Femaad’s experience on accidentally stumbling upon a townhouse on rush sale is a perfect opportunity to start a discussion on home-buying tips, especially now that Filipinos are buying houses both for investment and for old age.
(Photo courtesy of
Michelle Morelos).
It also illustrates how liquidity is the twin of opportunity. This is what she shared:
My husband and I have been renting since we got married in 2000. Medyo mahal rent namin - P30,000 a month. Before reading on financial independence, okay kami with that rent. Afterwards, we decided to downgrade and look for a cheaper place na comfortable, nice-looking naman, and secure. In the process of looking for a place to rent, we came across a townhouse for sale. Wala pa sanang planong bumili, but the corner unit’s price was a good deal, considering it was within town (hindi outskirts), about 500 meters from a jeepney line, with adequate water, good neighbors. It had three toilets and baths, four bedrooms, and a two-car garage. Nearby units were selling at P1 million to P2 million more. Cash kasi gusto ng nagbebenta kaya mas mura. Even my brother who’s a realtor and his friend, the head of chamber of commerce in our place, said we might not come across such a deal again.
So, we bought the place -- but, in the process, we had to exchange all our saved foreign currency; had to sell all stocks at PSE - buti na lang matataas prices in March; sold some shares I held at a hospital I am affiliated with; and we owed a little from the bank for our renovation since the interiors were not to our taste. Philequity shares na lang naiwan, pero konti lang yon.
Our architect-friend scraped off all paint outside & inside, waterproofed, then repainted; changed all trusses to metal; treated all metal works with anti-rust; reinforced the floors; used anti-bacterial paint; changed all lavatories/sinks; recomputed electrical power needs, and rewired; fixed all leaks…etc etc…had to owe a little more for renovation costs
We now have our own place, which we are so happy about. But, we only have a months’ worth of emergency money left (nakaka-insecure); and I have just gone back to buying stocks again, pero konti lang.
Start from scratch ulit, pero we all have to start, di ba? Honestly, sometimes we feel we made a mistake, since our plan was to get our own place in five years’ time pa; but then, when opportunity knocks, open the door, di ba? What do you guys think?
Some have been known to profit from investing using borrowed money, but that’s always an “iffy” proposition. That’s something that should have a “proceed at your own risk” sign in big bold letters. Remember the mantra “high-risk, high return” is often repeated without the most important word in the catchphrase – probability.
I'm not saying it can't be done. I'm saying it's best done based on rigorous study -- not on a whim. However, those who have their backs covered with ample cash can easily gain from unexpected good buys or good investment opportunities.
Advice from
Orly Javier, whose advocacy is called Wealth Trigonomics, and
JC were both sound and sensible. But I believe the tone would have been different if the house had been bought on credit and if the transaction endangered all rainy day funds and income opportunities for the couple. Liquidity was your family’s best friend, femaad :-) . Now, the best thing to do is to ramp up your savings again.
(Filipinos would do well to learn from ants' successful technique in preparing for the rainy day -- just keep on doing it!)
Femaad, if you paid more than 4M for your house, maybe you're better off renting at 30k/mo. This assumes you can earn at least 12% p.a. on your investment and your ave. rental increase is 3% p.a. You will earn more by investing than buying a house.
But this is a purely financial analysis. A house is an emotional investment. I would make more money selling my house and putting it in business. But I'm not selling my house, unless you'll buy it at 2x the market value. :-)
Some house buying tips:
1. Choose a reputable subdivision developer.
2. Check out if basic facilities like water, electricity, telephone are reliably available 24/7.
3. Check out public transportation to and from the place, better if available 24/7.
4. Check out proximity to facilities like market , hospitals, schools, churches, police and fire stations, recreation places like parks and malls.
5. Check out floods and traffic situations to and from the area.
6. Check out crime rates (you can go to police station and get info or ask residents)
7. Check out business developments in your area, you may want to get into it in the future.
8. Most of us don't have cash to pay a house in full. Shop around for the lowest mortgage interest.
9. Save enough money for downpayment, the more you save , the bigger your DP = the lesser your monthly payment and the shorter payment years.
