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buying a property: Loan or Pay in Cash???

melman · 46 · 10730

melman

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on: Feb 03, 2012, 08:21 PM
pa-advise naman po mga masters:
- my friend needs to pay the balance for her condo purhase, 80% na lang coz he paid 20% upfront nung pre-selling pa.
- he saves a lot and puts most of her money sa bangko... he can pay the balance in cash and still have some savings left

would you suggest to pay it in cash or put up a loan then to invest the cash or do a mix of both?

 :thankyou:


naldcagape

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Reply #1 on: Feb 03, 2012, 08:38 PM
pa-advise naman po mga masters:
- my friend needs to pay the balance for her condo purhase, 80% na lang coz he paid 20% upfront nung pre-selling pa.
- he saves a lot and puts most of her money sa bangko... he can pay the balance in cash and still have some savings left

would you suggest to pay it in cash or put up a loan then to invest the cash or do a mix of both?

 :thankyou:
what does he plan to do with the condo? is he reselling it or renting it out? what are his investment objectives?

if he's reselling - better pay it in cash so the loan costs don't eat into the profits.

if he's renting it out - you can pay some in cash and loan the rest. Make sure the monthly amortization is less than the rent so he has positive cashflow.

one person I know uses a credit line to finance his condo purchases. he sayss the advantage of using a credit line is you only need to pay the interest. i haven't done that option but that's what he does.


Bp22estafa

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Reply #2 on: Feb 03, 2012, 11:34 PM
is your friend bakla? sometimes he's a she & she's a he  :hihi:

anyway, i'll pay in cash & save on the interest payment if i have enough money just sitting in a savings account.


freefront

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Reply #3 on: Feb 03, 2012, 11:47 PM
^ and then do what with it afterwards?


wintan2006

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Reply #4 on: Feb 04, 2012, 08:22 AM

               i agree with naldcagape's suggestion.

               i took a loan from a bank with my house as collateral.The interest rate of the loan was and is(hanggang ngayon kasi)  3% per annum.though i could fully pay the loan back now, i used that money instead to invest in mutual funds  which is giving me 10 to 20% profit per annum.


ferrariEverest

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Reply #5 on: Feb 04, 2012, 02:01 PM
kung kaya naman, pay in cash.. para may discount ka pa. :D

is your friend bakla? sometimes he's a she & she's a he  :hihi:
baka mag-asawa sila. :D


naldcagape

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Reply #6 on: Feb 04, 2012, 03:59 PM
               i agree with naldcagape's suggestion.

               i took a loan from a bank with my house as collateral.The interest rate of the loan was and is(hanggang ngayon kasi)  3% per annum.though i could fully pay the loan back now, i used that money instead to invest in mutual funds  which is giving me 10 to 20% profit per annum.
thanks po. :)

sana maka-loan din ako sa taiwan. dito 8.75% ang 10-years fixed rate ko.


bauer

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Reply #7 on: Feb 05, 2012, 04:34 PM
pa-advise naman po mga masters:
- my friend needs to pay the balance for her condo purhase, 80% na lang coz he paid 20% upfront nung pre-selling pa.
- he saves a lot and puts most of her money sa bangko... he can pay the balance in cash and still have some savings left

would you suggest to pay it in cash or put up a loan then to invest the cash or do a mix of both?

 :thankyou:

Not all people are created equal. some are good in investing & earning a good profit while others are good in saving & let it grow in the long term.

The way i interpret the TS question, his/her friend is in the second category (very good in savings). So in this case, it is better not to take a loan if she/he has the extra cash to pay in full.  Just tell her/him to renegotiate the terms of payment since he/she will offer a more plaucible option to the developer.

If she/he will take out a loan and invest her/his savings in some investments (with her/his limited knowledge), she/he might take a bigger risk.  Imagine this scenario, her/his investments did not work out well and then she/he has a big loan to pay in installment, with no extra savings left to take a dip, what will happen to his/her property?

Cash payment is most appropriate under this situation.


naldcagape

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Reply #8 on: Feb 05, 2012, 05:20 PM
If she/he will take out a loan and invest her/his savings in some investments (with her/his limited knowledge), she/he might take a bigger risk.  Imagine this scenario, her/his investments did not work out well and then she/he has a big loan to pay in installment, with no extra savings left to take a dip, what will happen to his/her property?
That's why I asked what's the plan with the property. Are they reselling or renting it out?

It seems they have good cashflow since they can save a lot. If they plan to rent it out, it's ok to make a loan where the monthly amortization is less than the projected rent. Between the rent and their cashflow, they should be able to absorb the usual costs of renting out (like maintenance and vacancy). The extra cash can sit as a reserve fund for the property or used later to purchase another one.

One thing I forgot is if they will use it themselves. Then it's best to pay in cash.


wintan2006

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Reply #9 on: Feb 06, 2012, 10:09 AM

             My best friend's husband has started investing in real estate since last year.he keeps on buying (old and new) apartments.He took a loan for each of the apartments.His main purpose was investing.If he pays in full for an apartment here that costs 15M ,he won't be able to buy the 3rd ,the 4th and the 5th.His main purpose of investing in RE will be limited then.kasi limited din ang cash nya.they own a factory here so meron silang monthly fund na pumapasok to pay for the loans.Pina rent din nya yung ibang apartments.

