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Why renting is the best way to go

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We rent our house. Buying a house in the Philippines is not really something we have ever considered. Why? There are a number of reasons, but I’ll come to that later. Real estate articles on here tend to get emotional responses. What I’ve written is my experience only. Some people may have done things differently.

Renting a place to live in the Philippines is somewhat different than in many other locations in the world, particularly in the United States. Though, before moving here I had rented abroad previously, some expectations I had got quickly changed once I rented here. Some common things that are different:

49 Ways to Make a Living in the Philippines

1. Locating a place. In the United States and the UAE, if you wanted to find a place to rent, you got online or got the local classifieds. Generally, the rents were spelled out, fixed based on the unit or square footage, and are accurate and up-to-date for the most part. Trying to rent a place in the Philippines while you are still abroad is a nearly impossible task. Listings online or in the paper frequently are months old, rents are typically unspecified or not accurate, or the photos posted might not match. The landlord can pretty much choose the amount he will rent to you. Discrimination is not only legal, but many Filipinos expect it. If you are moving here from abroad, it is best to budget a few weeks in a hotel and search in person. If not, at least a couple of days and pick an initial, short term rental until you can find time to really look. Additionally, having a Filipino, say a relative of asawa or girlfriend, search for you will surely lead to disappointment. How can they possibly know what you really want? If you are working here, or going to school (or you have kids), traffic in Manila should dictate where you live more than any other factor, unless you want to spend a quarter of your life sitting on EDSA and commuting. You cannot know some of these things until you first stay here a while. If you bought, you are pretty much locked-in.

2. Move-in rents typically require four months minimum rental deposit. (Usually First, Last, and at least two months, usually more, security). This is pretty standard here. Compare versus the States where a typical flat might only require two months all-in.

3. Furnished apartments here typically have furniture that is the absolute cheapest possible. Executive long-stay places are not nearly as common here as in major business centers (Though they do exist).

4. A common practice here is for landlords to collect twelve post-dated rent checks in advance of move-in, and with lease renewal. Not all, but many, if not most, do this. Some landlords will allow the deposit to be used as last-month rent if they are allowed to inspect for damage before the lease expires.

5. Retrieving security deposits is not as easy as it may seem. Many renters here have great difficulty retrieving deposits. A good tenant/landlord relationship makes this much easier.

6. Annual rent increases are capped by law at 3%… How many landlords observe this law? Not many. Again, a good relationship with your landlord is critical. (In our case, she increases 3% every two years, which is fair and reasonable).

7. Typically, the renter is responsible for any and all maintenance (Something that is very different from renting in the USA). This includes things like plumbing, electrical, and upkeep. We were able to negotiate with our landlord on a leaky roof and some termite damage, but some landlords hold you to the letter of the agreement.

8. Most flats, houses, and apartments here are basically nothing more than four walls. On move-in, we needed to buy all appliances, aircon, water heaters, light fixtures, new locks, and shower heads. We were also responsible for replacing broken water fixtures if we didn’t want to use the broken ones. This is why I do not recommend renting from abroad… You never know what you will find until you move in.

9. Renters insurance, while useful in the USA, is effectively useless here.

Now, there are advantages to renting in the Philippines: Big advantages. We have had several opportunities to buy while living here. Passed on all of them. Some of the pros and cons of renting:

Renting pros and cons

Pros:

1. You cannot know the quality of a neighborhood from abroad. Relying on what family says is no good either. If you buy in an area, without knowing flood history, traffic, convenience, security in advance, you are opening yourself up to disappointment and a potentially large financial loss. If you rent and don’t like the neighbors, place, etc., you are limited only by the terms of your lease. How do you know that the neighbors’ roosters crow at 3:00am until you move in? Read Bob’s earlier article which detailed the call center that went up next door.  Before living here, I was told that I should look an area in Marikina. Wanna guess which area had massive floods? If I had purchased, I would have been stuck. Say you move close to asawa’s family, and there are problems. If you own, you cannot easily move away from the situation (I was lucky… No such issues). Place that house in the province… Now what ya’ gonna do? By renting, we have flexibility if we need it.

