From MoneySense Magazine Jan 2015 issue.
What I like about the New Year is the chance to have a fresh start. You get a do-over, correct mistakes, and improve yourself. Sure, you can do that anytime of the year, like every Monday, every morning. But there’s something about the New Year that just compels you to do more.
In Philippine culture, New Year’s resolutions usually revolve around the same categories. Most people want to lose weight and improve their health; “I will eat healthier,” “start exercising,” and “curb bad habits” are the most common resolutions. Others want to improve relationships, with friends near or far, with relatives, with God. And there are those who choose to improve professionally and financially.
Yearly, our entire family will sit down and write our goals, wishes and dreams in a notebook. We categorize these as short-term, mid-term and long-term goals, and these serve as our guide for the year. This activity helps us visualize our goals as a family.
Personally, every New Year I aim to improve my cash flow—but it’s not just about money. My goal is to accumulate cash flow-producing assets, because this will allow me to spend more time on the truly valuable things in life: God, family and my ministry.
Looking back, 2014 was a good year for Philippine real estate. If you purchased a property five years ago, most likely you have already enjoyed good capital appreciation. For example, if you purchased landed property in Nuvali five years ago at P13,000 per square meter (sqm.), it would be worth an estimated P20,000/sqm. by now. If you purchased a condo unit for P2.2 million 5 years ago from SMDC, you could now be enjoying rental income of around P22,000 per month, or a cool 10 percent return on your investment.
If your new year’s resolution includes having real estate in your portfolio, then these tips should be helpful.
1. Have a closer relationship with your money.
Be completely aware of the important things in your life, from your spouse and children to your business. When it comes to your money, you should know how much you have, how much you owe to debts and in credit card bills, how much you are making versus how much you are saving, and what your money is doing on a daily basis. Are you positive month to month or negative? Is your money working as hard as you want it to? If you know what’s happening to your money now, you can figure out what needs to change.
2. Augment your income best as you can.
Whenever a first-time investor asks me about property, I always ask how much extra income he or she is able to save monthly. Property is a good investment if you have excess cash or high positive cashflow, and is best suited to the preservation of wealth. It may not be a good idea if you are still at the early stages of your financial life. Younger investors can focus on working hard, working smart and finding ways to earn more income, so they can eventually move on to property investment.
3. Educate yourself about property.
Many people make investing mistakes because they are not well-informed about the power of their chosen investment product. Having your own business is your best option for fresh funds, but make one wrong move and it becomes a black hole for your time and money. Many people invest in property because of all the pros, but they’re surprised when they discover the disadvantages.
Avoid such mistakes by doing your research. Read books and online articles about property and the economy. Know and understand the pros and cons so that you can create a better investing strategy. Attend seminars and lectures, especially those where the speakers have years of experience in the industry.
4. Explore the market.
Go to open houses. Look at show flats and inquire about pricing and schemes. There is no price tag on asking questions. Even if you can’t yet spare money for the investment, you should already start inquiring as if you were ready to buy. Start looking for property best suited to your purpose. Find a mentor who can critique your strategy. Figure out how you are going to pay for it: what are your options for payment schemes, and where will the money come from?
You can also start meeting with property agents, but be careful. While some will sincerely watch out for your interests, others are just out there to make a sale. Ultimately it is your responsibility to educate yourself and to carefully process the data provided by any agent. The final decision is still yours. You also have a responsibility to manage the expectations of your agent. Be clear about whether you will be buying soon, or if you are just looking around and studying the market for a future investment. A good agent is a powerful ally who can give you updates on the market and help you make better investment decisions.
Property is a long-term strategy. Many people will grow old before they even venture into property investments, while others will be able to build and grow their property portfolio within their lifetime. It all starts with making a resolution today, armed with the historical knowledge that property can really create wealth. Good luck with your investments in 2015.
Carl Dy is the President of Spectrum Investments. A property investor with over ten years of experience, he is continually building up his portfolio, with the ultimate goal of living on passive income from property. He believes that property investment, just like business, is not an automatic income-generating product. One must combine passion with strategy, and devote time and effort for the investment to flourish. Join his seminar, “Creating Wealth Using Real Estate” on February 7, 2015, Saturday, from 10:00 AM to 3:00 PM at the SM Aura Convention Center. For more information, coaching and one-on-one mentoring, send an email to email@example.com or like the Facebook page “Real Estate Wealth Manila.”