Advantages Of Real Estate Investment 101
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Transcript of Advantages Of Real Estate Investment 101
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REAL ESTATE 101
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Why do in
ESTATE?
INVEST
REAL
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INTRODUCTION TO THE REAL ESTATE MARKET
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Supply and Demand The Real Estate Asset Market (Property Market)
SupplyInvestors
Wanting to Sell
Demand:Investors
Wanting to BuyMarket
DEVELOPERS BUYERS
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YOUR CLIENT
SupplyProperty Owners
(Landlords)
Demand:Property Users
(Tenants)Market
The Space Market
RENTAL MARKET
Supply and Demand
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What do people USUALLY invest in?
- LIFE INSURANCE
- PENSION FUNDS
- MUTUAL FUNDS
- BANKS
-- STOCK MARKETS
-- TREASURY BONDS
DIFFERENT CONSTITUENCIES, EXPERTISE, LIABILITIES, REGULATIONS, SIZES
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TWO MAJOR INVESTMENT OBJECTIVES
INCOME
G R O W T H
Relatively Long-term (Appreciation)
Short-term (On-going need for Cash Inflow)
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The ADVANTAGES of Real Estate Investment
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RISK CONTROL=
ADVANTAGES OFREAL ESTATE INVESTMENT
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ADVANTAGES OFREAL ESTATE INVESTMENT
CASH FLOW = PASSIVE INCOME
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ADVANTAGES OFREAL ESTATE INVESTMENT
RENTAL YIELD is more than
BANK SAVINGS RATE
MORE INCOME
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Gross Rental Yields - Philippines Compared to Continent
Taiwan, 2.68
Hong Kong, 3.12
China, 3.55
India, 3.59
Singapore, 3.79
Cambodia, 4.33
Japan, 5.69
Thailand, 7.99
Malaysia, 9.22
Philippines, 10.99
Indonesia, 12.34
0 2 4 6 8 10 12 14
1
IndonesiaPhilippinesMalaysiaThailandJapanCambodiaSingaporeIndiaChinaHong KongTaiwan
10.99%
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ADVANTAGES OFREAL ESTATE INVESTMENT
LEVERAGE
(CAN BE USED AS COLLATERAL)
BANK
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ADVANTAGES OFREAL ESTATE INVESTMENT
HEDGE AGAINST
INFLATION
INFLATION
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ADVANTAGES OFREAL ESTATE INVESTMENT
0
5
10
15
20
25
30
1st 2nd 3rd 4th 5th
Inflation
Cap rate
INFLATION VS.CAPITAL GAIN RATE
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House Price Changes, 5 Yrs (%) - Philippines Compared to Continent
Japan, -15.05
Indonesia, -14.04
Malaysia, 16.01
Thailand, 17.68
Taiwan, 22.75
Singapore, 24.47
Hong Kong, 44.7
Philippines, 57.81
China, 78.69
South Korea, 20.89
-20 0 20 40 60 80 100
1
China
Philippines
Hong Kong
Singapore
Taiwan
South Korea
Thailand
Malaysia
Indonesia
Japan
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ADVANTAGES OFREAL ESTATE INVESTMENT
FLEXIBILITY /
EXPANDABILITY
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ADVANTAGES OFREAL ESTATE INVESTMENT
DEPRECIATION
(HEDGE VS TAX)
TAX
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0
5
10
15
20
25
30
5 Yrs 10 Yrs 15 Yrs 20 Yrs
AmortizationIncome
ADVANTAGES OFREAL ESTATE INVESTMENT
POWER OF AMORTIZATION
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ADVANTAGES OFREAL ESTATE INVESTMENT
0
5
10
15
20
25
30
1 yr 5 yrs 10 yrs 20 Yrs
Cap Gain rateRental Rate
PREDICTABILITY/CONSERVATIVE
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ADVANTAGES OFREAL ESTATE INVESTMENT
LIFETIMEINVESTMENT
NEW COUPLE
YOUNG FAMILY
MID-LIFE STATUS
RETIREMENT
SINGLE STATUS
Different Lifestyles, Life Cycles, Personal Goals, Levels of Wealth
LEGACY
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HOW TO MAKE MONEY OUT OF YOUR
REAL ESTATE INVESTMENT?
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POWER OF CASH FLOW
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With your investment…
• You have the Opportunity for
Passive IncomeEXAMPLE: LA GUARDIA FLATS 1
Monthly Passive Income = P12,000 / mo
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With your investment…
• You have the Opportunity to Loan
More financing institutions grant loans when you have passive income
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With your investment…
• You have the Opportunity to Invest
As you earn passive income, you have the opportunity to invest in another property, in effect, gives you more passive income in the future.
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With your investment…
• You have the Power to use your property as Collateral
• Mortgage rate is relatively lower than rental yield
• Even assuming that it is equal, lessor pays your debt or mortgage payable
• In effect, more amount gets paid, and your equity increases.
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With your investment…
• YOU HAVE THE OPPORTUNITY FOR TAX SHIELD
• CAN BE DEDUCTED AS EXPENSE, THUS LESSEN TAXABLE INCOME
• SPREAD OVER THE LIFE OF THE PROPERTY
• IN MOST CASES, PROPERTY APPRAISES
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• RESALE• 30% / 70% RATIO• PROPERTY APPRAISES • FROM 1.35 TO 1.6, INCREASE OF 250T• AFTER 2 YRS (RFO), GROSS INCOME OF 60% OF INITIAL
INVESTMENT FOR RESALE.• LOANABLE AMOUNT 1M, • MINIMAL TRANSFER FEE• FOR MORE GROSS INCOME, INVEST ON MORE PROPERTIES.• MAKE SURE THAT IT IS A WELL LOCATED PROPERTY• DEVELOPED BY A REPUTABLE DEVELOPER• IF PROPERTY IS NOT WELL ESTABLISHED, HARD TO SELL).
• POWER OF EQUITY IS GOOD, BUT IT HAS TO BE A GOOD PROPERTY, WITH TRACK RECORD OF PROPERTY APPRECIATION EVEN MORE THAN INDUSTRY STANDARDS.
POWER OF EQUITY