2. You cannot own anything here, except a condo. Yeah, people say they “own”. You own nothing. Your spouse or whoever you bought the house for owns it. If you are in a long term, stable relationship, then the difference is quibbling over terms. If not, a BIG difference, regardless of what anyone tells you the law is or how they “bought” some land. Say you lease land and build a house. You DO NOT own the house, but not the land, as has been posted many times online. Under Philippine law, the house becomes part of the land (same thing, BTW, if you make “improvements” to a rental… We added an gate to our house. When we move, the gate stays behind unless we but the house back to original condition). As to condos, they do not necessarily only mean an apartment. Many subdivisions with single family homes are designated as condominiums. Also relating to condos, their value is always dependent on how well they are maintained. Ever look at building maintenance here? Buildings, were they in the States, that would look 40 years old are often relatively new, perhaps only ten years. Now, Rebecca and I have been married four year, together nearly six, and known each other for nine years. We are stable, I trust her 110%, but we still rent. Why? Yeah, owning a place might give her a little more security, but she doesn’t want to be tied here permanently (What if I croak? What if I am transferred? Say that Juanito inherits… Does he want to live here?) Selling a property in the Philippines can be an exhausting, trying, and expensive task.

3. Rents are much cheaper in the Philippines than house payments. Typically less than 1% of the value. We rent because the economics work.

4. The real estate market in the Philippines is terrible. If you think you will make money by buying a house, think again (Unless you are in a very highly desirable location, like in the CBD, or on the beach, or something similar). Many foreigners start building something here and the project is abandoned (The relationship went sour, they ran out of money, they ran into squatter or legal issues). The area around Rebecca’s place has numerous gigantic houses built for foreigners or OFWs that are virtually unsalable (Too expensive for the region). If you are planning to buy or build something and live in it until you die, then perhaps this is not a concern, but it is unlikely that you will make money. Those who make money in real estate in the Philippines either are playing in the luxury market (very limited), or are dealing with multi-unit rentals. Over the years, in the States, I was always told that real estate was a great investment. For many years, it was. Many of those same people who hounded me have eaten those words.

5. Mortgages in the Philippines are very difficult to acquire, and offer terrible terms and APR. Though some foreigners can “help” by being listed on a mortgage, since you cannot own land here, the bank will generally not issue a mortgage in your name alone. Banks view foreigners as debt risks, so unless your asawa’s family is well-off and she has the ability to qualify on her own, you are most likely out of luck. Not impossible, but very difficult. If you are over the age of 50, then forget this option entirely. Banks in the Philippines can, and do, discriminate based on age. Since those over 50 are more likely to kick off before the mortgage is paid, you are therefore a greater risk, no matter how good your pension or how much money you have. Though we could likely qualify for a mortgage here (The way I set bup our accounts will do that… We were offered 35% DP and 10 years at 14%… Much higher foreigner rates), the financial requirements simply do not add up: We would lose a bundle except by paying cash, and even then the numbers do not make much financial sense.

Cons:

1. If you own, you can build, modify, add-on any way you damn well please. Zoning in the Philippines is either weak or non-existent in most places. You want to start a fireworks factory in a residential area? Paint it purple with lime green accents? Build a sari-sari? No problem in many cases (Though the HOA might have an issue with that). However, your neighbors are free to do the same. In the provinces, with land all around, then most likely no big deal. In Makati? Might be a big deal.

2. Asawa security. With no divorce in the Philippines, many Filipinas view a house as security in their old age. Now, in my case, Rebecca doesn’t hold that view. However, many people here do hold that view. For those dating online and such, when a Filipina asks you to build a house, in many ways it is security should you decide to dump her or leave the country. May sound harsh, but facts is facts. Home, or land, ownership is also the one thing that shows true social status in the community… More than money or anything else. When Rebecca grew up, those who owned land never went hungry. Is that the case today? Probably not. But when you are raised believing it, a very different view. Is it worth the risks and hassles? Only each individual can decide for themselves, but buying something immediately, or sight unseen, is simply asking for trouble, regardless of reason. In the Philippines, real estate and the laws related to it are completely different than what expats will be familiar. At least when you live here a while before buying, or building, you can truly know the reality.

JohnM

John Miele is a Citizen of the World, having spent time in many locations around the globe. Currently, he finds himself in Manila, but travels throughout the Philippines. John joined the Live in the Philippines Web Magazine in mid-2008.

