Rental Thoughts Philippines
As many of you already know, my wife and I rent the home we are living in right now in the Philippines. To many Americans, long accustomed to buying more house than they can afford because “real estate always goes up” renting instead of buying is perceived as a very bad thing … an admission that I am unsuccessful or one step ahead of personal bankruptcy or the bill collector. Yet another “ran off to the Philippines failure” in some people’s view, I am sure.
Well opinions are just like armpits, everyone is entitled to a few, but for those that do feel that way, my own opinion is, you would be wrong. I am heading into my retirement with zero debt. Zero, as in “don’t owe nobody”. My car is near-new and paid off, I have money in the bank in both countries, and the next significant money my wife and I are planning to spend is travel for pleasure … for cash, nothing on the cards.
The economics of trying to buy a home like we live in now just don’t make sense. I know I have written about it before, but maybe not here on LiP. Basically I can pay my current rental rate for 10 or 11 years before the investment I’ve made equals what a normal down payment for a house in this price range would be … and then I’d have to take on a loan for 15 or 20 years to pay off the balance. Regardless of the dollars and pesos involved, I doubt I’ll be living in this house 10 years from now, so it makes no sense at all to me.
That being said, there’s a couple things you need to keep in mind if you are thinking about moving to the Philippines and renting a place to live:
Repairs and Improvements: In general Philippine landlords are not obligated to “take care” of their tenants to the degree US landlords are. I’ve even been offered houses to rent that lacked a working toilet. “Oh sir, once you sign the lease and make your deposit the landlord will order the repairs.” Yep. And I have some ocean-front property in Arizona to sell you too, if you believe that fairy tale. Our editor here, Bob, reports he has an excellent landlord who is atop all repairs right away, whenever asked. That’s great. It is also not the norm.
Deposits: Ah, yes, the magical deposit. In my area the typical lease asks for first and last month and one extra month’s rent as a damage deposit. Allegedly this will be returned upon the satisfactory termination of the lease. In practice, this seldom happens. The order of normal business I am aware of is this … you will likely be allowed to just live out the last couple months for free in lieu of an actual deposit return. If the landlord doesn’t agree to this, what is he going to do, evict you? You were leaving anyway. Again, like everything YMMV, but I certainly don’t expect my deposit back, even though the house is in a heck of a lot better condition now than when we first rented it.
Post Dated Checks: A very common business practice here in the Philippines, for any regular recurring debt, is to write a year or more worth of checks, in advance, dating each check for the month it is due and handing them all over to the landlord. It’s common, and it works for some people. I don’t like it. I am honored, because I have relatives nearby, known to the landlord, to be able to pay my rent in cash each month and I do consider it an honor. Especially since I don’t have a Philippine checking account and am in no hurry to get one. Think this through before you get too far down the road on a house you may be interested in renting.
Utilities: Bob also wrote about this issue recently when he pointed up the need to always keep receipts. It is likely your landlord may keep the utilities in his/her own name and just expect you to pay the bills for each month of use. Very unlikely that you can change this arrangement, even if you want to. For example, the electric company is very unlikely to even give you service as a foreigner without permanent residency status and some history of living here.
Not a big issue. Works ok for me and many others, but there is one huge caveat. Make sure any account you are thinking of accepting this arrangement on is current. If, for example, the last tenant ran up big charges, guess who is going to pay the charges in order to get the service turned on? Do you have a mirror handy?
An American friend just about went berserk on this issue a few years back. He rented a house that had a phone line but did not get the phone turned on at the time. A month or so later he visited the phone carrier’s office and asked for service. The smiling clerk said, “Certainly, sir, the charge will be about 50,000 Pesos.” After my friend picked himself up off the floor, he asked why.
Well, turns out that is what the last tenant had ran up and skipped out on. Now to people imbued with a sense of fairness, as many of us are, this just sounds unthinkable. My friend didn’t make those calls, why should he pay for them? The landlord certainly didn’t make the calls, so why should he pay for them? The phone company, though, is a public utility. It’s their job to collect the bills owed them. You want service on that phone line, then you pay the bill.
Eventually after a lot of harsh words, arm waving and elevated blood pressure, my friend just gave up on the idea of a land line phone. But the exact same thing could happen with an electricity account, or water. It’s a lot harder to live without electricity or water. So before agreeing to take on any utility accounts, visit the utility in question … the landlord may not even know about unpaid charges … and inquire for yourself. You can not fix a problem like this after the fact, you have to have reliable information before you sign a lease, or, just like in playing tag, you are “it”.
