REAL ESTATE CONSULTING

GROUP 3

PRESENTED BY:

ALOUNA V. JACINTO
ABEGAIL A. BUSALPA
MA. ELENIE M. MANGSAT
CRISTINA ABUSTAN
MARK ANGELO F. RACCA
REAL ESTATE AS INVESTMENT

Real Estate as Investment is real estate that

generates income or is otherwise intended
for investment purposes rather than as a
primary residence.

Residential investments typically involve

homes, townhouses, and condominiums.
REAL ESTATE AS INVESTMENT

An investment in commercial real estate might

involve the ownership of retail stores, office
buildings, or storage facilities and warehouses.

Investment real estate can create capital gains for

investors due to increases in property value as
well as provide rental income.
REAL ESTATE AS INVESTMENT
Real estate investors make money through rental
income, appreciation, and profits generated by
business activities that depend on the property.
The benefits of investing in real estate include
passive income, stable cash flow, tax advantages,
diversification, and leverage.
Real estate investment trusts (REITs) offer a way
to invest in real estate without having to own,
operate or finance properties.
REITS

REITs, or Real Estate Investment Trusts, are

companies that own, operate, or finance
income-generating real estate across various
sectors, such as residential, commercial, or
industrial properties. They're similar to mutual
funds, but instead of investing in stocks or bonds,
they own and manage real estate assets.
REITS

One of the key features of REITs is that they

must distribute at least 90% of their taxable
income to shareholders in the form of dividends,
making them attractive for income-seeking
investors. Additionally, they offer liquidity since
they're traded on major stock exchanges.
REITS

REITs can be categorized into different types based on the nature of

their holdings:
1. Equity REITs: These invest in and own income-producing real
estate. Their revenue primarily comes from leasing space and
collecting rents on the properties they own.
2. Mortgage REITs (mREITs): These provide financing for income-
producing real estate by purchasing or originating mortgages and
mortgage-backed securities. They earn income from the interest on
these investments.
3. Hybrid REITs: These combine the characteristics of both equity and
mortgage REITs by investing in both properties and mortgages.
REITS

REITs can be categorized into different types based on the nature of

their holdings:
1. Equity REITs: These invest in and own income-producing real
estate. Their revenue primarily comes from leasing space and
collecting rents on the properties they own.
2. Mortgage REITs (mREITs): These provide financing for income-
producing real estate by purchasing or originating mortgages and
mortgage-backed securities. They earn income from the interest on
these investments.
3. Hybrid REITs: These combine the characteristics of both equity and
mortgage REITs by investing in both properties and mortgages.
REITS

Investing in REITs provides diversification benefits since they offer

exposure to real estate assets without the need to directly own
physical properties. However, like all investments, they come with risks,
including fluctuations in real estate values, interest rate changes, and
economic downturns affecting occupancy rates and rental income.

Before investing in REITs, it's essential to research their management

team, portfolio composition, dividend history, and financial health to
make informed decisions aligned with your investment goals and risk
tolerance.
Best REITs to Invest in the
Philippines in 2024
PROPERTY RENTALS
5 Facts about Renting Properties in the Philippines

Rental is a robust part of the real estate economy here in the Philippines. There is a very healthy rental market for properties
here and this law that we will discuss today actually helps guide many of our people living here in the Philippines in renting
properties, both the landlord and the lessee.

A residential unit is defined in the Rent Control Act as: “Residential unit” shall refer to an apartment, house and/or land on which
another’s dwelling is located and is used for residential purposes shall include not only building houses, dormitories, rooms and bed
spaces offered for rent by their owners.

