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I found this very interesting advertorial in the in-flight magazine of the Cebu Pacific flight we took in our recent Boracay vacation and I just want to share it to all of you here, along with my insights and opinions. The advertorial which I am posting below is from The Property Forum Philippines, one of the top property auctioneers in the Philippines. Its president, Mr. Noli “El Subastajero” Alleje, has become a very familiar face when it comes to auctions of foreclosed properties.
This is a picture of the magazine
Secrets Revealed: Investing in foreclosures. Own your dream home or best real estate investments in auctions
With the collapse of the global financial markets, one investment stands as the best and most secured product, and that is real estate. Manuel “El Subastajero” Alleje’s top picks for property investments are foreclosures.
El Subastajero Alleje has powered his company, The Property Forum Phils., to move over 6 Billion pesos worth of real estate assets in 40 auctions conducted nationwide.
So why foreclosures???
LOW CASH DOWNPAYMENT: While you have seen the bank’s offer price to be P3M, you may have failed to notice that the downpayment is only a measly 5% to 10%. That’s only P150,000 to P300,000 as initial cash out. So how much can your P300,000 cash-in-the-bank be worth if you buy a property at 10% down payment? You would now be the owner of a P3,000,000 real estate investment…
I never knew that there were auctions that only required down payments as low as 5%! As far as I remember, all the recent auctions conducted by Property Forum Phils. required at least 10% down payment. Anyway, having a low down payment requirement is really one of the advantages of buying foreclosed properties. I often hear people say that investing in real estate requires a lot of money. I beg to disagree! However, I do understand where these people are coming from as I too had the same thoughts until I found out that only low down payments are required when buying bank-foreclosed properties and this is often called leverage. You can read more about leverage here.
LONG PAYMENT TERMS: After paying the low down payment, the balance of the investment can be paid over a short period of 5 years to a long period of 15 years. So you are hedging and earning over market appreciation…
I’m not really sure what the last sentence meant but what I do understand is that longer payment terms mean lower monthly amortizations which translates to higher positive cashflow. The last sentence could also mean that you will be paying amortizations based on the value of the real estate at the time of purchase (so you peg the price). At the end of the payment period, the value of the property has already appreciated and you can profit from the appreciation when you sell the property. Hedging basically means that you buy low now and peg the purchase price because you anticipate that the value of the property you bought will appreciate later.
LOW INTEREST: Imagine getting this low down payment, plus long payment term, at low interest rate of just 8%. Compared to purchasing fresh housing loans today with a demand of a higher lending rate, buying into bank foreclosures always offers a lower interest rate…
8% interest rates are usually available only for the first year and this is often not a fixed rate. This means at the end of the year your loan may be subject to “repricing” or adjustments in case the market interest rates have changed. What happens if a new financial crisis happens(God forbid) and interest rates shoot up? Then the interest rate of your loan shoots up as well along with your monthly amortizations, which can lead to negative cashflow situations and even more foreclosures. This is the reason why I often advice that one should always make sure that their interest rates are fixed for the longest possible term. By the way, other lending institutions like Pag-IBIG may offer lower interest rates (6% for loans up to Php400,000 and 7% for loans over Php400,000 up to Php750,000). I suppose transferring a loan from a bank to Pag-IBIG would be a good option in such cases.
EASY CREDIT APPROVAL: Fear not the credit investigation. Maybe in the past you may have made a wrong business decision that has affected your credit standing, thus preventing you from availing a mortgage. In buying foreclosure, banks go thru the CONTRACT TO SELL documentation, which entails the property to remain in their ownership. Therefore, the possibility of no mortgage or lenient credit investigation, to none at all…
Some banks use a Contract-To-Sell (CTS) wherein the Title of the property is not yet transferred to the buyer until the purchase price is paid in full. In contrast, if a property was bought through a mortgage loan, the Title is already transferred to the buyer and the same Title is then mortgaged to the bank. Because of this, the latter may require more stringent requirements. But still, even if a bank or a lending institution will be using a CTS, they would still do a credit investigation like checking a buyer’s capacity to pay, etc.