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BillB
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BillB

Great artical John, points out the good and the bad. Plus it’s great that Bob put yours and Paul’s artical back to back because it shows two sides of the story. This is one topic that is to each there own, and is different for everyone. You, me and everyone could give a reason for renting or buying but will never be the same for another person. My asawa and I choose to rent at this time but will be buying later, as in 2 or more years, but renting is the bust for us at this time. The thing… Read more »

John Miele
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John Miele

Bill: It was coincidence that Paul’s article and mine appeared together… But it does give both perspectives.

Paul Thompson
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Paul Thompson

Hello John; When the housing market crapped the bed in the United States, my brothers asked me how much money I lost on my house. I explained that there is no way I could lose, as it will never be for sale, and nothing was ever owed on it as it was built with my cash. This house will remain in the family, being passed down from one generation to the next. I never once thought about resale value, as I know this is the last place I’ll ever live. Many friends who rented until they passed away have left… Read more »

Miss August
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Miss August

Quote from Paul Thompson “…as it will never be for sale, and nothing was ever owed on it as it was built with my cash. This house will remain in the family, being passed down from one generation to the next.”

This is the same philosophy I have, about wanting to own my own house. Also, if my my daughters decide to visit the Philippines, they have a place to stay without paying for a hotel room.

John Miele
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John Miele

Miss August: Certainly, that is a valid point. I think the biggest message I tried to convey was that you should rent here first, and get the “lay of the land” before spending tons of money. Houses here can quickly turn into gigantic money pits if you are not careful.

Jim
Guest

Hi John _ I agree wholeheartedly with Paul’s reasoning behind buying and in my particular case had I rented a house here in CDO instead of building I would now be out of pocket. As it is by not renting I have recovered the cost of our house and minus building maintenance I’m a little ahead. Yes I agree, it’s horses for courses.
Regards.
Jim.

John Miele
Guest
John Miele

Jim: Everyone has their own comfort level… I assume that before building, though, that you had spent significant time in the area before making the decision, correct?

Jim
Guest

Hi John – Your correct we did not just jump at either the first place or house we saw, I had 20 years experiance of the area we chose to build our house in.
Regards.
Jim.

John Miele
Guest
John Miele

Paul: Right you are… Those I know who were not hurt by the real estate crash were those who bought a house with the intent to stay there for a long time. Problem is that so many were using their equity as a piggy bank. Those are the folks who got burned. It is a deeply personal choice… I think that is why these articles generate so much emotion.

Benny
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Benny

I do not know who it is that thinks buying a house in the Philippines is a good idea,BUT FOR ME?NO WAY,the prices per square foot/meter are just OUTRAGEOUS and the APR’s ,if mortgaging,are 14%….HYSTERICAL,as in,OUTRAGEOUSLY FUNNY.The construction of the places,in most cases,is HORRIBLE,as in CRACKED WALLS,FOUNDATIONS. I have rented on the beach here for 5 yrs. and saved enough $$$ to go back home and buy a place…CA$H.The opportuinities for making money to pay-off a mortgage in the Philippines do not exist so anyone who buys a place here and dies,loses the place as asawa can not pay the… Read more »

Greg May
Guest

Hi John! Great article and likely a great service to those western expats who are choosing to relocate here. I reside in Butuan City, am 55yrs old and happily married to my bride 10yrs my junior. If nothing else is retained by your readers, your statement that newly relocated folk ought to experience life here prior to making large investments is prescient and cannot be emphasized enough. Based on my experience, I offer an entirely different viewpoint regarding your premise; here’s why. Firstly, different climes have different standards as we know. Here in Butuan, I always suggest visiting a prospective… Read more »

Loren Pogue
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Loren Pogue

Right on.

John Miele
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John Miele

Greg: I somewhat agree with you, but I will say the following: Those I know who have been burned have always either done one of two things: 1. Rushed in before knowing what the real situation is 2. Gotten involved in various schemes to circumvent the law. That said, there are ways to “own”, and some are riskier than others. I always refer to the costitution, the supreme law of the land, which specifically, and unambiguously, prohibits foreign ownership. That said, there are many different options… But most are not really very feasible until you are here for a while,… Read more »

Greg May
Guest

Hi John,
Thank you for your reply.
Perhaps ,’Why Renting Can Be the Best Way to Go’, might have been a better title for your well constructed article?
T’was an enjoyable read; keep up the good work!

