For most OFW’s (and Filipinos as a whole), owning a land or a house is like winning a championship trophy in a basketball game. In fact, that’s an understatement. For the working Filipino, it is an achievement and a dream-come-true to finally own a tangible “investment”.
But if you are someone who has just started working, being tempted to “invest” in a house or lot somewhere outside the Metro or in a condo unit somewhere at The Fort is rather inevitable.
You can not escape from the binoculars of real estate agents positioned strategically inside malls and commercial establishments. They can identify if you have been dreaming to have a house soon. They know if you’re an OFW or a newbie yuppie from Makati.
Investing in A House or Condo Is Expensive
Flyers from property agents are results of great marketing efforts. They can really attract would-be buyers and potential “investors” to put in their hard-earned salaries and savings in house, lot, or condo unit. But buying a house or a condo unit isn’t cheap. You have to shell out at least 10% of the total contract price or value of the unit that you are dreaming to buy.
If you don’t have cash on hand, you will end up applying for a housing loan just because you believe that buying a house is an investment for you. And when you buy a unit on installment basis, you end up paying double the actual value of the that unit that you’re planning to have.
I know a lot of people who dipped their hands and feet into buying a house and lot without enough cash or other income streams to back up their plans of turning the unit into an income-generating asset. As a matter of fact, most of them didn’t have plans from the start. Those properties are now owned and being sold by the bank. Foreclosed for failure to commit the monthly amortization.
While buying a property may guarantee you price appreciation and capital growth, this is not always the case. “Investing” in property may not also give you the returns that you were expecting when the agent first offered you that Php8,000 per month amortization.
It’s very important that you make your personal assessment first if you really need to buy a house or a condo unit now before signing that contract and applying for that housing loan in the bank.
Do you really need to buy a house (investing) for it to generate rental income? Or is it just ego that’s running in your system telling you to buy it now (that’s purchasing, not investing) to show off your peers and relatives?
The Hidden Cost of Buying a House or a Condo Unit
When a real estate agent hands you a flyer in a mall showing you a “very affordable” condo unit in Makati or Libis, just take the flyer and tell him/her that you will think about it first. If he insists to get your mobile number, give them the mobile number of the person that you really hate. Just kidding. 😉
It’s fine to give them your mobile number. But be ready to be invited by them via SMS every hour of the day. Anyway, there’s always free lunch or snacks at the “Open House”. 😀
But in case you are not aware, there are so many other costs to consider when purchasing or investing in a property other than your monthly amortization. Although these costs may vary on a per case basis, still you have to be aware and prepare. See below:
1) Withholding taxes
2) Documentary stamp taxes – 1.5% of Selling Price or Zonal Value whichever is higher
3) Deed of sale preparation – Property Transfer – 1.5% of property value, including PHP100 notarization fee
4) VAT or Value-added tax (If condo unit price is above PhpP3,199,200)
5) Local transfer taxes (from from 0.25% to 0.75% of the purchase price, zonal value, or TD value of the property, whichever is higher.)
6) Transfer of title processing fees
7) Registration fees (at the Register of Deeds – Php8,796 for the first P1,700,000 + Php90 for every Php20,000 or fraction thereof in excess of Php1,700,000)
8) Move in fees for new condo
9) Association dues (Php40 to Php75 per floor area)
10) Membership dues (varies)
11) Utility charges (common)
12) Parking slots are not free and you have to buy a slot separately. It has a separate title, in case you are not aware
13) Insurance premium for your unit
14) Insurance premium for common areas and facilities
15) Repairs and maintenance fees (common)
16) Annual real property tax
17) Home inspection fees
18) Other incidental charges
This does not include the huge estate taxes that your heirs will pay for in case you die. Yes, you will die. All of us will, but not too soon. So you have think about insuring yourself as well to at least cover the cost of transferring your estates to your loved ones.
If you intend to sell your unit afterwards you also have to pay for the capital gains tax equivalent to 6% of the selling price on the Deed of Sale or the zonal value, whichever is higher. Consider also paying for your agent/broker’s commission.
UPDATE: A Filipino’s Home Buying Guide to Fees and Charges [Infographic]
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