This law in particular covers all residential units in the National Capital Region and other highly urbanized cities which has a total
monthly rent for each residential unit ranging from One peso (P1.00) to Ten thousand pesos (P10,000.00) and all residential units in
all other areas, the total monthly rent for each of which ranges from One peso (P1.00) to Five thousand pesos (P5,000.00), without
prejudice to existing contracts.
PROPERTY RENTALS
5 Facts about Renting Properties in the Philippines

1.) 7% ESCALATION RATE

The maximum amount of increase in the rental is rate 7% per annum. You cannot increase higher than this because you will
simply be violating the law. If the unit becomes vacant, that will be the only time that you will have an opportunity as
landlord to reset the properties’ rental price to a new rate. Then it’s going to be 7% from then. If your tenant is the same
and they are just simply renewing on a yearly basis, the maximum escalation rate that you can apply for your rental is only
7%. That is provided by the law. You will find it in Section 4 of the Rent Control Act. It specifies that the rental rate will not
be more than 7% annually as long as it is occupied by the same lessee. In the case of dormitories, rooms and bed spaces, it
also specifies that the increase in rental rate should not be more than once per year. So, the law really protects the tenant
in this case. So, that the landlords, some people who would like to take advantage of the person because they’ve been
living there, they’ve been staying in the area for quite some time, they’re used to it and it’s their place of abode, it protects
the tenant or the lessee from unscrupulous malpractices by landlords who just want to jack up the price out of nowhere.
For example, you’re renting a property for P35,000 a month and he just suddenly wants to increase it to 500,000 pesos a
month, otherwise, he’s going to eject you. He can’t do that to you. The maximum is only 7% of his current rental rate that
you agreed with.
PROPERTY RENTALS
5 Facts about Renting Properties in the Philippines

2nd: The suggested date of payment is within the first five days of the month unless otherwise specified by the contract

The second fact that we have to know about the Rent Control Act is the suggested date of
payment is within the first five days of the month unless otherwise specified by the
contract. In the Rent Control Act under Section 7, the suggested date of payment or the
rent is within the first five days of that particular month, unless otherwise specified by the
contract and agreed with by both parties: the landlord and the lessee. That’s the suggested
date by the law. It’s not required but is only suggested. Because if you agreed with the
landlord that you’re comfortable paying the rent every 16thof the month because it’s after
the payday, and you’re able to sort out your finances that way, and if the landlord agrees
then it’s actually okay according to the law. But the suggested date is on the first five days
of that particular month.
PROPERTY RENTALS
5 Facts about Renting Properties in the Philippines

3rd: ON SUB-LEASING

Subleasing a property that you are leasing is prohibited unless there

is a written consent by the owner.
PROPERTY RENTALS
5 Facts about Renting Properties in the Philippines

4th: GROUNDS FOR EJECTMENT

The fourth fact about renting properties in the Philippines is Grounds for
Ejectment. According to Section 9 of the Rent Control Act, there are several
grounds for ejectment, which can be legally enforced so that the tenant will
have to leave the property most especially if he abuses rights as the renter of
the property

The FIRST GROUND for ejectment is: subleasing the property without written
consent.

The SECOND GROUND for ejectment for the property that you’re leasing.
Three months arrears in payment.

The THIRD GROUND for ejectment is the legitimate need of the landlord to use
his property for the use of his relatives.
PROPERTY RENTALS
5 Facts about Renting Properties in the Philippines

5th: Protection against mortgage or sale of the property

The fifth fact is Protection against mortgage or sale of the property. According to
Section 10 of the Rent Control Act, no landlord will be allowed to eject a tenant by
reason of sale or mortgage of the property.
HOUSE FLIPPING

refers to the practice of

purchasing a property,
typically a house, with the
intention of renovating or
improving it and then selling
it quickly for a profit
TIPS FOR Make a budget with wiggle room

HOUSE FLIPPING know your market/ trends

GET CREATIVE WHEN SEARCHING FOR

HOUSES
These are valuable
financing
resources for real estate
investors, lenders, and
Profitability

professionals involved in TIMEFRames

the house flipping industry Challenges and risks

to make informed brag about your work

decisions and understand dont overprice the flip

market dynamics.
 PROS CONS
•Profit margins can •Lose a lot of
be significant if money
PROS and CONS done right. •Buying the right
of HOUSE property at the
right price isn’t
•You can see the
FLIPPING return on your easy.
investment more
•It’s a lot of work
quickly than with
investment •You dont always
properties know what you’re
going to get