Benny
Guest
Benny

MR.MIELE,LET THESE GUYS BUY THEIR LOVING WIVES A HOUSE,IT IS THE LEAST THEY CAN DO,RIGHT? I HAVE SEEN SO MANY GUYS BUY HOUSES THEY NO LONGER LIVE IN IT MAKES ME LAUGH.IF THEY DO NOT CARE ABOUT BUYING A SUB-STANDARD STRUCTURE AT OUTRAGEOUS PER SQUARE FOOT PRICES,AND EVEN WORSE IF MORTGAGING,14% IS AN APR I WILL NEVER PAY….WHO ARE ME AND YOU TO STOP THEM? HAVE YOU EVER MET A MAN WHO THOUGHT HE HAD GOOD IDEA THAT LIKED BEING TOLD IT IS NOT A GOOD IDEA?….LET THEM BUY A PACE! SOMETIMES A WORD TO THE WISE IS NOT SUFFICIENT,AND… Read more »

Gary Wigle
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Gary Wigle

I think I will just keep on renting. I have been renting this apartment since 2009 and the rent has never gone up. I would NEVER live long enough to see house ownership become cheaper than rent. One expat here in town built a 2,000 sq meter house. Yes, two thousand! I couldn’t afford the help to keep the place clean!!! If I wanted to live in my own home I would just move back to the States. All paid for but it is cheaper to live here than rent so I have caretakers living in the place. I am… Read more »

Miss August
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Miss August

Owning a home is not just a western ideas. 🙂

John Miele
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John Miele

Miss August: I would say that it is more western oriented, though. Many of my business colleagues in a number of countries have no intention of ever buying anything.

Benny
Guest
Benny

YOU ARE RIGHT MR. MIELE.I UNDERSTAND THAT YOU WERE TREPEDITIOUS ABOUT BASHING THE BANKS INTEREST RATES IN THE P.I.,THE CONSTRUCTION STANDARDS AS WELL AS PRICES PER SQ. FT/MTR. COMPARED TO THE WESTERN PLACES I MENTIONED ABOVE,BUT I AM IN STITCHES OVER WHAT PLACES ARE GOING FOR HERE.IF ANYONE MORTHAHES A HOME IN THE PHILIPPINES AND IS NOT A RICH GUY,THE JOKE IS ON THEM.YOU ARE JUST WARNING THEM.I SEE A GUY UP ABOVE SAYING ATTRACTIVE APR’S ARE OFFERED,REALY?WHERE? NOT IN THE PHILIPPINES PAGIBIG IS THE CHEAPEST AT 11%,IF YOU ARE ACCEPTED.ON A 20 YR. NOTE,THE MORTGAGE AMOUNT MORE THAN QUADRUPLES.I… Read more »

John Power
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John Power

What planet are you on Benny??? I haven’t seen one here who agrees with you. Most of us “foreigners” who come here can afford to buy without a mortgage. Prices? The house I had built here in an “up market” subdivision cost about 20% what it would cost back home in London. It’s built to a very good standard. No cracked walls, or foundations. However, like MOST people on here agree, it’s not for everyone.

John Miele
Guest
John Miele

Gary: I agree… If it works for you and your wife, why change it? There are other ways to provide security besides owning a house.

RandyL
Guest
RandyL

Hi John, Although you have raised many points on both sides of the ownership issue, I have to agree with Greg May. As a practicing real estate broker for many years, I am familiar with market differences here and there (RP) and vibrant market conditions exist there if you know where to look. When you rent and then have to upkeep the unit, you will find the cost of rent PLUS is not all that reasonable and can be a money pit. Sure you can move, then you can move again…and again, and you can’t take any of the leasehold… Read more »

RandyL
Guest
RandyL

What I forgot to mention is that with good advance planning, you should have NO house payment and more disposable income to work with. Now that’s something to shoot for! 😀

John Miele
Guest
John Miele

Randy: Renting can be a nightmare, but you are short long term monetary committment. As I stated above, there are many ways to provide security: Not just land. Again, it really is a personal decision, but there are always options.

peterjoy
Guest
peterjoy

good posting john but unlike the most off u here i am buying a home in the php and i am happy to say like most men here in tassie i did dream off having a home off my own and with the thinks are going up and up here i did know i can never own one here at home so as 1 one day i will have to live there in manila we did start to look about for a home to buy there and have rented for some years we did find the home just for us… Read more »

John Miele
Guest
John Miele

Peterjoy: Exactly my point: You were here first for a while, before buying. In my mind, that makes sense. You also stated you were buying a place to live… Not just as investment.

petejoy
Guest
petejoy

jonh the home i am buying to live in not just investment ok it as been a dream for years too have a home mate so this is my deam and i am happy to tell u if i was to die in the next year or so this home then will go to my wife and the kids and at lst thay will always have a place to live ok as home here in tassie are now are over $200.000 and on the manland it is over $500.0000 and how in the hell am i meent to pay off… Read more »

John Power
Guest
John Power

What’s “tassie”???