Neighbors and Noises: A foreigner friend lives nearby and suffers greatly from noise. The neighbor on one side of my friend’s home in our residential neighborhood actually runs a commercial sheet metal manufacturing business out of his house and driveway. All day and sometimes into the night metal gets beaten into shape, welds get made (just great for the power in my friend’s house) the welds get nosily ground down, the parts get spray painted with clouds of smelly spray paint, and noisy trucks deliver and pick up often.
The is essentially no concept of zoning and conforming use laws in many towns. And there is no one who is going to go out and enforce any that do exist in many cases. How did my friend get into such a pickle? Easy.
He was so afraid that the landlord would charge him a higher price because he was a foreigner, he sent his sister –in-law to look at the house and negotiate the price. The lady did a fine job, my friend only pays PhP 1,000 more a month than I do, which is the going rate for these houses. But to the sister-in-law, the sheet metal shop next door was nothing unusual at all … in fact some would consider it an asset, because if you had an unemployed bum or a drug dealer living next door, things could be worse, diba?
Dave’s advice? (and it’s only my opinion, of course). Forget about this sometimes overblown fear of being ripped off with a foreigner price. You can easily find out what things are supposed to cost without sticking your nose in first. Then go look at any house you are going to rent yourself and make your own decision. In particular, as part of the process, introduce yourself to the neighbors on each side and the lot on the street behind you. It only makes good sense to me, you are the one who has to live there, and you should do your own research.
If something about the neighbor scares you or turns your stomach … or if the neighbor seems hostile toward you, wouldn’t it make sense to find out before the landlord has your deposit money and your signed lease?
Happy Philippine home renting.
Hi Dave, very good post for expats (I am a pinoy BTW). May I know how long have you lived there? I cannot add anything but can only ask how long have you lived there.
@ Roy ==> Hi Roy, thanks for writing. Of course I know your Filipino, I read all your comments. I have lived in the Phiulippines full-time now for 16 months. I write often on my own blog, . PhilFAQS which Bob kindly posts right there in my little bio footer at the end of every post. Again, thanks for reading and commenting.
Dave,
I blows my mind even here in the states when people buy a rental property and the rent won’t even cover the cost of the mortgage. Even if one can buy a decent house for P2-3 million pesos in the Philippines, it will take a long time to pay it off. The personal income there is very low and therefore the rent will also be low. More importantly, can you even sell the property for what you spent on it. I seriously doubt this given the lack of the middle class there.
Only 16 months?! Impressive Dave. Your fellow expats would learn a lot from you. Everything you said about the utilities is true.
“Even if one can buy a decent house for P2-3 million pesos in the Philippines, it will take a long time to pay it off. ”
Something tells me this does not happen in the Phil. Most decent houses in the Phil that cost along that tag price of 2-3 million pesos are paid usually in at least30% downpayment, the balance paid in10 yr installment at the most. .
Hi Roy, my bad. I was thinking of my visa status at the meonent, as that’s what i have on my mind. I have lived here 28 months now, continuously. There’s basically nothing that I didn’t learn from fellow expats, rather than them learning from me. I’ve been studying the subject for more than 10 years now. ever since my wife and I decided we would retire here.
You won’t learn abiout living here as a foreigner from your Filipino freinds for the most part. How could you, they aren’t the foreigner
It’s no different in the US or any other country, most Americans know little or nothing about life is like for a foreigner in the US, becuase they have lived there all their life.
@ ===> Adel. Hi thanks for reading and for commenting. The figures I am talking about apply mainly to low mifddel class single family housing like the one3 I live in … built 30-something years ago as low-cost housing for BSP employees.
But you absoltely _can_ make money with rental property in the Philippines, I’ve been writing about it exstensively on my own blog.
My wife and I agree that one of the saddest things we see are OFW’s who come back to the Philippines having spent most of their money on short-term things, when they could make wise investments in something taht will pay for the rest of their lives and even live on aftyer them … like the affordable properties my local investor friend is building.