•Less tax-efficient
House Flipping

FAQs
What is the house
flipper 70% Rule?
-this so called golden rule:
the 70% rule, says that you
should pay no more than
70% of what you estimate
the house’s ARV(after-
repair value) to be.
Is flipping houses
profitable?
-flipping houses can be
quite profitable and quickly
bring you a lot of profit but
can also expose you to lot
of financial risk.
What are the best
houses to flip?
-the ones that have the
least amount of risk.
What are the worst
houses to flip?
-stay away from homes
that have been burned,
that are in a flood zone or
may be difficult to resell for
various reasons.
LEARNING
OUTCOME
Understand the fundamental
principles of real estate investment,
including risk, return, and liquidity.
The fundamental principles of real estate
investment encompass several key aspects:
1.Location 5.Risk Management
2.Supply and Demand 6.Tax Benefits
3.Cash Flow 7.Exit Strategy
4.Appreciation
Understand the fundamental
principles of real estate investment,
including risk, return, and liquidity.

RISK RETURN LIQUIDITY

1.Market Risk 1.Rental Income 1.Market Cycles
2.Economic Risk 2.Property 2.Fluctuations
3.Property- Appreciation
specific Risk 3.Tax Benefits
Learn how to value real estate
properties using methods like the
sales comparison approach, income
capitalization approach, and cost
approach.

1. Sales Comparison Approach: This method

compares the subject property to similar properties
recently sold in the same area.
2. Income Capitalization Approach: This approach is
commonly used for income-producing properties
such as rental apartments or commercial buildings
Learn how to value real estate
properties using methods like the
sales comparison approach, income
capitalization approach, and cost
approach.
3. Cost Approach: This method determines the value of a
property by calculating the cost to replace it with a similar one,
adjusted for depreciation.

Each approach has its strengths and limitations, and real estate
appraisers often use a combination of methods to arrive at a
comprehensive valuation.
RISKS ASSOCIATED WITH REAL ESTATE INVESTMENTS

Real estate investing, like any

investment, carries inherent
risks.
1. Market Risk: Real estate
markets can fluctuate due
to economic conditions,
changes in interest rates,
local market trends, and
other factors. A downturn
in the market could lead to
a decrease in property
values and rental income.
2. Liquidity Risk: Real estate
investments are relatively
illiquid compared to other
assets like stocks or bonds. It
may take time to sell a
property, especially during
market downturns, which
could affect your ability to
access funds quickly.
3. Vacancy Risk: Rental
properties may experience
periods of vacancy, during
which there is no rental
income coming in. Vacancy
risk can be influenced by
factors such as location,
property condition, and
economic conditions.
4. Maintenance and Repair
Costs: Property ownership
entails ongoing
maintenance and repair
expenses. Unexpected
repairs or capital
improvements can
significantly impact your
cash flow and profitability.
5. Regulatory and Legal Risks: Real
estate investments are subject to
various regulations and laws,
including zoning regulations,
landlord-tenant laws, building codes,
and environmental regulations.
Non-compliance with these
regulations can lead to fines, legal
disputes, or other liabilities.
6. Financing Risks: If you
finance your real estate
investment with a mortgage
or other debt, you're exposed
to financing risks such as
interest rate fluctuations,
changes in lending policies,
and the risk of default if you're
unable to make loan
payments.
7. Tenant Risk: Rental
properties are dependent on
tenants for income.
Problematic tenants, such as
those who default on rent
payments or cause damage
to the property, can pose a risk
to your investment.
8. Natural Disaster and
Catastrophic Events: Real estate
investments are susceptible to
damage from natural disasters
such as floods, hurricanes,
earthquakes, or wildfires. While
insurance can mitigate some of
these risks, it may not cover all
potential losses.
9. Property Depreciation: Over
time, properties may
depreciate in value due to
factors such as wear and tear,
changes in neighborhood
conditions, or obsolescence.
10. Economic and Political
Factors: Economic
downturns, changes in
government policies, and
geopolitical events can all
impact real estate markets
and affect the value and
performance of your
investments.
It's important for real estate investors to conduct
thorough due diligence, assess risks carefully,
and have strategies in place to mitigate and
manage these risks effectively. Diversification,
proper financial planning, and seeking
professional advice can also help mitigate the
impact of these risks on your investment
portfolio.
 Explore different financing options for
real estate investments, including
mortgages, loans, and leveraging

