i was also told the same thing by a friend as well as a practitioner of the line of thought. imagine a property developer dad of my friend is renting a a house in exclusive villages and sometimes transfer every year?

i don’t need a P50m house, i’d probably buy a smaller house, invest part of it, and travel somewhere

I guess it all boils down to 2 things.

If you actually get more than what you need and want by keeping 50 million pesos and much more to spare, then by all means…go rent.

Second, how important is it to you to have your own home. Or what is your priority in having/acquiring a home.

hmmm, how I wish its my problem.

But I am not good in handling cash. If I have that money in the bank, it would be gone in 3 years or maybe 5 years. I would spend it on anything. I would probably gamble it away.

Since I have to live on its earnings, I would invest most of it, say 45M on something that would give me cash monthly like apartments or something. I would just keep 5M in the bank, as I do not trust myself with that much cash setting in the bank.

What a nice problem to have indeed.

I will buy myself a smaller house as well, set-up a small business to keep me busy (not stressed), travel around the world with my family, invest the rest in a diversified portfolio (to manage risk and maximize returns), and live simply from the investment’s earnings.

I will quit my present job and spend more time with my family. I’ve always wanted to drive and fetch my kids to and from school everyday.

If I have P50 million, I would diffinitely invest it into business. Just keeping it in the bank is not a good idea to me. How much would it earn in interest. It would not compare to the earnigs one would get if he invest it into a business that pays an ROI of say 20 to 30%.

And one thing more if I had P50 million now, I will make sure that by the end of the year it would be P55 or P60 million already. I would not like to see it at the same P50 million after two or three years. I would strive to double it in 5 or 10 years time.

ANYBODY WHO WANTS TO LEND ME P50 MILLION?

Rey

P50M is not much for the rich and famous, but for the working class where I am in, it’s more than enough.

You can either spend 1 million a year and it will still last you a little over 50 years with interest. So if you are in your 30’s then you would have lived a modest life till you die.

As for me, I will keep my lifestyle and still be an employee. That way, a 50M time deposit would have proceeds enough to buy a car with 12 months to pay or a house with 1-2 years to pay. After paying for the house and the car, my 50M would still be intact after the i’d fully paid them.

Invest in treasury bonds, mutual funds, money market funds, stocks and commercial real estate. Not necessarily in that order. No particular percentage allocation, not even based on the my age, but reallocation occasionally everytime an instrument goes up or down. Purchase from the proceeds my own piece of real estate with enough garden to plant different fruit bearing trees to be able to harvest something any time of the year; and travel the world on my spare time.

It would be nice just to rent than buy a house if the rent is NOT P85000! Since i got just 1 kid, i’d just rent a small apartment P8-15K a month. I don’t have to worry about depreciation and repairs of the house. In my 15 years of adult experience (I’m 35), the rent of a modest 2 story apartment have only grown from 6k to 8k. Thats just 30% in 15 years. If you are an employee and just need to beat the inflation, you need to double your income every 5 years. To beat inflation, in 15yrs, you SHOULD have “eight-tupled” or increase 800% your income. 30% increase in expense compared to 800% in income is not bad.

I am of the principle that buying a house IS USUALLY a liability than an asset IF you are a businessman and you know how to handle cash. I understand the principle of CASH is KING.

If you are not a businessman and you don’t know how to handle cash, it’s better that you buy that more than modest house of P2-4M but buy it using PAG-IBIG loan. Not buying it in cash would allow you the remainder of the house cash cost from the deposit to invest in time deposit or prudent investments to pay the rest of the monthly amortization.

I guess I’d buy a jollibee franchise with the remaining cash.

But i think i know better, i’d invest in stocks right now… since prices are low enough.

I think I’ll definitely buy or build my own house. There’s nothing like living in the comfort and security of your own home.

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Simple Math:

Put that 50M in TDs or CDs, that gains say minimum of 5% annually. That equates into 2.50M interests profit or say net of 2M after tax.

That would be a clean 165K a month to spend less 85K for rent and still leaves a handsome amount to spend for other things.

Practicality:

Staying and enjoying the perks of a big house only lasts for a while, sooner or later the glitters and excitement will all fade to last. If you spent all that money into buidling that expensive house, you’ll only savor it until excitement lasts… then what afterwards?

That guy is really smart if i may say, if he outlived the beauty of the present house he can always find a newer one. No hasles to pay also for huge property tax accompanied with owning an expensive house. It will only become a huge liability if it is not made to earn cash.

