In my last post, I mentioned about analyzing foreclosed properties to check if they are worth buying. Before doing a detailed analysis which can be too time consuming and overwhelming to some, one should at least do a quick analysis to shorten the list of prospect properties, especially with so many foreclosed properties available out there. This leads to the question, just how does one do a quick analysis of a property? Let me show you how I do it.
- I start off by checking the listing of foreclosed properties if there are properties in my area of focus, which includes Marikina, Pasig, Cainta, Antipolo, Mandaluyong, Makati, San Juan, and Quezon City (excluding Novaliches). I have limited my focus to these areas since these are in my general vicinity, and can be reached in 30 minutes to 1 hour (including allowance for traffic jams). Distance is important since (1) I do not want to spend precious time going back and forth to a property and (2) I don’t want to waste money on fuel. If I get a property that is far from my house, I would be spending a lot of time whenever I do my inspection, accompany contractors, or even when I show the property to prospective buyers. If I see properties that are not in my area of focus, I just skip them.
- Of the remaining properties that are in my area of focus, I check those which are within my budget or the budget of my target buyers. Currently, my budget is up to P2M only for properties listed for public auction. How did I arrive at this amount? First, I believe that this is the loan amount that a bank would surely approve, taking into consideration my earning ability. With this cap, it would not be too difficult to come up with the downpayment, which is around 10% to 20% of the purchase price. P2M is my absolute maximum amount and it would be a waste of my time to check out properties that I cannot afford. For properties open to negotiated sale, P2M is my maximum offer too, but since my target is to submit offers below 40% of the indicative price, my actual threshold is P2.8M (P2.8M less 40% is P2M).
- From all those properties that are within my budget, I check the descriptions and exclude any properties that are only lots. I would prefer properties that are described as house and lots, apartments, condos, and townhouses, or anything that says lot w/ improvement. Most properties described as lot w/ improvements would have dilapidated structures as improvements but you just might be surprised when you find one that turns out to be a house, an apartment, or even a building. Why do I exclude “lot only” properties by the way? Lots are harder to sell because they are not readily usable. It is also difficult to have them leased so it would take a lot of time before you can get any income out of them – remember that holding costs can kill your profits.
- I then check the floor areas of the remaining properties. Those which have the biggest floor areas are more promising and have better value. The smaller the floor area, the less favorable it is for me. Do take note that if a property has less than 20sqm floor area, then its probably a parking slot. Some may argue that parking slots are good investments but most of the time you can’t just buy a parking slot, you also have to own a unit on the same condo or building.
I would then inquire with the banks about the properties left using the questions I enumerated in my post about the 31 questions you need to ask when inquiring about a foreclosed property. Helpful tip: You can skip questions that already have answers on the ad.
If I focus on doing this quick analysis on any particular public auction listing I have posted recently, I can finish this in about half an hour or 1 hour tops. The properties which have passed the quick analysis will then be subjected to a more detailed analysis like checking the projected ROI if I were to have a property rented out.
To recap, the following are the quick analysis steps which you may follow in short-listing prospect properties:
- Determine your areas of focus and exclude properties outside these areas. Possible reasons for choosing your area of focus are the following: distance to your house, your familiarity with the area, etc.
- Determine your budget. You should be able to afford the downpayment and be sure that the bank will grant you a loan for the cost of the property.
- Check the descriptions of the properties left. Choose lots with improvement and exclude lots only.
- Check the floor areas of the remaining properties. The bigger the floor area, the better as they should have better value.
I would like to emphasize that the purpose of these steps are only meant to shorten the list of candidate properties. You still need to do a detailed analysis to determine if a property will really be a profitable investment worth buying.
It’s not as hard as it looks! What are you waiting for, go ahead and start analyzing those properties!
To our financial freedom!
Jay Castillo
Real Estate Investor
REBL#: 20056
Blog: www.foreclosurephilippines.com
Social Network: foreclosurephilippines.ning.com
Mobile: +639178843882
E-mail: ph.investor@gmail.com
Hi, I’m Jay Castillo, full time dad, real estate investor, and internet marketer, based in the Philippines
Very useful. You didn’t mention though if you actually visit the property yourself. Do you do this all the time before attending a public auction?
