WHY People Buy And Invest In Real Estate; What Other Opportunities Are In REAL ESTATE.


WHY PEOPLE BUY REAL ESTATE

  1. Basic necessity (food, clothing, shelter)
  2. A hedge against inflation
  3. For speculation and profit
  4. It’s a savings bank, more than, actually, than savings bank
  5. Source of wealth and power

THINGS TO REMEMBER IN IVESTING IN REAL ESTATE

  • The supply of land is finite. Remember the law of supply and demand. We keep having babies but God quit making land along time.
  • An agricultural area may someday becomes industrial, residential or urban land
  • Real estate is a money making machine
  • Inflation, generally, favors real estate owners.
  • Consider leasing a space for yourself-a tax minimization scheme.
  • Real estate is considered “spark plug” of the company. It has a multiplier effect on nation’s economy.
  • Land is not a wasting asset. Depreciation of the building is a tax shield.
  • Taxes, local and national (in case of transfer) eat our savings in real estate, however, maybe used as tax shield.

SOURCES OF INCOME BY REAL ESTATE DEALER AND DEVELOPERS

  • The regular profit
  • Forfeiture of payments due to default using Maceda Law
  • Interest income-Developers and dealers charge as much as 18% interest per annum on in-house financing
  • Savings on VAT

WHAT IS PYRAMIDING IN REAL ESTATE

  • The practice of pyramiding transfers your equity every so many years into a much larger investment. Using your income stream in rental and bank’s facilities (leverage), your investment is capable of supporting you for the remainder of your life and the future of your children.

WHY REAL ESTATE IS A GOOD INVESTMENT

  • It offers the investors four (4) different returns or ways of making money on his investment.
  • Continues cash flow or spendable income. You work for money, but here, your money or investment is working for you. It is important to know how much you have left after taxes, not before taxes.
    • Equity income or equity build up or principal reduction in case of installment. Interest on the part of amortization is tax shield.
    • Tax shelter. Interest, depreciation, realty taxes, regular maintenance are all deductible from gross income.
    • Appreciation- The increase in value of the property without or too much effort on the part of the owner-a hedge against inflation. We call this Unearned Increment.
  • Inflation eats away our retirement money. Interest in banks is subject to withholding tax. In 1971, minimum wage in Philippines is at P8.00 a day, now almost P600.00/day.
  • Inflation is from 3% to 4% per year more than what our savings and time deposit earn in the banks. INVEST IN REAL ESTATE!
  • For rental properties, property management skill is a must.
    • Selecting tenants
    • Determining competitive and fair market rent
    • Record keeping and accounting
    • Property maintenance
    • Compensation of property manager and his staff for medium and large scale properties.

AS PRACTICE (SALESMAN, BROKER, APPRAISER, CONSULTANT, ASSESSOR)

As practice, it refers to rendition of professional services for and in behalf of the seller/buyer, lessor/lessee, mortgagor/mortgagee, investor, user or any other person with reference to real estate for a fee.

EMPLOYMENT OPPORTUNITIES IN GOVERNMENT (Sec. 30 of RA9646)

Within 3 years from the effectively of this law (or July 2012), all existing and new positions in the national and local governments, whether career, permanent, temporary or contractual, shall be filled only by registered and licensed real estate practitioners.

EMPLOYMENT OPPORTUNITIES IN PRIVATE OFFICES (Sec. 32 of RA 9646)

  1. Real estate developers employing sales agents should have at least one licensed broker for every 20 salespersons. Many real estate developers are not in favor of this provision.
  2. No partnership or corporation shall engage in the business of real estate service unless the persons authorized to act for the partnership or corporation are duly licensed real estate brokers, appraisers and consultants as the case maybe.
  3. Branch offices of real estate brokers, appraisers and consultants must be manned by licensed real estate practitioners whichever is applicable.
  4. Divisions or departments of real estate marketing or development must be headed by a full time licensed and registered real estate broker

AS SELF-EMPLOYED INDIVIDUAL

Licensed brokers may earn commissions or fees even without actually selling by;

  1. By getting listings (they are called listing brokers) and give it to selling brokers (the brokers of the buyers). Sharing commissions depends on their agreement.
  2. By employing sub-agents-networking
  3. Referral system
  4. Even a full time employee may earn commissions even without resigning from his or her employment. Many are doing that.

AS REAL ESTATE APPRAISER

There is a great demand in real estate valuation.

AS REAL ESTATE CONSULTANT

Please refer to its definition to understand the scope or coverage of real estate consultancy.

AS REAL ESTATE LECTURER/REVEIWER OR RESOURCE SPEAKER OR TRAINOR

The industry lacks good educators. Demand will surely be high after the passage of RA 9646. Beginning 2012, real estate is already a 4-year course (Bachelor of Science in Real Estate Management-BSREM). To be accredited as lecturer by PRC, he or she must be in actual real estate training for at least 5 years. In my opinion, this should not be the criterion.

BETTER PERSPECTIVE IN REAL ESTATE PROFESSION

The practice is better now in form and substance with passage of the law.

AS BUSINESS

  • Real Estate Dealer
    • Simply buy, and sell for profit
    • Simply buy, renovate or built and sell (pocket size subdivision)
  • Real Estate Developer (buy, develop and sell)
    • Subdivision, condominiums, memorial parks
    • Resorts and golf course
  • Real Estate Lessor
    • Commercial leasing like SM, Robinson Mall, Office Buildings
    • Residential apartments
    • Industrial warehouses
    • And many more…
  • Real estate financing (interest and foreclosures)
  • Real estate brokerage, appraisal, consultancy
  • Real estate education (school)

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