10. Don't buy a house that is 3x more than your annual gross income. You will have a hard time paying amortization when all the other bills and taxes are factored in per month.
11. Don't rush in buying a house and don't let the broker pressure you in buying. Take your time and do your assignment, check your budget over and over. Factor in emergencies like loss of job, sickness etc in planning for your amortization.
12. Read all the fine prints in your contract and ask for help if you don't understand certain clauses.
13. Some banks advertise a fix low interest for 2 or 3 or 5 years and then say the next years will be based on market rates , be carefull, your non-fix interest may be high , you can't afford it.
14. Never take a second mortgage on your house unless absolutely needed..in the end, either your monthly amortization or your payment years will increase in exchange for your cash out "it's like borrowing your own money, then paying the interest too.."
15. Everybody loves a nice neighbourhood, but if you can't afford it , don't keep up with the Joneses...buy where you can afford...you will sleep better at night.
16. For starting couples, plan your house as early as possible, if the children comes into the picture, it would be hard to save for a DP and most just can't afford it and just rent a house until such time extra money comes a long..which is always rare (unless you win the lottery or your parents gives you part of their wealth)...as a result it would be rent for ever...
Don't buy stock, there is a recession coming, or put off buying until the mortgage problems settle down, buy foreign currencies, Yuan is the best...go to HongKong and time deposit a certain amount, cebu pacific's fare is cheap..
I stay liquid, spreading my currencies...pounds..Austrlian dollar, kiwi, HKD, USD...eaning different amount in interest and some powerful winnings from appreciations like those AUD, pounds and kiwi...BTW, I started early with USD early on and branched out our holdings when I saw the chance, one can buy piecemeal style, so that you don't get burned in one setting, but the return will be moderate, but if you get it right, it will be very liquid!
Now is the best time to invest in a basket of currencies...peso is strong ( bot for long ), peso's interest is low vis-a-vis other foreign currencies...if my current earning is in peso, I'll divert into other currencies...
We've put off building our house coz it will deplete all our savings and investments once we start. We've decided to invest and leave it to grow for 3-5 years. Well, we hope our money will double in 5 years time (or 20% interest p.a.), and allocate half of it to a house by then.
current trend for OFWs nowadays is to save in euros as opposed to the norm of saving in USD. advice please =)
Currency Investments depends on what currency one is earning, if one is earning peso right now, one can start buying Chinese Yuan ( my favorite ), USD is sell..sell..sell...because once USD interest comes down even 0.5%, dumping of USD will ensue, see, how the Japanese Yen is appreciating the last week? maybe even with a 0.25% decline in USD interest rate, Yen vis-avis USD will go up as high as 115-114...My advice is Yuan...buy...buy...buy...and hold.
I started to work oversea at 29 years of age, my salary than was 40K and if converted to Peso will only amount to 10K during those earlier years, and about 1 USD = 42, but I really felt that the currency will appreciate vis-a-vis every currency on earth, that is why I hold all my salaries, earning interest on time deposit, in those days the country where I work has a stable political and economic atmosphere, after 3 years the local currency started appreciating and even catched up and later surpassed the peso, ( It is now 1=1.3-.14 peso ), it reached it's highest against the USD at an exchange of 1USD = 26.5, in those days everyone see this country as the head of the 4 tigers in Asia, it was said that money drowning the whole country, but when the political wind of change started by a mister Lee, I got scared, I converted every single penny to USD with interest of 8% per annum, even though I can earn more in local currency, by than I had amazed 220K USD, I even borrowed from the bank paying 13% for the house we bought, and instead of paying the bank for our loans, I paid the dues and turn every penny to USD..Mister Lee started to quarrel with his neighbor and the local currency started to plunge, up until the Asian crisis, by than, I felt the USD reached it's highest point and shifted those USD I earned to Pounds which has an exchnage of 1 pound = 46 USD, and I let it nest there until today, later I bought AUD, Kiwi, HKD...when I saw what the US government is doing under Bush, I feel strongly US is doing a very bad thing, well now, I'm vindicated, becasuse my USD holdings did not evaporate, it is always balanced by the other currencies, I gained more than 500% from my ounds since I bought it, interest and appreciation, AUD and Kiwi more than 50% up, Hongkong dollar breakeven with USD, but with the local currency I earned, BTW, the local currency I bought for 220K USD is at an average of 27 to a USD, IT IS NOW A LITTLE UNDER 33 TO a USD, the house is paid and we always go abroad every year 2-3 times a year, we buy L V..Loewe..Montblanc..diamonds...and counting all into USD now, we still have 1.5M in cash if converted at this rates to USD... raised 3 kids...BTW, I did not count my money in the stocks, although they are substantial...the lesson? POLITICS and ECONOMICS mix badly,And if someone told me it is a conspiracy, so be it!
