My wife who has become so obsessed with finding a new house we can call our home shares updates on what we are thinking of doing with our old house that was devastated by Ondoy, what things to consider, our target locations, finding not just a house but also a sound real estate investment by searching foreclosed property listings, and applicable tax exemptions and pending articles about this and other taxes that apply to real estate, which I hope she finishes soon…

I’m just glad that I was able to convince her to buy a property the way true real estate investors looks for a good deal. Knowing how stubborn she is, I was surprised how easy it was for me to convince her that this is a perfect opportunity for us (as a team) to find a really sound real estate investment that will produce a good positive cashflow if we decide to have it rented out, or sell it for a significant profit down the road. This can only happen if we buy a house well below market value and apply Rich Dad’s principle “… You make money when you buy, not when you sell” as often mentioned by Robert Kiyosaki, best selling author of “Rich Dad Poor Dad”.

Our journey to our new house

By Cherry Castillo

As most of you may already know, we are looking for a new house, as our old house was totally devastated by Ondoy. I am sure many of you are in the same boat as ours. Of course, our decision to move entails more decisions with regard to the next steps, such as:

1. What do we do with our old house? Right now, we have a payment holiday until January 15 with Pag-Ibig. But after that date, we have to continue paying the monthly amortizations. Admittedly, the market value of the house is in question, and it’s not practical to continue paying the amortizations which was based on the market value of Provident Village prior to Ondoy. The next question is, do we sell it now, do we let Pag-Ibig foreclose it, or do we surrender it through a dacion en pago (a.k.a. payment in kind – that is, we give the house as payment for the loan)? If we sell it now, we will be selling it at a loss, but we will be cutting our losses since we will stop paying the high monthly amortization. If we let Pag-Ibig foreclose it (or if we surrender it through dacion en pago), how do we go about it? While it is clear that my husband will no longer be able to take out another housing loan from Pag-Ibig, would it also affect my husband’s credit rating and prevent him from taking out a loan from banks?

2. Granted that we will be moving, where do we go? We can  go anywhere! Anywhere where there’s no flood of course. And since we are now so paranoid of natural (and man-made) calamities, if we are to move, we have to make sure that the area is one that was not reached by floods and that there is at least a second floor.  I don’t want to be in the mountainside too for fear of landslides. We are now open to condominiums (unlike before, when I really could not imagine living in one), but not those that are too high, as I am also concerned about earthquakes. You may have noticed that there have been a lot of news about earthquakes in the Asian region and in the Philippines in particular. I have been telling my officemates that the best place to be is in a low-rise condominium, somewhere in the 3^rd or 4^th floor, since it will not be reached by floods, the structure will be strong enough to withstand earthquakes, and if there’s a fire I can jump out of the window and just have broken bones, or, if there’s a swimming pool nearby, I can just go straight to it. I know it’s a bit on the psycho side but you really get to think a lot about these things if you’ve gone through the great flood brought about by Ondoy. Oh, I forgot, I don’t know how to swim. I better join my son in his swimming lessons this summer! And time to turn into reality the Ondoy-related ideas I have thought about.

3. Where are our target locations? I have narrowed down our choices to the elevated portions of Kapitolyo, Pasig, San Juan, and Quezon City near UP. Aside from the earlier-mentioned considerations, it is very important for us to be near to a good co-ed school for our son as he will be turning five in January 2010 already and it won’t be long before he enters elementary school. I have sort-of developed loyalty to Mother Goose  Playskool and Grade School (This is my son’s school in Provident Village, Marikina which was also devastated by Ondoy. Because they have several branches, they allowed my son to finish the rest of the school year in their Makati branch. Mabuhay ang Mother Goose!) so I want to find a house near a Mother Goose branch. As for my work, I am currently working in Makati but I am open to moving to Ortigas or QC, or maybe if my husband’s business picks up, I might just help him in the business. One of the best lessons I learned in the past years is that TIME is the most precious commodity. There are only 24 hours in a day and spending it on the road is totally useless. So the house should be near the place of work and study. In the course of my research, I have learned that prices are really so steep in the good areas.

