Read the Tagalog Version of this article: Bibili Ka Ba ng Bahay o Mangungupahan na Lang?
Buying a house is one of the biggest expenses a person can make throughout his life. So it is only appropriate to regard and take into consideration of lots of things before giving the down payment when buying a home, because once you have given the initial payment, you can never get it back. It will not be a problem if the cost is just an extra cash of yours. But to many, the value of a house is worth nearly his entire lifetime savings.
In this article, Green Stickman™ will help you to decide whether to or not to buy a house with your current financial status. Since many real estate agents are using the social media like Facebook to target the OFWs which in turn to be quickly entice or attracted to this so called investment. And it prompts me to create this article. Many OFWs who suddenly got entice will suddenly come to a decision to purchase a home using the money they mostly acquired through their blood, sweat and tears. I am not particularly against to buy their own home. In fact, I agree that it will be more convenient and comfortable to live in your own home. But in what capacity and what qualifications should we consider before buying a house? When should you buy a house and stop the tenancy (if you are renting)?
When should you buy a house?
In general, this is something that cannot be answer easily because of differences in financial status of each person. In the Philippines, a Php 3M house may be cheaper for others, but for the other side of the society, it may be too expensive. But one way or another, whatever the state of your financial status, there are 2 major aspects that we should pay attention before we decide to buy a house.
The 2 Major Aspects in Buying a House:
- Financial Aspects
- Personal Aspects
After we define and carefully weigh both this aspect, you can now decide better if you buy a house or rent an apartment.
In this aspect, you should know the CASH FLOW requirement of buying a house or renting an apartment.
Let’s deal first on renting a house or paying rent on an apartment. Tenancy has a low cash outlay requirement. I mean, if you’re renting because, basically you need so are those 2 months advance and 1 month deposit for the place you want to stay. Once you paid this initial payment requirement, the monthly rental will then be easy for you if you are employed and have a regular monthly income.
Whereas, if you buy a house, it requires higher cash outlay because you have to pay the reservation deposit worth Php 10,000 to 50,000 (depending on location). You also need to pay the down payment for that property. And of course you should be well prepared for its monthly amortization. If you buy a home, a “monetary stability” is a must. If you buy a property through financing, prepare to include on your budget for 10 to 15 years its monthly amortization. If you are not sure of the stability of your job, maybe you should think twice before deciding to buy one. Because it will be a total waste if in the midst of the sales period the house you dream of will be forecloses by the bank.
Remember, it’s hard to find someone who will lend you money for the amortization of the house. This kind of problem differs to your apartment rental issue. Well essentially the same end result, you will be driven away from your house, condo or apartment if you will be a delinquent tenant towards your obligations and arrears. However, most of the time, a monthly rental fee is lesser than a monthly amortization, making it easier to handle. If you are an OFW with an income of less than 40,000 pesos a month, maybe it is better for you to prioritize a business or an investment than buying a house. So, if in case you need to be back in the Philippines, you can do so without much worries. The worse thing that may happen is that you do have a house but nothing for your food. The worst case scenario is, the house will later be taken by the bank if you can no longer sustain to pay for it. I know a lot of case like this. Agents convinced them and immediately bought a property from a subdivision. But for some reasons, the company he works for suddenly broke, and then he/she resorted to lose the property. Seems like everything come to nothing. Thus, if we notice, here in the Philippines, many foreclosed properties were owned by the banks and the government sectors like PAGIBIG and NHMFC (National Home Mortgage Finance Corporation).
Besides the financial aspect, we must also consider the personal aspect. This aspect is related to job mobility of people who wants to buy a house. If for example your work is unstable, or you do not plan to stay in a single company for long; or you intend to travel abroad in the future, it’s better for you to rent a place to stay rather than buying a house.
Another factor is the presence of “sense of security and self ESTEEM” of Filipinos. What’s this? Because many have mistakenly thought that if you are just renting an apartment, they think you cannot afford to buy a house. Thus, others got affected and controlled by this thought, and tend to buy a house even though he does not really need it, just for the reason of not wanting to be labeled as “poor”. But this is not always the case. I have many acquaintances with money but still choose to rent. And I think it is wiser since they can invest their money instead of buying a property they never need. In this way, they can grow their money and prevented any untoward incident like thieves getting interested on his house. They are what we called “Low Profile” persons.
Aside from these two, another factor is the Filipino customs: the old Filipino Tradition mixed with the concept of “pamana” or inheritance. Many Pinoy parents are investing on land and house for that reason thinking that when they die, they have something to leave a home for their children. Well, there is no problem if it’s owned and fully paid. Problem is, if it’s not yet paid; the children will inherit a debt rather than a property. Another product of this custom is causing more pain. If parents do not fix the separation of inheritance of their children, it may end up in a clash between siblings (I can tell because this happened to my father and my uncles).