          Another very good friend also invested in RE.she bought 3 new apartments and rented them right away.Ganun din ang style nya,she also took a loan.The loan rate here is around 2.5 to 3%.Inde ko lang alam how much money she took for the loans,50% ba or 30%.she didn't mention kasi.what i know is she is loaded.Still she took a loan,dapat daw kasi meron cash sa bulsa,inde daw pwede ibuhos lahat sa investment for possible new investments daw.they own a factory, too so meron silang cash flow monthly.She's earning 4% from the rents and she's happy with it.she will only earn 1.3% if she puts it in TDs here.Her purpose of buying a house is to resell them,but for the meantime pina rent nya muna and waiting for the value of the house to go up tsaka nya resell.meron isang prospect buyer,she bids for the house but my friend declined it.sabi nya sa akin,inde pa daw nya need ang pera kaya ayaw nya ibenta so hold pa sya.antay pa daw nya tumaas.

        a classmate of mine sa aerobics,she also invests in RE .Wala silang anak.she's 41 and her husband is 60.They own a factory too.Mayaman sila.(ako lang po  ang pinaka poor sa mga kaibigan ko :hihi:)Yung brother ng hubby nya hingi ng hingi ng pera sa asawa nya so what she did was to buy 2 old apartments in cash for the purpose of renting them out para daw yung mga nangungutang sa kanila meron na daw syang excuse to tell them that she has just bought 2 apartments so wala syang ipapautang.she's earning around 3.5 to 4% per annum ,not bad considering our TD rates here.

        My kumare bought their 1st house 4 yrs ago.Wala sila masyadong cash noon so talagang lahat ni loan nila.They have steady jobs and earning a modest income.they of course pay their  monthly amortization.pero pag nakaipon sila ng 100k,binabayaran kagad nila yung bank para matapos na yun loan.

       So what do we learn from these cases? different folks different strokes. :hello:

       

       

           

           


krissy

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Reply #10 on: Feb 06, 2012, 11:14 AM
thanks --

i just have a question
what's modest % of return for apartment business?


ferrariEverest

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Reply #11 on: Feb 06, 2012, 11:45 AM
"modest" is a relative term.


wintan2006

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Reply #12 on: Feb 06, 2012, 11:47 AM
             ^krissy,I don't have an idea sa pinas.But there's a poster here who bought a condo unit and rented it out sabi nya sa post nya around 8% yata ang return nya.i dunno with others.I think it will also depend on the location of your condo or apartment.Then nabasa ko rin dito just to give an idea on how much you will rent it,10% daw ng halaga ng unit mo.so kung 1.5M ang condo mo,rent it out for 15k.

              tama si FE.in fact there's no rule na kailangan na ganyan ang rental fee eh kung wala naman nag rent sa price mo,inde mo ba bababaan? lalo na kung kailangan mo ng pera? If you will refer to my first scenario above this post,yung mom in law nya meron syang maliit na apartment dito which she's been renting out for 20 yrs to the same tenant for 9k.Then 3 yrs ago,yung tenant nya humingi ng discount sa rental fee.inde na raw nila kaya yung 9k,lilipat daw sila.Yung mom in law ng friend ko decided to rent it to her for 7k.sabi nya kesa mabakante lang,pabayaan na daw for 7k.she is rich ,she can do that.meron pa namn kasi silang ibang apartments pa.

          Yung pharmacy namin dito naikwento ng owner sa akin,tataasan daw sila from 60k to 63k,renewal na kasi ng contract.nakiusap yung pharmacy na wag naman,ang tigas ng landlord,mayabang eh.naisip nya,inde yun nababakante.so lumipat yung pharmacy 2 blocks from it.Then yung nabakanteng space hanggang ngayon 8 months na wala nag rent.Until na may sign na For Rent.so there are really no rules ,depende sa capital mo,sa loan rate mo. :hello:
« Last Edit: Feb 06, 2012, 12:13 PM by wintan2006 »


krissy

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Reply #13 on: Feb 06, 2012, 11:47 AM
for you, what would be your modest return on rental business?

Post Merge: Feb 06, 2012, 11:49 AM
             ^krissy,I don't have an idea sa pinas.But there's a poster here who bought a condo unit and rented it out sabi nya sa post nya around 8% yata ang return nya.i dunno with others.I think it will also depend on the location of your condo or apartment.Then nabasa ko rin dito just to give an idea on how much you will rent it,10% daw ng halaga ng unit mo.so kung 1.5M ang condo mo,rent it out for 15k.

hmm.. thanks! need it.. im looking at a property corner edsa aurora near lrt and mrt.. thinking how much i could rent it out.. and payback ng down payment ko if ever i buy it.. so it's 10% pala.. hehe thanks!
« Last Edit: Feb 06, 2012, 11:49 AM by krissy »


bauer

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Reply #14 on: Feb 06, 2012, 01:22 PM
rental income in the Philippines?

although FE is right that 'modest' is a relative term, you can still digest a minimal effective rate of return for your rental business.

insurance for your property - you need to allocate 0.5 to 1% per annum
realty property tax - you need to allocate about 0.5 to 1% per annum
cost of money - comparable to time deposit or SDA income (at least 4.5% per annum)
cover for repair works on your property - relative (range from 1 to 2% or higher if your tenant is high risk)

all in all you, add up the above condition and it will be about 6.5% to 8.5% (again, without extra provision for higher risk rate of return).

in my own opinion, any rental income earnings below 12% per annum is not acceptable.


 


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