4. This of course led me to search our site for foreclosed property listings (In the right side of the this page, you can use the “search” function to look for listings in this site.) I have also called several banks so I have updated listings with me, which my husband will be posting soon. I have also revisited my husband’s post on the Ultimate List of Bank Websites and I have found some updated listings there too. I have found a lot of promising properties and I must admit that it’s really exciting looking for good buys. I have been a bit depressed since last week, after I visited our old house and saw its sorry state. I determined that the only way for me to get out of depression is to finally have a new house! I have been joking that leaving our house is like breaking up with a boyfriend of 5 years – the only way to have closure is to have a new house/boyfriend! The process of looking for and deciding on the perfect place to grow our roots is both tiring and exciting. I do hope we find the house meant for us soon. We have visited a foreclosed property in Mandaluyong last week, full of excitement, only to have our bubble burst because of the really bad neighborhood, one of the worst as my husband put it (And he grew up in Mandaluyong! I really don’t understand why the Mandaluyong local government spends so much money fixing the islands  when they have so many squatters!).  My husband reminded me that it should be the other way around – we should find the worst looking house in a good neighborhood. I have also selected several properties and when I called up the bank, I discovered that they either have pending cases or encumbrances, or the bank does not have possession. Hay! I guess we have to look at more foreclosed properties (Around 100 more according to my husband – that’s a lot!). In God’s time, I know we will find the one for us.

5. Applicable taxes and tax exemptions? Being the tax person that I am, I really have to consider taking advantage of the  capital gains tax (CGT) exemption from the sale of principal residence. I also need to create a post about this and all the other taxes – real property tax (RPT), percentage taxes, VAT, etc. (Okay, I’m really delinquent I admit!).

So basically, we will be going through the entire process of choosing a property that will also be a good investment. We are also looking at other properties, though not foreclosed but are rather houses for sale by owner (FSBO), but which look like good deals. We will do our best to document each step of the way so that it can be a handy and useful guide for everybody, much like a walk-through of the process. Wish us luck!

Cherry is my wife. She is a certified public accountant (CPA) and lawyer.

—

My vision – financial freedom for all!

Jay Castillo
Real Estate Investor
Real Estate Broker License #: 20056
Blog: http://www.foreclosurephilippines.com
Click here to contact me via E-mail
Mobile phone (Call/SMS): +639178843882
Twitter: http://twitter.com/jay_castillo
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Text by Jay Castillo. Copyright © 2009 All rights reserved.

PS. If you are a new visitor, please start here to learn more about foreclosure investing in the Philippines.

PS2. Larry Gamboa and Bo Sanchez will give the Think Rich Pinoy Seminar this November 21 at the Philamlife Building in UN avenue in Manila. Larry will discuss his unique Real Estate methods, buying foreclosed properties and turning them around for passive income. You’ll also get to play Robert Kiyosaki’s CashFlow 101 Game and learn! To attend, click here now!

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Our journey to our new house – Finding a new home like true real estate investors is a post from: Foreclosure Investing Philippines

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This is the second part in my series on the reflections of a real estate investor(that would be me!) after Typhoon Ondoy’s wrath. If you missed the first part, you may want to read it before reading this. You can find part one here – Reflections of a Real Estate Investor: Ondoy’s aftermath

Next I try to share what I’ve learned and become aware of as a licensed real estate broker, homeowner, and as a real estate investor in Provident Village, Marikina City, Philippines. Here goes…

This banner was placed on a wall at the entrance of Provident Village, Marikina City

Yes, I know we can!

Last Monday, I went back to Provident Village to see the situation and to check if we can already go back to our house to try to salvage what can be salvaged and assess the extent of the damage. As I turned right to the entrance of Provident Village, I saw the banner above and  tears rolled down my face immediately. No, they were not tears of despair but rather tears of hope. The banner reads “Bangon Marikina, kaya natin ito (Get up Marikina, we can do this!)”. I say yes, I know we  can!