For me we should not follow with this concept because in reality, once our children grow, there is a greater chance that he will not live there. He or she might get a job or get married and settle down somewhere else. Better yet to leave him some Certificate of Stocks or Certificates of Participation in various investment instruments than a real estate property. At least if he shall redeem it and have obtained the money, he/she can choose a place and home where he/she like to settle.
Green Stickman™ Guidelines in Buying a Home:
- If you decide to actually buy a house (you may also use these guidelines in choosing a place to stay like condo or apartment), the most important thing that one should consider is the location. This is a rule of thumb in a real estate; the choice of good location.
- When buying a house, make sure you afford the price where you wanted it to. Cause even if for instance that you want to live in an exclusive subdivision but does not have enough savings and capability, do not fool yourself and include this to your lists of target place to stay.
- In regards to location, considered the availability of basics facilities and other facilities for emergency needs. Make sure it has an easy access to public transportation. It will be a pain if there’s no other means of transporatation except for a cart of a carabao for you to get in other places. Better if the place have at least tricycles or jeepneys that you can ride. There should also be a nearby hospital and schools for your child. And as much as possible there should be market or grocery store within your area. It would be hard for your family to live in a place without these facilities.
- Aside from these facilities, you must also consider the neighborhood. A lot of people do not consider this, but really, this is very essential. Remember, buying a house commonly means or denotes ‘permanency’. Your family including your child/children will live within that neighborhood for long. And the kinds of neighborhood we live will surely a factor to your child’s behavior. Of course, as much as possible we want a better place for them to live. And we don’t like to live in a place where we are always worried for our safety.
- Another consideration nowadays are being a free-flood zone areas. Of course, we don’t want to worry of our things whenever there’s a storm. Although there are some subdivisions claiming to be a flood free area, you also have to check if the roads within the vicinity are accessible and flood free as well.
- And now that earthquake occurrences are not few, we also have to consider and make sure the place is not within the fault line of the earth like in Marikina Fault Line.
- In buying a house, you can also try to check the list and compare the prices offered by the bank or other government sector like PAGIBIG and NHMFC of their foreclosed properties available. Maybe you may find one.
- Try considering a rent to own properties instead of buying one. Well you can still buy a pre-sell housing like condominium but choose a trustworthy real estate or land developer by having them well checked.
- Even if you have a money that is ready for full payment, I suggest you still put it in a “financing” (e.g. PAGIBIG, bank financing, etc.) to pay for the properties instead of paying it in full even though you can afford to. In this case you can save and invest the bigger part of your money since initially; you would only have to pay for the reservation, down payment and other fees necessary. Invest your money to different investment instruments where it will still be safe and grow.
Is buying a house an investment or not?
Once, I passed a condo being built in Magallanes (MRT) with a woman on business attire that handed me flyers.
“Investment? How it will be an investment if I live there, give my money and earn nothing?” I said to myself, it can only be considered as an “investment” if it has a ROI or “income” after releasing a money or capital. I want to argue with that woman, but I’m late to my meeting so I have to just let it pass.
After a few days, I again passed to the same place. I heard the same line “Investment Sir!”, only this time it’s not the woman but a man. It seems to me that they are being program of what they say. They were taught to say “Investment Sir!/Ma’am” for obvious reasons, to have SALES and sell a condo unit.
Going back to the question, was buying investment property like a condo or house an investment? It depends. This simply like if you buy a car. If you buy a vehicle for image and status and using it for personal reasons, it is not considered an investment. In fact, it will be an extra expense for you because it’s more economical to take a public transport and the gas and vehicle maintenance is expensive. But if you use the vehicle to deliver the items or use as a service for your business, you can somehow consider that as an investment. Example, you are a Medical Representative, it will be more convenient for you to have a vehicle and go to a lot more hospitals or possible customers along your way. You got the idea? So long that it helps you to build assets, you may consider it as part of our investment.
Applying the principles to purchasing a home or condo, we can also consider this as an investment in certain conditions. What conditions? This is the part not being illustrated well by other sales agents thus become misleading from the word “investment”. If you live and decided to settled there for a long time, it could not be consider as an investment.
It can only be considered as an investment if you plan to sell it after sometime, or you plan to lease the place to have a regular monthly income.
Let me end it here. Hopefully this article has helped you to decide whether to buy a house or not. This will be enough for you to weigh and consider in avoiding mistakes.
Remember, it is hard to save money, so before deciding to use them as a “down payment” on a property; you must have regarded all the considerations. Of course it is better to have your emergency fund first before you buy a house.
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