Real Estate Financing - describes the methods and potential

sources from which someone who wishes to purchase property
secures the funds to do so. Though the term technically would also
apply to residential purchases, in practice it is more commonly
used to describe financing for real estate deals that involve
investment properties.
Real estate investing - refers to the purchase of property as an
investment to generate income rather than using it as a primary
residence. In simple terms, it can be understood as any land,
building, infrastructure and other tangible property which is usually
immovable but transferable.
Real Estate Finance is required for
Land Acquisition
Construction
Operational Expenses
Cost of Capital

Mortgages are available in a variety of

types, including fixed-rate and
adjustable-rate.
The cost of a mortgage will depend
on the type of loan, the term (such as
30 years), and the interest rate that
the lender charges.
Mortgage rates can vary widely
depending on the type of product and
the qualifications of the applicant.

Companies can use leverage to
invest in growth strategies.
Leverage is using debt or borrowed
capital to undertake an investment or
project. It is commonly used to boost
an entity's equity base. The concept
of leverage is used by both investors
and companies:
Pros
Can amplify returns, creating potential
for big profits
Reduces barriers to entry by allowing
investors to access more expensive
trading opportunities
A strategic way for companies to
meet short-term financing needs for
acquisitions or buyouts
Cons
Can amplify downside by creating potential
for losses and increased debt
More expensive than other types of trading
Results in fees, margin rates, and contract
premiums regardless of the success of the
trade
More complex as trading may require
additional capital and time based on
portfolio needs
A loan is when money is given to another
party in exchange for repayment of the
loan principal amount plus interest.
Lenders will consider a prospective
borrower's income, credit score, and debt
levels before deciding to offer them a loan.
A loan may be secured by collateral, such
as a mortgage, or it may be unsecured,
such as a credit card.
Lenders may charge higher interest rates
to risky borrowers.
Real Estate Investment Financing Options:

Conventional Bank Financing

Conventional bank financing is a mortgage loan from banks and other financial
institutions not secured by the government. It’s appealing to real estate developers
and investors because it’s more secure than other types of real estate loans,
despite the expected additional paperwork.
The typical expectation for a down payment with traditional financing is 20 to 30% of
the real estate’s purchase price.
The good news is that with a conventional bank loan, your credit score and credit
history determine your ability to get approved with fixed interest rates until the loan
matures. Other financial institution may also ask for your financial information, such
as payslips, income tax returns, etc.

Hard Loan Money

This type of real estate loan can be an alternative to traditional bank financing for
real estate projects. In some cases, it may also be used when conventional
financing is unavailable or has been exhausted. Usually, these financing options’
interest rates are higher than traditional loans. The lender uses the property as
collateral for this type of loan.
Real Estate Investment Financing

Private Money Loans

Private money loans are unsecured loansgiven to individuals or companies by a
private individual or organization. These financing options are typically not secured
by collateral but rather by the borrower’s character, personal network, and business
acumen. This can be risky for borrowers and lenders alike, but it is often much more
affordable than traditional financing options.
Private money lenders are typical: individuals with an existing relationship with the
borrower, business owners who want to loan their own money to friends or
relatives, and family members who will not charge interest on the loan

Home Equity Loans

A home equity loan is another real estate financing option that allows you to
borrow money against the value of your property. It is based on the principle that
you can make money on your home by borrowing against it and receiving cash.
Understand the tax implications of real estate
investments, including deductions,
depreciation, and capital gains tax.