Did I mention that I stop working for 3 years now? I self declared my retirement and doing odd jobs now....where do I get my everyday or every month's expenses? From my best performing currency, whichever one has the best price, I sell some...I never have any business deal even once, all my money came from monthly salary and interest from my basket of currency...
The good thing about currency trading, the more volatile the better. My best buddy is in Yen and USD, he'll start buying at 121 and upwards, and start selling at 118, well, he is earning more than the interest of both currencies added up together...easy isn't it?
@john young. congratulations on your success. sana ma-recreate namin ang success mo. :D
@pinoy investor, believe it or not, even before we moved in, a no. of foreigners were interested in buying our place. well, like you, won't sell unless we earn substantially from the sale :-) btw, purchase + renovation cost us a lot; however, rent was increasing 16% per annum :-( ...and yes, it's an emotional investment. renting has many limitations and one of the worst is not being able to fix it up (paint, furnishings) the way one wants to. one is supposed to go home to one's sanctuary; and when one goes home to a place fixed by someone else, it just never really feels like home, and is very unsettling. we don't feel that way now.
@omski check..check..check...kaya lang, we are guilty of not looking for the lowest mortgage rates; instead, we got the one who would give the highest loan for our renovation. don't worry, loan is only 1.8x my gross income (husband's income not counted), and we got a 7-yr payment period which is easy on the pocket. the 2nd additional loan we got for additional renovation costs was from a very good friend who won't charge interest. we actually had the money for that, but we needed to have ready cash available for any emergency purposes...mahirap namang zero ang maiwan..
@john young, i have limited myself to buying mining stocks for long-term investment. cherry red majority of stocks now, so am mulling whether i should buy (kasi mababa) or just stay away from pse muna. maybe, like you, i should buy foreign currency again...
@mzkukuro, as mentioned, we really had no plans to buy...it just was too good a deal to let go of...consequence is both good and bad...ngayon, may pinupuntahan ang monthly amort compared to rent; but, we're not as liquid as we used to be. it's starting over time again for us
for those who are thinking of buying a place that's previously owned - like us - it would be good to check how much renovation is needed and how much that would cost. we were kinda taken aback when our architect friend said there was so much to be done. he said our purchase wasnt a white elephant naman, since he has seen home purchases which were really bad (better to just tear down and build a new one). buti na lang, he didn't charge any fee, or expenses would have been even more. i'm saying this, because when we purchased our townhouse, we actually allotted money for renovation, but it wasn't enough, hence the need for a loan...
I spotted a typo...what I mean is 1 pound = 46 NTD ( taiwan ), that is where I work, when I think back in time, my best friend learned the ropes of currency trading from me. We arrived in Taiwan at the same time 1987, and he sent his salary back to the Phillipines, converted some to peso and some deposited as USD, while me, I see it differently, I kept it until the best time and my hunches are to the dot, now, my best friend is doing the same thing but in a different way, he play short term, while I am more on a long term basis, maybe because I'm ahead of the market and he is trying to catch up...the guy is single, 300K worth in USD, he is paying for his house, although he also declared retirement, kasi, marunong na siyang mag-currency atsaka ang tipid niya, walang asaw at anak...