Hi Mitz, deciding to inspect a property would come after doing a more detailed analysis on a property using details I would get from the bank through phone. Out of a hundred shortlisted properties, I should inspect the top 10 of the most promising. Lately however, my shortlist is normally less than a dozen properties, which means I only visit 1 or 2 properties. Saves me time and gas.
Nice of you to drop by, when I’m financially free, I hope to travel as much as you!
Good PM. I chanced upon this site by accident and I stand by Og Mandino’s words that our Creator still communicates with us and looks after our welfare and they do this through authors and artists alike.Modern day messengers. As he used to say “The Hand of God”. Cheers to you and all this info you are sharing to us.God Bless
This is everything in a nutshell. Thanks heaps Jay. Regards
Hey Dragoro! You’re welcome. Take note that this is just for shortlisting purposes, you still have to do a detailed analysis afterwards.
Nice to see you again, how have you been? As for me I’m still recovering from over fatigue, last Monday and Tuesday was so tiring at the office. Thank God its Friday!
Hi RG. I really don’t know what to say. My mom reads Og Mandino’s books and I really should start reading it as well. Thank you for your comment and may God bless you and your family as well. Thank you also for visiting!
[...] prospect properties before actually doing the inspections with your contractor. My previous post on how to shortlist foreclosed properties should give you an idea on how to trim down your list of foreclosed properties to inspect. Of [...]
Thanks Jay for wonderful insights and simple guides to use in looking for foreclosed properties!
btw, it was nice finally meeting you at the Manila Internet Marketing Workshop! I posted our pictures in this site: http://internetmarketingworkshop.ning.com/photo/albums/manila-internet-marketing
See you this week bro!
Bryan Uy
http://www.investingpinoy.blogspot.com
Hi Bryan, you’re welcome and thank you also for the power lunch.
Can’t wait for the next meeting!;) Muchos gracias jay!
http://www.investingpinoy.blogspot.com
It’s such a blessing to stumble upon your website Jay! I just attended the Think Rich Pinoy Seminar last August 1 and I was looking for information on how to look for good foreclosed properties and I got to find more than that in this site. This is a such a find in itself! Thank you! I’ll be sure to drop by here again.
by the way, are you a TRP franchisee?
Hi John, thanks for the compliment! Nope, I’m only a TRP Club Marikina member. I wasn’t accepted on my attempt to be a franchisee. I reviewed my answers on the questionnaire Larry Gamboa gave me 3 years ago and it was obvious my mindset was not yet ready during that time. I was no longer able to pursue it though because It just so happened that I met someone who was also featured in the book “Think Rich Pinoy” who became my mentor.
Thanks again for dropping by!
Hi Jay!
What does the annotation “w/ Sec. 7 RA 26 ” on a TCT mean ? Will this be a problem?
Hi Richard, it may mean that the title was recently reconstituted but it does not affect the rights or interests of other parties in the property that were duly noted in the original TCT but are not present in the reconstituted certificate of title.
A copy of RA 26(AN ACT PROVIDING A SPECIAL PROCEDURE FOR THE RECONSTITUTION OF TORRENS CERTIFICATES OF TITLE LOST OR DESTROYED) can be found here: http://www.lawphil.net/statutes/repacts/ra1946/ra_26_1946.html
Just let me know if you need further clarifications. I believe I should come up with an article about RA 26 as part of one’s due diligence. Thanks for the idea and for visiting!
Any upcoming Think Rich Pinoy seminar for the month of August?
Im interested to attend pls post if know…thanks
Hi Myke, unfortunately, the TRP seminar for August was conducted last August 1. I guess the next one will be after 3 months.
If you want, you may choose to attend a lecture series on Investing In Real Estate which starts on August 12. More details can be found here: http://www.urban-institute.blogspot.com
Thanks for dropping by!
Thanks for sharing this steps.
Hi! your blog is very informative. I have been reading this to educate myself first before venturing in buying foreclosed properties. I just want to ask if you have TRP seminar on July ? I am a wife of an OFW and I will be in the Philippines this July 2010. Do you have a schedule for July ? Thanks
hi Jay,been reading your articles and I find it very informative.i have a house in Ortigas extention that i want to sell.reason is my family needs a bigger place to live in..Can I request for a copy of CLOP which I might consider in using if I dont get to sell my house in cash…Thank you so much and God bless.
Thank you for such wonderful articles, you’ve really helped a lot to become successful!