Rental Income and Taxes

When you invest in rental properties, the income

generated from rental payments is subject to
taxes. This rental income is typically considered
taxable, and you must report it on your tax return.
However, the good news is that you can offset
this income with deductible expenses, such as
property management fees, repairs, insurance,
and even mortgage interest.
Understand the tax implications of real estate
investments, including deductions,
depreciation, and capital gains tax.

Depreciate costs over time

As commonly defined, depreciation is the incremental loss
of an asset’s value, generally due to assumed wear and
tear. If you are a real estate investor that has income-
producing rental property, you can deduct depreciation as
an expense on your taxes. That means you will be able to
lower your taxable income and possibly reduce your tax
liability.
Understand the tax implications of real estate
investments, including deductions,
depreciation, and capital gains tax.

What is Capital Gains Tax in the Philippines?

Capital Gains Tax is one of the property taxes in the Philippines. The Bureau of Internal Revenue (BIR)
defines the Capital Gains Tax (CGT) as a tax levied on the estimated profits a seller attains from the sale,
exchange, or any other transfer of capital assets in the Philippines.

For tax purposes, capital assets refer to all properties the taxpayer holds, excluding those primarily held for
sale to customers in the ordinary trade or business or those that form part of the taxpayer’s inventory or
stock in trade. The most common examples of capital assets are lands and buildings.

The Capital Gains Tax in the Philippines is only imposed on two types of capital assets: real properties and
shares of stocks.
Who pays the Capital Gains Tax in the Philippines?

The seller or transferor typically shoulders the Capital Gains Tax in the Philippines. It is applied to those
who sell, exchange or dispose of capital assets located within the country, regardless of whether they
are a natural or juridical entity, resident or non-resident, including estates and trusts.
It’s applied to the gains presumed to have been realized from the sale, exchange, or other means of
disposal of capital assets. Notably, the term sale includes pacto de retro sales and other forms of
conditional sales. A pacto de retro sale is a contract in which ownership of the property being sold is
immediately vested in the buyer, subject to the condition that the seller may repurchase it within a
certain period.
Therefore, anyone selling, exchanging, or otherwise disposing of capital assets in the Philippines
should expect to pay Capital Gains Tax.

Real Property: Capital gain tax on the sale of real property in the Philippines, classified as capital assets, is
taxed at a rate of 6% of the gross selling price or the current fair market value, whichever is higher. This
tax must be paid within 30 days following the sale.
Capital Gains Tax Requirements and Exemptions

The required documentation includes:

1.TIN of sellers and buyers. TIN, short for Taxpayer Identification Number, is a unique code used to identify sellers and buyers for tax
purposes.
2.Notarized Deed of Absolute Sale or Deed of Transfer.
3.Certified True Copies of the Tax Declaration at the time or nearest to the transaction date, issued by the Local Assessor’s Office for
land and improvement.
4.Certified True Copies of Original/Transfer/Condominium Certificates of Title (OCT/TCT/CCT)
5.If applicable, a Special Power of Attorney (SPA) from the transacting party.
6.For cases wherein there is no improvement on the land, either a Sworn Declaration of No Improvement by at least one of the
transferees or a Certificate of No Improvement issued by the Assessor’s Office.
7.Receipt/Deposit Slip and duly validated return as proofs of payment of taxes.
8.If the seller or transferor is a corporation, a Secretary’s Certificate or Board Resolution approving the sale/transfer of the real
property and indicating the name and position of the authorized signatory to the Deed of Sale/Assignment.

Exemptions from Capital Gains Tax

Foreigners may be granted exemption from Capital Gains Tax in the Philippines if they obtain a Certificate of Exemption or BIR Ruling
from the Commissioner of Internal Revenue or the authorized representative.
THANK YOU FOR
YOUR TIME.
GOD SPEED.