I was also pleasantly surprised that there were a lot of bulldozers and trucks that were being used for the clearing up operations. Last Monday, the front of our house was still full of mud and debris which made it not passable to small cars like my Hyundai Getz but I can see that our entire street will be cleared before the end of this week.

Suggestions from Mayor MCF

After a quick visit to Provident Village, I then proceeded to the Marikina City Hall to attend a meeting between Mayor Marides C. Fernando (also known as MCF to her constituents in Marikina City) and the Real Estate Brokers Association of the Philippines – Marikina River City Inc. (REBAP-MRCI) chapter which I was a member of.

REBAP-MRCI President Malou Llado(left) speaks as MCF(center) and other REBAP-MRCI members listen

Meeting adjourned. I’m the guy at the back but in the middle of the picture, with glasses.

As real estate brokers (and also as a real estate investor in my case), members of REBAP-MRCI wanted to know how we could help the Marikina City Government after the City of Marikina was badly hit by Typhoon Ondoy. We were also interested in finding out what plans the Marikina City Government had for Marikina after the devastation. Obviously, the floods will have a big impact on property prices and demand for such, which in turn would affect the livelihood of real estate brokers that focus on the City of Marikina. I’ll try to summarize what I learned from the meeting below:

1. MCF suggested that houses in those areas that experienced very high floods should seriously consider using their first floors exclusively for garage or parking purposes and houses should at least have a second floor. A roof deck is highly recommended. It would be more like a house built on stilts.  I personally have thought of the same in case we do decide to push through with plans to have a major renovation done on our house. More on this later.
2. During the conversation, one member of REBAP-MRCI asked if there were any plans to put up more water pumping stations in Marikina. MCF answered with another question, “Where would the flood waters be pumped to?” I guess the real problem is that the flood waters are not really from Marikina itself but rather from the surrounding areas. That’s the problem with being a valley.
3. With regard to reports that some homeowners are selling their houses at ridiculously low prices and yet still have no interested buyers, MCF advised us that maybe we can find opportunities there. Of  course as licensed brokers we may help those that want to sell and also help find houses for sale for real estate investors.
4. Another suggestion from MCF was to use low lying areas exclusively for non-residential purposes which are okay to get submerged by flood waters.

Our meeting got cut short because of an unplanned but very welcome healing mass with healing priest Father Suarez which was just about to start at the Marikina City Hall. The meeting was adjourned and  we just attended  the mass. This was just what we all needed, healing!

Father Suarez during the healing mass at the Marikina City hall

Lessons learned and observations of a homeowner in Provident Village

1. Always have your house insured with coverage for Acts of God. Though a lot of people have said that what had happened was actually an act of man(ex. the alleged releasing of water from dams, climate change, etc.), it would not hurt to have Acts of God coverage. The higher premiums would have been well worth it. Unfortunately, our house only had fire insurance. I’m quite certain insurance premiums would sky rocket after the floods and I also won’t be surprised if insurance companies would start refusing to give such coverage to areas hit by the floods.

2. Houses should be built like houses on stilts. In this configuration, the ground floor would be just a wide open space that can serve as parking or a basketball court, etc.  At the very minimum, houses should have a second floor that has an exit that won’t be hampered by flood waters (more on this below). There were a lot of reports of people being trapped at their second floors and they only got out by destroying the ceiling and the roof.

3. Functionality of doors and windows and their locks should not be affected by flood waters. One thing in common I found with most houses that got submerged by the floods was the doors and windows(including fire escapes) could not easily be opened. Either the door mechanisms/padlocks got jammed or the wood of the door itself expanded and got stuck with the door jamb. I’m not sure if there are water resistant door mechanisms and locks out there but I guess keeping them well lubricated would help. As for doors, I guess using high quality wood would help prevent the “pamamaga(expanding)”. Obviously, if the rising water had force and pressure, this would also hamper opening them.

