the ownership of the property, authenticating the title and computing related taxes and fees, etc. You are also required to constantly search for new properties to sell, also called "property listings."
Although the requirements are very strict, many still strive to get into the real estate industry because they know that there is possibly big money to those who are hard working and even simply lucky. It is therefore advisable to attend seminars and trainings before jumping into the bandwagon.
There are several ways of making investment and creating passive income in acquiring real estate property. The common way is going into a property rental whether it is bed spacers, room, house or apartment for rent. You have the option to turn rental business into a daily, monthly or yearly income source. Motels and Hotels are such a good example, too. Also, billboard advertisement is another way of utilizing space in the rental space.
Developers create opportunities whether it is horizontal projects like subdivision housing or vertical projects like condominium for residential living or office and commercial purpose like BPO or Office Towers and Commercial Malls.
Real estate investment doesn't mean buying house and lot only. You may also engage in other activities such as cultivation of crops and vegetations, production of poultry, swine and animal herds are also as opportunities that rise from acquiring real estate property.
At the end of the day, everything involves risk. Life is no walk in the park, anyway. The same applies in real estate investing. Vast opportunities are wide open and there are many ways to make investments and creating passive income thru real estate.
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That’s why we need this guide in buying and selling real estate property so that we can prevent mistakes along the way that would otherwise lead to conflicts or problems in the future. It is for the same reason we must know the proper documentation in buying and selling properties in the Philippines. After all, it’s no easy and quick process but requires loads of patience and due diligence.
But upon learning of these steps above, you’ll become a better, if not the best, real estate investor who can make passive income in the real estate industry because you’re now equipped with knowledge on the step-by-step process in buying and selling real estate property.
Thank you for reading this e-book to the very end. I do hope you gained an idea on the entire process needed in buying and selling real estate property. If ever you got questions or concerns, feel free getting in touch with me. Email me at: [email protected] or visit www.i-investpinoy.com
I am always here to help.
To your success in your investment towards your financial freedom,
Johnson B. Escober
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Sample Transfer Certificate of Title (TCT)
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Sample of Tax Declaration
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Sample of Tax Receipt
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Sample of Deed of Sale
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Sample of BIR Form 1706 Capital Gains Tax Return - Front Page
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Sample of BIR Form 1706 Capital Gains Tax Return - Back Page
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Sample of BIR Form 2000 OT Documentary Stamp Tax Declaration / Return - Front Page
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Sample of BIR Form 2000 OT Documentary Stamp Tax Declaration / Return - Back Page
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Sample of ONETT Computation Sheet for Capital Gains Tax (CGT) and Documentary Stamp Tax (DST)
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Sample of Certificate of No Improvement
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Sample of Certificate of Authorizing Registration (CAR)
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Sample of Tax Clearance Certificate
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Sample of Certificate of Full Payment
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Sample of Release of Real Estate Mortgage
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Sample of Deed of Release of Assignment
Buying & Selling Real Estate Property Even If You Are Not A Real Estate Broker! Page 80