Ang maganda sa currency is hindi malulugi ang investment mo, if it went down, it will go up...if not meron pa rin interest na mag babalanse sa kulang, note, hindi ko sinabing lahat ng currency ha, I did not mention euro, kasi maliit lang ang kinita ko duon, tapos binenta ko na siya, and I'm waiting for a more proper time to enter, pero walang pang pagkakataon, kasi si Bush is bad, BTW, dahil sa gulo ng politikal dito, we are the laggard of the 4 tigers...somebody will say, conspiracy ito, I'm just honest, bad politics, brings bad economics, kung matigas ang ulo mo at pipilitin mo ang mali sa tama, palagi kang malulugi, kasi mali ang logic mo.
Good things about foreign currency. Liquid, meron interest, walang transaction fee, walang tax..kaya maski kumita ka ng back and forth na maliit lang, kita pa din. Iyong friend ko this year lang sa Yen=USD, back and forth siya, naka accumulate na siya ng 10,000 yen..per 1000 USD..hindi na masama di ba? wala pang nakakaalam na kumita cya, kasi internet ang gamit nya, every now and then tinatawagan ko, para malaman ko kung makukuha ko na iyong pamana ko sa kanya, if you know what I mean, baka, bumaho na cya, wala pang nakaka alam...hehehhehe.
sorry another typo, kasi, I'm, going back and forth kanina, mamanahin ko sa kanya, not pamana...LOL!
femaad,
You and your husband must be earning a lot! and actually living the "Filipino Dream" ! cheers to you!
ang galing ng forecast mo about forex john young... i'm just new here in moneysmarts kasi balak ko matuto about investing since i currently work abroad and earning with some savings left that i think is better to invest and let the money work for me. actually i got inspired in your story and i will be very much delighted if you could give me some tips on how to start. i really am new in this line of business and i need the basics like how, where & when. thank you so much in advance.
Sabi ko nga, depende sa kinikita mong currency O iyong hawak mong currency ngayon, if you have Japanese Yen right now and the trading is 118 or 117 to the dollar, tapos walang balak magbaba ng interest ang USD, puede kang bumili ng USD, lagay mo lang maski sa savings deposit, pero kung meron kahit kahiblang balitang magbababa ng interest ang USD, hold kamuna, dahil, maaaring tumaas ang Yen up to 114-115, pero ang paborito ngayon at hindi ko na jailangan na magisip ng marami is Renminbi...matigas ito, the strongest in the world..sa HongKong kalang at sa Tsina makaka deposito nito..like, next week, meron akong placement ng USD na mag mamature and the Kiwi ( NZD ) is much lower than USD compared sa historical high niya, tapos iyong interest niya is much higher, I can earn, 6.4% per annum, USD is only 4.8% per annum, so I might shift 20K to Kiwi if the rates hold at this level vis-a-vis USD...tapos place ko sa Kiwi and kung tumaas siya later, I can sell my previous Kiwi which is maturing soon din, iyong puhunan ko duon is much much lower, kasi I bought those 1 1/2 years ago na...easy..di ba? just look for a range..USD is weak..8 trillions in debt and growing, negative 1% savings from their people..1 Billion USD daily na gastos sa Iraq palang ha?! How can a country get out from such a hole, kaya nga, pag USD ang hawak mo at meron pagkakataon, benta! benta! benta!
