Real Estate 101: How to Invest in Real Estate in the Philippines

Investing in real estate starts with understanding your options and knowing what fits your budget and financial goals.

Key Takeaways

• Understand the different types of real estate and investment approaches available in the Philippines.
• Assess your budget, financial readiness, and intended use before choosing a property.
• Explore financing options such as an RCBC Home Loan to help fund a house or property purchase.

We’ve heard it all before, the advice that one of the best investments to make is real estate. This advice has stood true for years, and it will continue to do so for years to come. Why? Simply because real estate is one of the few assets that appreciate over time. 

Unfortunately, it can be difficult to start investing in real estate. It has a high buy-in rate, and it can be difficult to navigate for those with no experience. 

In this article, we’ll go through how to invest in real estate in the Philippines so you can gain the confidence to do so. Whether you’re investing in a condo or a house and lot, we’ll make sure that you know what to do when it’s time to invest in your first property.

Why Should You Invest in Real Estate in the Philippines?

The Philippines has been making significant strides in connecting cities, towns, and municipalities by improving road networks to decentralize real estate development from high-density cities. This effort hasn’t gone unnoticed, and more and more people are taking advantage of this opportunity to add real estate to their portfolio of investments.

According to investors, real estate is one of the safest investments one can make because it’s considered to be recession-proof. No matter the current condition of the country, people will always be looking to buy or lease a home. If done correctly, you can flip your property for a higher price or you can lease out your investment and let the rent pay for the mortgage. 

In real estate, there’s endless opportunity available, and if we follow the data from Bangko Sentral ng Pilipinas (BSP), we can conclude that housing prices in the Philippines are continuing an upward trend, with real estate prices continuing to grow at a swift rate. This data shows us that investing in property in the Philippines will yield excellent returns.

What are the Different Types of Real Estate?

There are four different types of real estate that you can invest in:

Commercial

Commercial investments are properties like retail centers, office buildings, and restaurant spaces. These types of structures are leased out to other businesses and typically offer longer lease contracts with predictable cash flows.

Industrial

Industrial real estate refers to large structures like warehouses, factories, and truck terminals. With the booming e-commerce sector in the Philippines, demand for warehousing and cold storage spaces near major expressways has grown significantly.

Residential

This type of real estate investment involves houses, condos, and other structures where people reside. Residential properties offer lower barriers to entry and higher liquidity compared to commercial assets.

Land

Land is also an excellent investment because you can turn it into any of the following investments above. Although, you’ll need to put in a considerable amount of money to get it up and running. 

When choosing between these property types, consider how the property will generate value for you. A residential property may be used as a primary home or rental, while commercial and industrial properties may depend more heavily on tenant demand and business activity. Vacant land, meanwhile, may require additional spending before it can generate income.

What are the Different Types of Real Estate Investments?

To become a real estate investor, there are different types of investments you can look into. 

We recommend going through this list and seeing which strategy fits your budget and your investor personality.

Real Estate Investment Trusts

Real Estate Investment Trusts (REITs) are one of the best ways to own real estate without shelling out a lot of money. REITs are traded in the stock market, and you can buy and sell shares of these properties, allowing you to earn from dividend-paying stocks. 

Unlike directly purchasing a house, condominium, or commercial property, investing in a REIT gives you exposure to a portfolio of income-generating real estate assets through publicly traded shares. 

This type of real estate investment is a quick and easy way to own property minus the hassle of managing it.

Rental Properties

With the influx of people moving back into Metro Manila, rental properties have been in high demand. Both short-term and long-term rental properties are excellent investments in the city. You can easily find tenants for your property by listing it on platforms such as Airbnb, Carousell, or Lamudi.

Before purchasing a rental property, research the area's actual rental demand and compare expected rent with your projected costs. When estimating potential cash flow, consider vacancy periods, association dues, property management, repairs, insurance, taxes, and loan payments.

Buy and Hold

Buy and hold is a real estate investment strategy that focuses on long-term gains. This means that you hold onto your property for as long as possible until the highest buyer comes along.

This strategy requires patience and an understanding of your property's ongoing costs. A property that increases in value may still require regular expenses while you hold it, so potential appreciation should be considered alongside cash flow and ownership costs.