GOOD TITLE: A constant concern in real estate investment is the veracity of the title. Remember that before this real estate asset became a foreclosure, it was a collateral for a loan and has undergone due diligence review by the bank. You must also consider that banks will not endanger their integrity and credibility…
Banks are supposed to do due diligence before they accept a property as collateral for a loan so this is very true. Nevertheless, one should always do his or her due diligence even if one is buying a foreclosed property from a bank because sometimes foreclosed properties are involved in pending court cases (like the red tag foreclosed properties from BPI-Buena Mano) and these are annotated on the Title as a lis pendens (pending case). Always do your due diligence. At the minimum, one should get certified true copies of the Title plus traceback from the registry of deeds, etc.
IMMEDIATE APPRECIATION: When you buy real estate investments you make money, so be sure you get the best deal. It would be good to check out market values in the neighborhood…
I believe what they were trying to say was one can get immediate appreciation in the form of instant equity (Equity is the difference between a property’s current appraised value /market value and the loan principal balance) if you are able to buy a foreclosed property at a price below market value. This is the essence of the statement “You make money when you buy, not when you sell” as often said by Robert Kiyosaki, author of Rich Dad Poor Dad. Just make sure that you really are buying a property below market value by doing your own property valuation.
Now that you know the secrets of buying foreclosures, how do you get started?…
Hold your horses! Before you go out there to start looking for foreclosed properties, make sure you have learned to manage your finances first. Start increasing your financial IQ and be on your way to becoming financially literate. If you can’t manage your cashflow now, you won’t be able to do so when you already have investment properties. Without financial literacy, no matter how many good deals you find, you will surely end up losing money.
SEARCH FOR YOUR CHOICE: For the complete list of ready-to-market foreclosures, go to www.propertyforum.net.ph and utilize the first Philippine real estate search engine.
Sadly, their website is not updated. Don’t worry, as long as I get copies of their foreclosed property listings, I’ll post it here in Foreclosure Philippines.
INSPECT ALL CHOICES: It’s time to go shopping! Prepare a list of choices. Be sure to have made necessary arrangements to be able to enter and inspect the properties. The Property Forum Area partners will help you choose your investment, as all properties listed in our auctions are pre-inspected.
Before inspecting all those foreclosed properties, make sure you have at least analyzed and shortlisted them, and visit only those that look really promising. When inquiring, make sure you also ask the right questions.
GRAB THAT GREAT DEAL: Our auction assets go through a price deliberation process that ensures bidders that they get value for their money. That great deal may be handed to you at even almost half its market value.
Better make sure you really are getting that foreclosed property you are eyeing at below market value by doing your own property valuation as I have mention in my post on how I estimate market values of foreclosed properties.
If you want to be a foreclosure real estate investor by acquiring property, fixing it up, and leasing it out, or you would like to buy a ready to move in house with low down payment, long payment terms, and with the right interest rate, then call us. We will gladly share with you our experience on how do it step-by-step. HAPPY TRIPPING!!! PROPERTY IS PROSPERITY.
Personally, I have found it a pleasant experience in dealing with Property Forum Philippines. I attended my very first auction which was conducted by Property Forum Philippines sometime during the first half of 2007 , and then a year after, I had my first win for a bid for a foreclosed property during a public auction also conducted by them (read more about it near the bottom of this post). I believe they now also offer investors a means to invest passively in foreclosures. I’ll check on this and post more information as they become available.
Happy investing!
—–
To our financial freedom!
Jay Castillo
Real Estate Investor
Real Estate Broker License #: 20056
Blog: http://www.foreclosurephilippines.com
Social Network: http://foreclosurephilippines.ning.com
Mobile: +639178843882
E-mail: ph.investor@gmail.com
Text by Jay Castillo. Copyright © 2009 All rights reserved.
P.S. – If you are a new visitor, please start here to learn more about foreclosure investing in the Philippines.
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