John Reyes
Guest

I believe the state of Tasmania in Australia, John.

John Power
Guest
John Power

Ah yes. Of course. Thanks.

Ricardo Sumilang
Guest
Ricardo Sumilang

Good points about owning a home versus renting. What is lost in all of this is that you are forgetting you are a foreigner and will always be in a country in which you are not a citizen. As such, there is always a possibility – however remote – that you may have to pull up roots someday and return to your country of origin because of political turmoil or a failed relationship.

RandyL
Guest
RandyL

Ricardo, if a foreigners relationship is unstable, why would that foreigner even consider buying? That would not be the smart thing to do. I believe I equated building/buying to making making a smart long term investment, which I think would include a stable relationship. Relationship no good – no buy! It’s that simple. And political turmoil? …it can happen anywhere. But as a 13A visa holder, well….that’s all part of the equation. Everything you do in life is a calculated risk, is it not?

Jonno
Guest
Jonno

Randy, you are a classic example of the saying “a fool and his money”

John Miele
Guest
John Miele

Ricardo: I sort of thought that was somewhat implied… I also know a number of people who lost everything buying “freehold” in Mexico (The law changed) and the UAE (The sheikh decided one day to expropriate “freehold” property to build a mall… No compensation). As a foreigner, especially regarding land and real estate, you will always be at a disadvantage.

Boss
Guest
Boss

Always in the back of my mind.

Bob New York
Guest
Bob New York

Although I have no intention of moving there at the present time, I have kept in mind many of the things I have read here on ” LIP ” about housing in The Philippines. The words ” Apartment ” and ” House ” may take on an entirely different meaning in Philippines. An apartment that one of my Filipino friends was living in was not much more than an old hotel / motel that had been converted. If the place had ever had a fire it probably would burn down faster than the ” fire Dept ” could get there.… Read more »

John Miele
Guest
John Miele

Bob: For starters, I agree 100%.

Miss August
Guest
Miss August

John, you made a lot of good points about renting. For me, when I build my house, it’s where I will spend my old age; so renting won’t work for me. Also, I don’t plan to get a mortgage, fortunately we will have to funds to do build. It won’t be huge house, a simple ranch style or bungalow would suffice as long as I have enough yard for a small vegetable garden.

John Miele
Guest
John Miele

Miss August: That seems like a good option, if it works for you… Personal wants and desires, again.

brianking
Guest
brianking

As a full time real estate investor for the last 26 years I generally agree with Johns opinion. If you are looking at a real estate purchase in the RP for investment IMHO avoid it at all costs…the return on investment (roi) is minimal, while talking to several pinoy investors last year they were giddy they were getting 4-5% return. Factor in the rate of inflation and its much less..I smiled and congratulated them but by my standards it was a dismal return unworthy of the investment. Yes there are places which do well and have a above agerage rate… Read more »

RandyL
Guest
RandyL

Brianking ~ I don’t plan on living in an investment…We plan on living in our ‘home’, which will be paid for. And I’d say a 3-4% annual ROI on investment properties in the RP are much better than what the USA has been doing of late. If anyone has any ideas of building or buying and flipping for profit in the RP, well you might as well stay put…it doesn’t very often have a happy ending, at least in the residential sector.

brianking
Guest
brianking

Sigle family homes have taken a beating on equity but all the ones I have are still doing well on return (well over 10% ) most fellow investors who did not over leverage themselves are still doing ok.

John Miele
Guest
John Miele

Randy: I also draw a distinction between buying a place to live and an investment.

John Miele
Guest
John Miele

Brian: I cannot disagree… Real estate game in the RP is very risky. Nearly every foreigner I know who has lost money here, it was two major things: Real estate or small business. That is why I keep stressing not to invest uless you are here for a while.

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