Monday, March 23, 2020

Dabbling into Real Estate: An Introduction to the Basics of Real Estate Investing For Beginners



It has been more than 10 years now since I have attended the TRP seminar by Dr. Larry Gamboa. In my reflection as a real estate professional it has been a worthwhile experience to gain the knowledge of doing this method. It does have risks involve and bigger gains to have upon selling the property.  

During my attendance with the Think Rich Pinoy (TRP) in 17th of February 2008 at the Phil-Am Life Auditorium in Malate, Manila. People of all walks of life attended the seminar it in order to learn and gain an insight on this concept which is widely used in the United States at that time adapted to Philippine settings. One of the most prominent practitioner of this method was Robert Kiyosaki of Rich Dad, Poor Dad fame on how he ventured into real estate.


The writer with other participants at TRP event in February 2008

What Are The Advantage of Real Estate Ownership?

Real Estate ownership has economic impact in the real estate industry. There is always a universal need for real estate properties. In the Philippine market, shelter development has been a priority by the government thru National Housing Authority addresses the basic needs of the population particularly the urban poor with very affordable social housing for the recipients. In some other instance, real estate can be a hedge against inflation.

Other than this, most banks and financial institution will prefer real estate as a collateral the most therefore the major source of capital formation. In recent years, land generally appreciates in value for those who hold and sell over a period of time. Real Estate provides impetus to economy through job creation, investment spending and inter industry linkages (construction materials) with multiplier effect.

What Are the Disadvantage of Real Estate Investment?
  • No organized market - There is no centralized market for real estate transactions
  • Market information is not readily available : Information concerning sale prices, lease terms , financing and other agreements maybe confidential and unavailable to individuals who are not part of a sale.
  • Immobility of the investment- Real estate property is tied to a fixed location.
  • Production takes time – Real estate development takes time to construct, design and finance.
  • High transaction costs- The financial requirement in purchasing a real estate property is huge, as you have to consider a lot of costs, buying and moving costs, agent’s fee, registration fees, to name a few.
  • Heterogeneity - Each property is unique : No two parcels of land can ever be exactly alike
  • Segmented markets : The real estate market is divided into numerous segments or submarkets that do not necessarily behave the same way.
  • Durability - The ability to withstand wear and tear, pressure or damage. Raw land is indestructible and immovable, while a building, a major infrastructure or improvement in real estate has a long life span that can last for decades.

What are the Investment Strategies in Real Estate?

There are three strategies that anyone use in making a profit in real estate. However you understand the basic facts on how real estate will in your advantages. A good reason why most investors fail is that they have little or no understanding on real estate so their aim is to just buy not knowing the consequences of it at all. 

1.) Buy, Fix and Sell For a Profit

This strategy in acquiring a property is about acquiring the property at a low price, repair it by making minor to major renovations on the property then later selling it a high margin or price. As a major rule, property's depend on location as the number one factor in finding the property and number two property's viability and feasibility.

2.) Buy, Fix and Lease or Hold For Long Term

Similar to the first strategy and not entirely advised by Dr. Gamboa. It can be done but the gains of recouping your investment could take time indeed. In my personal experience and assumptions using capitalization and discounted cash flow analysis a residential property an owner could recoup its gains for about a period or 10 years or less. However, with the new technology coming out in the recent decades, AirBnb and Booking.com application have given property owners an option to lease their property for a short period of time as transients.

How To Sell / Lease Your Properties as a Real Estate Investors?

If you do not have the knowledge in selling the properties you can hire licensed real estate brokers who have wide networks and contacts or list of clients who are looking for a property that you are trying to sell. For short term leasing, an investor can use the mobile apps such as AirBnB and Booking.com for your convenience which are trending nowadays. In an instance, they are looking to long term lease a property, better to hire a real estate professional to market one's property for rent / lease. 

Are You Looking For Foreclosed Properties to Invest too?

C. F. Baluyut Realty have different listings of foreclosed residential properties in Pampanga ready for owners to invest and rehabilitate the said properties for sale. Send us a message or give us a call on our contact page on this website. 

Source(s)

Real Estate Economics (PARC Handouts / Lectures) - Medina-Cue, MM.



About the Writer


CRB Benedict Baluyut is a professional real estate broker, real estate appraiser and associate of C. F. Baluyut Realty. He is currently the Vice President for External Affairs, Real Estate Brokers Association of the Philippines, Inc. (REBAP) - Pampanga Chapter. You can get in touch with him at https://www.cfbaluyutrealty.com.





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