In my previous blog post, I talked about the 3C’s of buying a property - capacity, credit, and cash flow that revolve around money matters which is the most important consideration. But here’s another thing that you need to have to finally take a leap at property investments.
Hence, let me introduce the fourth C of buying a property, called “courage.” Courage, as defined, is the ability to do something that frightens one. In high-value investments like real estate, fears and risks are inevitable. While courage is the actions you take to minimize and manage those fears and risks. As Winston Churchill said,
“Fear is a reaction. Courage is a decision.”
Here are the three most common fears in real estate investments and how you can rise above them with courage.
#1 “Mas mahal na bumili ng bahay these days. Hintayin ko na lang bumaba.”
- With courage, you decide to be well-informed about the real estate drivers, trend, and outlook.
Compared to other investment options, residential property is a tangible asset mainly driven by use and not by news.
Prices of real estate is tied to the law of supply and demand. While we know that there is an increase in supply, there is also a very strong demand for residential properties as evidenced by a very low vacancy rate at 2% in Metro Manila CBDs and increasing rent prices, estimated at 5.8% increase for 2019.
In the coming years, it is projected that there will be a sustained demand for residential properties. Key driving force is the continued economic growth, powered by increasing purchasing power of the local consumers from strong OFW remittances and from the young labor force. The median age of Filipinos is estimated to be around 25.7 years old, meaning a huge young and productive work force by global standards fuels the country’s rapid and stable GDP growth. To learn more about the real estate market, read this: There's no real estate bubble and here's why.
#2 “Di ako maka-commit because I don’t know what my life would be in the next 5-10 years.”
- With courage, you decide to take control, plan ahead, and believe in your capability.
Some of my clients are afraid of long-term financial commitment because they don’t know what’s going to happen with their life in the next 5-10 years. I’d like you take a minute to ask yourself these questions.
Is my financial situation better off now than it was 3-5 years ago?
Do I see my earnings progress in the same direction in the next 5-10 years?
Do I have a plan and believe in my capability to achieve my goals?
If you answered yes to these questions, your life is going in a positive direction. And this is more than enough reason to be confident in investing in real estate.
#3 “Buying a property is overwhelming. Marami pa akong tanong and concerns."
- With courage, you decide to keep it simple and prioritize what truly matters.
There are a lot of options out there that you like to consider and so many questions you think need to be answered. Having this kind of mindset prolongs the decision process and eventually, you’ll find yourself getting priced out of the market. As with anything, we should put 80% of our focus on the most important aspects, especially if we have a strict budget in mind. So do yourself a favor by making the decision process simpler for you.
First, narrow down to one or two locations you are comfortable with. Second, identify how much you are willing to invest in depending on your long-term cash flow. Lastly, know what you want and what you need in a property in terms of size and amenities. Overall, you need to identify your negotiables and non-negotiables.
To help you appreciate the huge advantage of having courage in real estate investments, here’s an illustrative example.
Illustrative Example:
Person A and Person B know they would need a 2-bedroom in 4 years. They both checked the 2-bedroom unit worth Php 7 million in the same development, under pre-selling term of 4 years. The monthly payments would be Php40,000 per month, which is within both their budgets.
Person A decided to pass on purchasing now since he’s afraid of a long-term financial commitment and he doesn’t know what’s going to happen in his life in the next 5 years.
Person B has a plan for himself for the next 5 to 10 years, even though he doesn’t know the details of how it will turn out, he is very confident of achieving his goals. He is also deliberate about his negotiables and non-negotiables. After careful consideration of all the risks and rewards, he reserved his unit and has slowly been paying for the property at Php40,000 per month.
Four years go by and Person A is now in need of a unit to live in immediately. He came back to same property that he was eyeing before but was shocked to see that the prices of this property had already increased by Php 5 million (based on the growth rate of some of the best properties in Metro Manila). He was priced out so he had to settle for one of the other properties that he was not 100% happy about.
Meanwhile, Person B enjoys his capital appreciation of 5 million and looking forward to living in his dream home.
At the end of the day, you need a dose of courage. As long as you have the right market understanding and you minimize and manage the risks, you are more than ready to take a leap at property investments. There’s this saying,
“If it excites you and scares you at the same time, it probably means you should do it.”
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ABOUT THE AUTHOR Edric Maguan is a successful real estate investor, an experienced and accredited Real Estate Broker of several top developers, and a Certified Public Accountant from University of the Philippines - Diliman. He found his passion in inspiring and empowering people to make the most out of their hard-earned money through real estate investment. Read full biography here.