On this blog, I have long advocated renting your house first when you move here. Why? Isn’t it a waste of money to rent? Actually, it is not, and we’ll talk about that later in this post. But, putting money issues aside, do you realize how advantageous renting can be? It can really give you a chance to move around, get a feel for your new home country, learn a few new things, etc. Let me give you a little rundown on my experiences.
Let me say first, that we have moved more than we intended to, no doubt about that! It’s been a good experience, though, and quite helpful to me.
When we first moved here, Feyma and I lived in General Santos City. We rented a beautiful house from a British man and his Filipino wife. This couple had moved here and built the house, then they had some marital problems (due to another subject I’ve talked about – aggressive women chased the guy and he enjoyed it!) they split up. He stayed in the Philippines and she went back to Britain. The house was very nice, and we rented it very cheap, since they had a hard time finding a renter. As I recall, the house had been marketed for sale at P5 or P6 Million. We paid P11,000 rental. Under the rules of real estate that I knew back in the States, a house should bring the owner about 1% of the property value per month in rental to be a money maker. If they had been able to rent that house at that percentage, they would have gotten P50,000 per month. So, I paid about 1/5 of what the owner should have wanted to get in rent for a property of that value. Nice deal, don’t you think? We liked the house, it was beautiful – big yard, marble walls and floors, etc. – but we decided that General Santos was not where we wanted to settle down. We lived there 2 years before moving to Davao City.
When we moved to Davao City, the housing market here was tight, it was hard to find the right place to rent. We ended up settling for a nice place, but the size was only about half of what we needed for our large family. We paid P12,500 per month for rent, which again was quite reasonable. But, we were very cramped there. We signed a one year lease on the place, but after less than 6 months we found a more suitable place, so under the terms of our contract we moved out and forfeited our security deposit (as I recall it was 2 months rent).
After moving from that place, we ended up in Marfori Heights Subdivision in a very large older house. The house was built back in the 1960′s. It had a wonderful huge yard, and the house was absolutely huge too! We actually called the place by the nickname “The Auditorium” because it was so big. We really liked this place, and we lived there for 2 years. We would have stayed longer, but we had some trouble with the landlord, which I have also written about here on the blog.
When we moved from Marfori Heights, we ended up in a gated subdivision, Woodridge Park Subdivision. It is a very nice place, akin to some of the nice neighborhoods in the States, with large stately homes and such. We moved out after one year because the house had a lot of things wrong with it, and the landlord was unwilling (read – he didn’t have enough money) to fix the problems. Broken water pipes underground caused our water bill to be 10 times what it should be, toilets and showers leaked water all over the place, etc. And, this was a relatively new house, and an upper class house at that! We were paying P50,000 per month in rent, and the place was falling apart, so we decided to move.
We always loved living in Marfori Heights, it was so near to everything, so we decided to move back there after leaving Woodridge. As a matter of fact, we moved into the house right next door to where we had lived before, and we are still living in this house. We really like it here.
Now, why all this moving, and why am I recommending that you rent for a while and do a little moving around like we did? Well, every time we move we learn a little bit about what we like and what we don’t like. We always thought that those gated subdivisions were so nice, but after a year of living there, we found that we didn’t care for that lifestyle. Renting allowed us to re-evaluate our decision to live in General Santos City, and I’m glad that we moved to Davao City, because we both love it here. See, every move taught us something that we would not have otherwise known. This is why I feel that for somebody who is new in moving to the Philippines, this is a very desirable thing to do. Look at the British/Filipina couple that we rented from in GenSan, they built a beautiful house, and it didn’t work out for them. In the end, they had to get whatever they could for their house and try to rebuild their lives. Don’t let that happen to you!
Now, why do I say that renting is not a waste of money? Well, you have to consider the cost of money. For example, I pointed out above that we rented a P5M house for P11,000 per month. Let’s break that down and see how much of a waste of money that was:
- To buy this house, it would have cost P5 Million. Let’s just say that the dollar is at P50:$1 (I know it’s not, but we are just making an example here, and the math will be easier). To buy the house would have been $100,000.
- If I had taken that $100,000 and invested it in a secure investment instead of spending it on a house, how much money could I have earned on it? Well, let’s say that a very conservative investment would have brought me 5% return. So, $100,000 would have brought me $5,000 per year.
- My total rental payments would convert to $220 per month, so one years worth of rent would be $2,640.
- By putting the $100,000 into an investment, and paying rent out of my returns, I would keep the $100,000, pay all my rent, and still walk away with $2,360. Not bad, huh?
So, as you can see in my example, I would actually make a profit by renting rather than buying in this case! No matter what the exchange rate, if the rest of the numbers in the example were the same, the results would not change, it is cheaper to rent than buy!
Tomorrow I will have the second half of this article about my future plans for a home.