Do the numbers. If you buy/build say a 4-door townhouse property where each unit rents for P10T a month, pay it off while working abroad, which can be done if you live “sulit”. and then come live in one unit while renting the others, that’s P30T per month for life, just for having a roof over your head. Build two units like that and you can clear P60T or more per month, for life, even when you get old and crippled and can’t work. When you die, your children inherit.
People just need to dream the right dreams, for tomorrow, not today.
Rent an rant .. Own an moan ..You have good articles John .. I really enjoy them I rented 2 different places , I had no trouble with owners .. they all were very helpful to my wife an me . then Jess had the opportunity to buy some land 10×15 sq m ..30,000 pesos out in the country .. zoned no business it is 50 meters off the road .. we need land on the road to have a business were we are at .. ” go figure ” .. My wife built the house in 4 months and she moved in ..1 story , block house 2 cr’s, 2 bedrooms ,kitchen,dinning,living room and a ..2 meter high bamboo fence around the property ..The location I am in the house is worth about 250,000 – 350,000 pesos .. oh and i have to pay for the land title change — 50,000 pesos to do it .
” Rich American ” Now I’m looking at some farmland back in the forest ..6 hectors … So when i move there i have a place to live . .. Sell the house and buy the farm . ” Sounds like America ” . Wheeling an dealing in the pines .. Phil n Jess
Hi Dave,
Wise words of advice.
Many people in the west have been brainwashed that buying is best,but sometimes renting has many advantages,including flexibility.Ive seen many examples(and i’m sure you have) of a couple or small family living in a huge property mortgaged to the hilt,far bigger than they need.Common sense should tell them its better to buy 2 or 3 smaller properties as per your Philippine example and rent out the others.The problem with common sense is,its not very common.
Many people also forget that when they buy with mortgage,they own nothing until every cent is repaid,as many in the west are now finding out.
regards Chas.
Hi Dave,
A great post with lots of useful info for the resident-to-be.
One thing I’ve noticed on some of the Philippine real estate web-sites is that the more expensive properties seem to languish forever. I suspect they might be owned by foreigners who built their dream home in paradise and then for whatever reason moved out of the Philippines. Now they can’t unload their house because most filipinos can’t afford it and the rich filipinos prefer to build their own design.
@ Phil n Jess ==>> Keep on with the dream. You have to build to suit the area, that’s for sure/ Many must realize I live in the metro area, things like a 4-door or 6-door twonhouse type project may not be what is needed where they live. As the saying goes, YMMV.
@ chasdv ==>> Yes it is always ricky to get into the rent versus buy debate. But it is true, many Americans have no idea what they really ‘own’. Example, the last house I ‘owned’ was in Colorado Springs. Much of the city is built atop agandoned, shallow coal mines. All property within the city limits is deeded only to 10 feet below the surface. The city owns the rest, including the mineral rights. Also the city has ubnrestricted right of access to any property for the extraction of minerals.
So, with the city budget in the toilet and the continua;l need for more energy always present, what would a lot owner do if the city drove up and started sinking a mine shaft? Not a damn thing, legally, except wish that he had inly signed a one year lease rather than a thirty-year mortgage.
There really is no ’security’ in life, we each only have what someone else grants us, no matter if we rent or own.
@ Randall Jessup ==>. Indeed. I could fill a blog with all the ‘busted dream’ stories. If you go to high-end subdivisoons in places where there are alot of expats … like Angeles City, Cebu and such, you will see house after house for sale, naby where people subnk their ‘lungs’ into the project and then, for whatever reason, now want out.
The offers don’t come often, becuase ven a bargain price for many of these homes is more than many new guys can or will pay, and the people who are sitting on that kind of money, foreginer or Filipino, prefer to build their ‘dream’, not buy someone else’s.
My wide and I do intend to build something together, soon. But it will be somehting like one of these small town house style aprtment buildings in all likelyhood. Not only can buildings like this bring in a small income in metro areas, but if you have to think worst case you can always live in one unit and still pay the bills, something it’s much harder to do with some expat mansion.
Hi Dave,
Great post, lots of very useful information there. I’m learning a lot on this web-site.
Great article Dave . I will have to visit your site .
When we bought our house in Las Pinas it took over a year to get title as the sellers had not paid the taxes due.We ended up paying the bill.Be aware that everything connected with taxes and utilities are proven to be paid before completion of the sale or you might end up with payments you had not considered.We paid as there was no option as the sellers did nothing so it was pay up or no title deeds.