4. Have rubber boats, air-beds, life-jackets, life-savers or inner tubes, or any acceptable “floatation” device handy. These would at least give you a fighting chance in case you needed to move to higher ground. When my son and Emily, his nanny, eventually had to transfer from roof-to-roof to reach the 3-story apartment building a house away, they used an air-bed from one of our neighbors. I’m so thankful for the courage and quick thinking of Emily, and Edgar, one of our neighbors. It turns out Edgar was a ship captain and was prepared for such situations. Thank God!

5. Have some sort of alerting mechanism in place that would warn against floods, etc. Here in the office, I implemented an automated monitoring system on critical servers which automatically sends SMS alerts which I receive on my cellphone in case conditions that can lead to problems occur. For example, if the free space on the system drive of our e-mail server goes below a threshold we have set, all concerned I.T. staff including myself will receive an alert through a text message. I just wish that someone can come up with a similar system that would alert the City Government just in case an unusually high amount of rain fall occurs or if flood waters or water released from dams  are detected from surrounding areas that would eventually end up in Marikina City.  The City government can then alert residents or even evacuate them. Maybe I should forward this idea to PAGASA, they already have equipment that measure rainfall right?

6. The flood receded very fast so the problem is really with the source of the floods. Would you believe that the flood that reached levels as high as the ceilings of the second floor of houses in Provident Village receded by the next day? Yes, it receded that fast. In fairness to the efforts of the Marikina Government, I believe that the drainage systems are functioning as they should, but it just so happened that the flood waters, wherever it came from, was just too much. What if there was a way to at least control the source of the floods? Another  challenge, how can the drainage systems be cleaned of the mud (that will eventually harden) left behind by the flood waters?

7. Just sell the house and live in a flood free area! I know a lot of you have this in mind just like me. This would be the ultimate solution for me and my family unless someone finds a permanent solution that would result in a flood free Provident Village. I just wish selling the house would be easy. We could then move to another place in Marikina that was not affected by the floods. In case I decide to, I would have to wait for the village to be cleared of all the mud and debris before I can sell the house. Let’s wait and see…

Points to ponder from the point of view of a real estate investor

1. Do I renovate the house and construct a second floor and a roof deck or do I repair the house at its present configuration (our house is just a bungalow)? The obvious things I should consider would be the cost involved and if these can be recovered if I have our house rented out or sold down the road. For the same cost of constructing a second floor plus roofdeck, I could already have a new house constructed somewhere else that is flood free, which I can definitely sell for a profit or rent with positive cashflow in the future.

2. Do I sell the house now (after doing some repairs to make it ready for occupancy) or wait for property prices to stabilize after a few years? As mentioned above, property prices in Marikina have surely been affected by the recent floods. Demand is also very low while supply is very high as I’m sure a lot of homeowners already have their Provident Village houses for sale while there are very few people interested in buying properties in areas affected by the floods(except maybe for investors). If I decide not sell the house now, I should be able able to find tenants to at least cover part of the monthly amortizations for our house.

3. As an investor, I really should avoid flood prone areas! I’m just lucky that all of my investment properties were not affected by the floods and only my primary residence was hit. Just the same, I should also treat my home as an investment as I have mentioned in my recent post:  Why not treat your first home as a real estate investment?. As early as now, the implications I see are getting a negative cashflow if I do decide to have our house rented out, the difficulty of finding tenants/buyers for a bungalow in the middle of  Provident Village, the time it would take for the clearing up operations to finish(I estimate this to finish around Christmas time), and more importantly, the safety of those who would be living in our house.

What do you think?

To be continued…

*Photos of MCF and Father Suarez are courtesy of Cora Uy of REBAP-MRCI: http://www.rebapmarikina.com

**I would also like to thank all REBAP-MRCI and REBAP-QC members for the relief goods given to fellow REBAP members affected by the floods, including me and my family.

Lessons learned by a real estate broker, homeowner, and investor from Provident Village is a post from: Foreclosure Investing Philippines

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