Buying property is a serious business, whether as an investor or a potential owner. There are plenty of things you need to consider and prepare for.
So, what better way to steer you in the right direction than getting expert advice from a real estate broker? Read on for tips on how to know if a property is worth buying from Joseph “Joe” Salomon, Managing Director and Licensed Real Estate Broker of Eureka PH Properties.
Factors to Consider When Buying Property
We asked Joe to rank various factors in determining a property’s value by importance. Here’s what he had to say.
Location and Proximity
You may have heard the famous real estate phrase, “Location, location, location!” And there’s a very valid reason for that!
“Location is always [crucial] for both investors and end users when deciding what property to buy,” Joe shares.
“Location dictates potential property appreciation, as well as access to central business district areas, hospitals, malls, and transportation terminals [increases property value],” he adds.
Is this property near necessities and establishments? What is the condition of nearby houses or properties? Do tenants typically stay long-term? Is there easy access to transportation? Is it in a safe neighborhood? Are there good schools nearby? Is the area suitable for kids? Even natural surroundings, such as parks or landscaping, affect someone’s view of the area, especially those looking to own property.
Essential questions like these significantly affect the perceived value of a property and can influence your decision. For example, property investors would likely want real estate that has good client retention, is close to great amenities, and has easy access to entertainment establishments, as these aspects significantly affect potential return on investment and rental income. However, families looking for their forever home may prioritize proximity to schools and neighborhood safety. On the other hand, younger clients may prefer vibrant areas with plenty of activities, rich nightlife, and proximity to their workplace.
“The same applies to the location’s proximity to necessary establishments, which is why buyers also prefer township projects,” Joe continues.
Township projects can be defined as large-scale development to create self-sustaining neighborhoods that include most (if not all) daily requirements, such as office spaces, schools, healthcare, and retail outlets, already within the area. As they can be seen as a “one-stop shop” compared to standalone apartment buildings, these areas can be desirable to those looking for convenience.
Property Pricing and Payment Terms
“After location, the next factor would be property pricing and payment terms, as not everyone is liquid and may prefer to use their cash for an income-generating asset versus other investors,” Joe continues.
Of course, when checking if a property is within your price range, you should also look at the payment terms. By checking the amortization plan provided by the developers, you can check if your current financial status can cover the monthly payments. The best step would be to have your real estate agent provide you with payment term options you can choose from based on different payment types and payment schedules to best suit your needs.
You can also seek advice from your agent about the advantages of getting an extended amortization schedule versus cash payment and possible housing loan options, such as in-house financing, bank loans, and PAG-IBIG.
Local Market Conditions
Closely watching local market conditions, as well as economic indicators, can help you determine whether the real estate you’re eyeing is a good deal for you at a given time, as the number of properties for sale in your area and the number of buyers in the market can have a significant impact on its perceived value.
“Actual market value is different from developer’s price of property,” Joe states. “It means that if the actual market value (meaning how many people are actually buying property) is trending upwards, then it affects property prices.”
If more buyers compete for fewer properties, that benefits the sellers. On the other hand, suppose there are fewer buyers but more properties. In that case, the buyers have more of an upper hand, as there will likely be more room for negotiations on factors such as pricing, possible repairs, and timelines.
Amenities and Infrastructure
Ensuring our homes are comfortable and well-suited to our needs is a bigger priority now than ever. Joe states, “Due to the pandemic, amenities are another important factor for both types of buyers as people realized they could work from home.”
That’s why looking at what a property offers that adds to the quality of life, including access to fast and reliable Wi-Fi providers, consistent clean water, parking (plus extra parking for guests), and generators can make or break a deal. Inclusions of common fixtures such as kitchen appliances, office space, and other pieces of furniture can also make a property more attractive, especially for those just starting out.
Aside from that, some properties may also include amenities such as shared gyms, event spaces, kids’ play areas, Wi-Fi lounges, and pool privileges available for homeowners. They may even have laundry services, restaurants, and convenience stores within the building. Some properties may also be directly linked to parks, shopping centers, and train stations.
These extra perks being readily available and easily accessible can be a game changer for buyer’s satisfaction, especially when many of us are still working from home or in a hybrid work setup. The added convenience helps streamline our day-to-day activities, as many of the things we need are already nearby, and also helps provide entertainment and make the living space more enjoyable. Therefore, aligning your priorities with the amenities in or near your chosen property can significantly impact whether or not you decide to take the leap.
Property Management
However, looking at properties isn’t all about looking at what’s on the outside. Determining whether the property developer has a good track record is also essential.
“You also need to check If the developer is reputable, has a good track record, and manages their properties well, as this dictates property value appreciation,” Joe states.
Having good property management can be your insight into what your experience of owning that property will be like. With good property management, you’ll see consistency in maintaining the property and physical upkeep, plus perhaps more improvements in the future to ensure homeowner and tenant satisfaction.
“A good property management team, such as that of Rockwell and Ayala, also affects property values because it will ensure that the property is well maintained over time — unlike other condos or villages that seem “old” and not taken care of,” Joe shares.
Knowing a developer’s track record is especially important when it comes to considering properties that are on pre-selling or in a new development, as this would be a good indicator of what to expect as time goes on. However, it’s important that you also get good warranty coverage as a safety precaution for any possible defects that may arise.
Property Taxes
You may notice differences in property taxes when comparing different properties to buy. This is because our local government assesses property taxes based on location and value. These taxes are then paid by homeowners and used by states to provide critical services and infrastructure.
While property taxes may sound daunting, you don’t need to worry as much about it. As Joe says, “Property taxes are still generally low compared to other countries, which makes this the last factor.”
Red Flags to Look Out For
Joe lets us in on some things to be wary of when purchasing real estate.
“Look out for subpar property management and unreasonable property dues per square meter. Imagine already paying for the property and still having to shell out more money every month for something you paid for and for dues you don't get to enjoy.”
This typically falls under association dues, which should cover regular upkeep of amenities, general facility repairs, security, waste disposal, and wages of personnel employed by the property management. Generally, owners may need to pay higher association dues if the property has more amenities and larger common areas to maintain. Therefore, if property management is subpar, you may be paying much more than the services you’re receiving.
“I don't mind paying for reasonable property dues that have a corresponding value to residents, such as excellent property management services or hotel-like services and amenities.”
Top Tips from a Real Estate Broker
From your point of view and experience, what are your tips for first-time property buyers?
Always check for the price per square meter of the dues and property management track record. You can also simply ask existing tenants or residents. Ensure you have the proper budget to purchase a home since it is easy to [consider it] an investment; however, if you do not use it for profit, it falls under a liability.
At what age or conditions (financial, economic, etc.) would you recommend someone purchasing a property? When can you say someone is ready to buy a property?
If you can shell out 30% of your monthly income to pay for the property’s monthly payment, then, by all means, go for it! You can never go wrong with investing in real estate.
Do you have any trustworthy developers that you can recommend to potential property buyers? If so, tell us more about them and why you recommend them?
Rockwell, Ayala Group, Shang Properties, and Arthaland as they all prioritize build quality while being very customer-centric. Their properties also appreciate fast and have high rental yields.
If you can summarize in one sentence the most important tip for determining whether a property is worth buying, what would it be?
Ensure you are buying property when it's below actual market value.
Thank you to Joe Salomon for sharing his valuable time and insights! Check out his LinkedIn or Instagram if you’d like to reach him for your real estate needs.
