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Balikbayan Tips - Home Buying in Philippines

How often do we hear someone say: "My dream is to own a home." "I would be happy and contented owning a small house and lot." This is the simple Filipino dream. Concurrently, the measure of one's success is determined by how many pieces of real estate he owns. Truly, for a Filipino, real estate ownership is the barometer of his achievement. It may also be the cause of his downfall, if he does not buy correctly.

The typical Filipino mentality in home buying is that the first home he buys should be his dream home and that is where he is going to stay until the day he dies. If you are looking for the key to money-wise home ownership for the coming decade, keep this rule in mind: When you buy, make sure you buy with an eye to resell, sooner rather than later. This means that if you are a smart consumer, you'll look at any house you're buying with a view to its resale-ability at maximum gain, probably within the next five to seven years. Even if you don't sell within the average time frame, you will find this buy-to-sell perspective will bring you sounder investments.

Simply explained, the first home you buy does not necessarily have to be your dream home. You can use this first purchase as a stepping stone to eventually buying your "castle"” The important thing is for you to make that first step into property ownership: buy with the intention of selling later, and then buy again a much bigger one, until you reach your dream. Here are some basic rules to consider to make this principle work for you:

Rule 1: The most important general principle in house-hunting is - location, location, location. Your home's location within the community will be the most important controller to your resale profit. Good schools, proximity to shopping and transportation, and accessibility to the central employment area are factors that make location favorable. A home purchase is the largest investment most families undertake. When you settle in the community of your choice, you gain a stake in its future, its plans and problems. You will develop a sense of responsibility and pride in home ownership and, with your neighbors, will have a strong influence on the growth of the community. If you choose a home in the heart of the metropolis, you’ll enjoy close proximity to shopping areas and convenient transportation.

Rule 2: After you have determined the best location for you, the next important factor to check when buying a house in a development project, is to check out the reputation of the builder or developer. See as many houses he has built or projects he has developed. Do they have ample water supply? How is the security in the area?

Rule 3: Choose a house whose architectural style places it safely within the mainstream of your area and price range. Highly personalized and dramatic architectural structures may take more time to re-sell later on as you may have to find a buyer with the same personality and tastes as you.

Rule 4: If you are buying an older house, be certain that your house has, or will when you've finished renovating it, the value added features considered essential for your location and price bracket. Among these may be an additional bathroom, bedrooms, a carport for at least one car.

Rule 5: Avoid the big value losers. A house with its own swimming pool may be a status symbol for you but for a maintenance-conscious individual, this may become a liability for resale rather than an asset.

Rule 6: Another consideration you should take is how you are going to finance the purchase. For those who are going to pay the whole amount in cash, there is usually no problem because they will buy or build up to the amount of money they have set aside for the purchase. On the other hand, for those who intend to finance their purchase, the most important thing to remember is - do not over-extend yourselves. In simpler words, do not borrow more than you can afford to pay in monthly amortization.

The rule of thumb in financing is your monthly amortization payments should not exceed 30% of your family income per month. Of course, each lending institution will have their qualifying requirements, so I suggest that you visit your bank and get yourselves pre-qualified first before you start your home search. If you know your qualifying limit, then you will stick to viewing only the homes in your price range. The wise and prudent buyer will pick the best looking house in his price range, and then move up to a better one later using the equity build-up and appreciation from the re-sale of the old house.

Rule 7: Be prudent in buying or investing in projects or developments being pre-sold. In a normal market, property appreciation is based on supply and demand. In a boom market, speculating in pre-selling may seem attractive because one thinks he is buying at a lower value. I believe that real estate is still one of the most dependable hedges against inflation in a normal market, and it does a whole lot more in a brisk market. Let me illustrate further. If the rate of inflation today is 7%, it is more than likely that the rate of appreciation of your real estate property will go up at least 7% annually.

Rule 8: An educated consumer will realize the value of working with a licensed real estate professional - a formally trained and qualified agent to help him through the process of finding the property, handling the legal paperwork and details, getting the best financing option possible, and eventually closing the transaction. There is value to the peace of mind generated from using the services of a real estate professional. Commissioning a knowledgeable agent will save you time, provide a greater selection of properties to choose from and will make the buying process less stressful.

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