BTW, kung nakabili ka ng Yen sa 118 o 117, puede mong ibenta ng 121 or above, iyong small difference iyon na ang kita mo, hindi mo naman kailangan tingan ng oras-oras iyong change, at the end of the day just look at the news about what is the rate and if the FEDS is thinking of lowering the USD rates, viola, tapos na ang analysis...if you want more, CPI, weekly jobs etc.etc...these naman ang basehan ng feds kung itataas o ibababa ang interest rate.
buying and selling must be sa banko at hindi sa money changers sa tabi-tabi ha? Kasi mas malaking agwat ng money changers kesa banko...like here sa Taiwan the difference is just 0.1 or mas maliit depende sa association mo sa banko, kasi kapag matagal na ang transaction mo sa banko mas maliit na ang difference, kaya mas madling kumita sa range ng rates...BTW, Soros got rich from currency trading din...
Buying your house? Check this out :
http://www.thedigeratilife.com/blog/index.php/2006/11/08/how-rich-neighborhoods-can-be-deadly/
@omski, we don't earn much naman, but a little more than the average wage-earner. i guess, we can save because we're not really mabongga like the rest of our friends who have to change cars every 2 yrs, or be seen at country club or the manor at least once a week, or buy clothes/shoes only at shangri la-mall or greenbelt.
our car was inherited and still running good at 7 yrs; we eat at home or at the fastfood of the mall; and we stick to classics when it comes to clothes - boring but when trends change, we still can wear them and not be outdated.
and, salve, so far, we still haven't bought a large LCD TV or HDTV :-)
femaad, good to hear your not mabongga lifestyle, keep it up!
i just figured you are earning a lot because a 30k rent is just way up my earning capacity and I thought I am also a little bit more than the average wage earner...;-)
@john young--- how about euro, is it strong enough to invest in? since my current salary is in AED which is pegged to USD i'm thinking of converting it into euro, pounds, AUS, or CAD. ano sa tingin mo ang mas ok
before the end of the year any chance na maka-recover ang USD?
meron correction ngayon ang Euro and AUD, you can exchange some and time deeposit them, bago ka lang, kaya hindi mo pa alam ang timing, ang advice ko is you do it piecemeal and make a record of your purchase, so that when you unload them later, you'll be able to know whixh batch and how much to sell, piecemal buy in, piecemeal sell-out. I saw na mas malaki ang correction ng KIWI=NZD, must mataas pa ang interest rate.
Is there a remote chnace that AED will unpegg from USD? If meron, hold ka muna sa currency mo,,.. kung walang chance the ma-unpegg, you can go in piecemeal lang, although malakas din ang Euro, CAD, pounds, AUD..pero kasi malaki na ang inakyat nila....
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thanks and happy reading.
Sayang kung meron lang akong peso, I could have earned a little na, kasi iyong peso ko pang gastos lang ng anak and Mom ko diyan...hehehehe, kung kwekwentahin, almost 1 peso per USD na ang kita di ba? I advice to sell peso last week di ba? So after a few days, less than one week iya, ha? Those who bought stocks will be drowned, those who sell peso will be up...so who's right and who's wrong?
trina, its true. there are more Filipinos investing in euros now because the dollar has not been giving good returns for the past year. You will see the same trend in mutual funds -- there are more and more euro-denominated mutual funds being set up in the country and that's partly because we have an increasing number of OFWs in Europe.
Check out these articles from experienced fund managers on cross currency investing:
WHAT TO DO WITH LOSING DOLLAR INVESTMENTS
By Efren Cruz
http://business.inquirer.net/money/advice/view_article.php?article_id=81501
What the 1997 financial crisis has done to Filipino savers
By Johnny Noet Ravalo
http://business.inquirer.net/money/advice/view_article.php?article_id=77529
This article endorses looking at third currencies, not just the dollar
Understanding the foreign exchange market
By Johnny Noet Ravalo
http://business.inquirer.net/money/advice/view_article.php?article_id=71250
Personally, I would invest in euros if I had requirements in euros and i believe I can hedge well so that if the market turns I will be covered. Playing in foreign currencies is tricky because its very fickle and you need to be on your toes and up to date all the time. Some have the stomach for it, but I don't so I leave it to the professionals. :-)
omski, that's a lengthy list of tips. thanks for taking the time to share it with us. Since I am now in the process of choosing what to buy, this is very very helpful! Thanks much.
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