Buy and Sell

Buy and sell is straightforward. You purchase the property at a low cost, and you sell it at a higher price. However, some people can also renovate the property before selling to increase its market value, thus “flipping” it.

When calculating a potential profit, don't look only at the difference between the purchase and selling prices. Include renovation costs, financing costs, taxes, transaction expenses, professional fees, and other costs associated with buying and selling the property.

Shared Ownership

If you cannot afford a certain real estate investment on your own, you can find partners that you can trust to go into a joint venture in purchasing property. Any profit gained will be split equitably between the arrangement you and your partners have come up with.

If you choose shared ownership, put the arrangement in writing before purchasing the property. Clearly define each person's ownership share, financial contribution, responsibilities, decision-making rights, and what happens if one partner wants to sell or can no longer contribute.

How Much to Invest in Real Estate in the Philippines?

Now that you know the types of real estate you can invest in, you may be wondering how much you’ll need to buy into this industry. 

The short answer? It depends on the type of real estate you want to invest in. For REITs, you can purchase stock for as low as Php 5,000. 

However, for condos or houses, you may need at least Php 2 million, depending on the property you’re eyeing. You also need to consider the 20% down payment that you need to put down before you can start the proceedings. 

If you don’t have this kind of money at your disposal, you can also apply for a bank housing loan. An RCBC Home Loan can help qualified borrowers finance eligible residential property purchases, subject to the bank’s assessment and applicable terms.

How to Get Started on Investing in Real Estate?

Before you get started on investing in real estate, it’s important that you evaluate your budget and intention first. Real estate is a big responsibility and financial commitment that you don’t want to enter without scrutinizing your intentions first.

Ask yourself the following questions:

• Do you have an emergency fund ready to shoulder the mortgage in case anything was to happen to you?
• How much is your budget for this type of investment?
• Are you financially ready for the responsibility of being a property owner?
• Are you mentally ready for the challenges of being a property owner?
• Do you have enough money for the property’s downpayment? If not, are there other investment vehicles that you can investigate?
• What type of real estate do you want to invest in?
• If you’re taking a housing loan from a bank, have you found the right financial institution for you?
• Do you have all the necessary documents needed for housing loan requirements?
• If you’re entering a shared ownership, do you trust your partners?

If you’ve found your answers to be satisfactory, then congratulations! You’re ready to add real estate to your portfolio.

Recession-Proofing Your Future

You’ve finally learned how to invest in real estate in the Philippines, now it’s time for you to recession-proof your future by putting your plan into place. If you don’t have enough financial resources for the purchase of your investment, we recommend approaching a financial institution that can help you with your goals.

Here at RCBC, we’re committed to supporting our clients to achieve their investment goals by providing them with a competitive home loan. Read through RCBC’s home loan FAQs and get the answers you need to know before submitting your RCBC housing loan application form.

If you have any other questions about how we can help you, please don’t hesitate to contact us.

Frequently Asked Questions

Is real estate a good investment in the Philippines?

Real estate can serve different purposes, including a personal residence, rental income, or a long-term investment. However, potential returns depend on factors such as location, property type, market conditions, costs, and how you manage the property.

How much money do I need to invest in real estate in the Philippines?

The amount you need depends on the property you want to purchase and its location. Aside from the purchase price, consider the down payment, taxes, fees, insurance, maintenance, and other ownership costs. If you need financing, you can also explore home loan options such as RCBC Home Loan.

Can I use a home loan to buy a property in the Philippines?

Yes. Qualified borrowers can use a home loan to finance eligible residential property purchases, subject to the lender’s requirements, credit assessment, and loan terms. RCBC offers Home Loan options that can help qualified customers finance their residential property purchase.

What should I consider before investing in real estate?

Consider your budget, financial capacity, investment goals, property location, expected expenses, potential rental demand or resale value, and available financing options. If you plan to take out a home loan, review the requirements and repayment terms carefully before applying.

Is it better to invest in a house or a condominium?

The right property type depends on your budget, preferred location, and intended use. A house may offer more space and ownership flexibility, while a condominium may provide access to amenities and locations near business districts and commercial areas. Before deciding, consider the purchase price and potential rental or resale demand.