I may say, the one who rent the house is smarter even.

A descent house to shelter us is fair enough, no need to extend all the lavishness dot is not at all required. In excess of nescissity will always become a liablity.

INVEST:

I will invest that 50M until it grows to 100M++, then i am sure the interests will be more that sufficient to offer me the goodness of life.

Good Luck All !!

Your friend didn’t take into consideration the effect of inflation. Although he gets to keep the P50 m intact, the real value of that is actually is diminishing whereas the value of the house and lot appreciates over time.

I’ll give half of it to charity. 1M a year for 25 yrs. Put half of it in fixed-income funds and live on interest income. Retire from employment and help the poor!

@pinoyinvestor, I’m with you, give some to charity and continue to help the poor.

What’s ever left, pay my debts and put more money on my investments. Take care of my health and my family. Live a simple life.

invest of course! take calculated risks if necessary. ika nga, no guts, no glory. and of course share some of your blessings.

oh yeah, in case it’s P 50M in cash: go to the bank and withdraw it all in 20-peso bills. isaboy mo lahat sa loob ng kwarto mo. lumangoy-langoy at palipad-lipadin mo ang kwarta mo! hahaha pag nagsawa ka na, invest na. okey?

To me it doesnt make sense having 50M but just renting a house for the cost most Filipinos can’t afford.

If were him, I’ll buy a house worth 25M and live with the earnings of the other half.

Rent or Own - that is exactly what I was thinking in the past days. There is this property I like but too expensive. And I figure, if I put my money (dreaming I have them) in TD, the earnings will still afford me to rent a unit in that property. Plus, real property tax and association dues can be very expesive too.

Anyway, if I have P50M I’ll use a portion of the money (3-5 M) to buy/contruct a decent, reasonably priced house/rest house/weekend home in the province. I feel secured having a permanent place of my own. I’ll give some to charity and invest some of it. If I want to stay in Manila, I’ll just rent. The price of properties in Manila is outrageous. I better rent na lang.

Buy raw land for P 25 million, hire a developer to build infrastructure, divide the land into small lots, build houses, and then sell to the public. That’s how Sen Villar did it…

Rents and property values rise with inflation. If the inflation rate is 7% per year, and you buy a house worth P50 million, you have effectively bought yourself an inflation hedge. But the house is illiquid, and the goal is not simply to match inflation but to beat it. Stocks have significantly beaten inflation over the past 100 years. So one should put some money in stocks.

Buy a house worth not more than P10 million. Put the remaining P40 million in liquid securities (50% in stocks and 50% in bonds/cash). That should generate a conservative 6 to 10% annually - or P2.4 to 4 million annually. People can probably live on this amount in the Philippines without ever having to work another day in their lives.

You also need to make provision for health care expenses. Part of the P50 million should be devoted to health care needs. A major heart attack that requires bypass surgery can easily consume more than P1 million. That’s only for one person; what if your spouse has the same problem? And that doesn’t include ongoing expenses on drugs, doctor’s visits, lab tests, etc. My late niece (16 years old) who had leukemia spent P2 million on a bone marrow transplant that ultimately failed. That pretty much wiped out my cousin’s (her dad’s) finances.

The point being, you can’t put all of P50 million in a house, or in any one “investment”, especially if that investment is illiquid. The money has got to be spread out among conservative to aggressive asset classes.

You know what? My wife and I have been daydreaming a similar scenario for years.

I think *prestigious* banks, on average, have 12% per annum interest rates for time deposits.

If you make a time deposit for the amount of 50 million pesos, you *roughly* get an interest income of 500,000 pesos per month (exclusive of taxes and charges).

This monthly interest income is what you will spend for your day to day and special projects.

Of course, there’s the risk of bank runs. So, spread the deposits on several *prestigious* banks.

I would agree with you wiljoe…I’ll take all the money from the bank considering it wont grow as much as I wanted it to be, just look at the inflation rate last month 12.2%, how much can you get as interest for time deposit…3% the most? Looking at this figures you are already in deficit..right?You loose a lot of value from your money, so I would rather go for investments. Buy a land, find a developer and build houses for urban poor, you can of help and at the end of the day..you might grow your 50M twice as much or maybe more…

Chinese doctrine in terms of money is quite different to Filipinos. If I have 50 million, invest in loan shark company and employ Indian national.

hmmm…i was toying with the same idea with a friend couple of days back. we were thinking how many books we should sell in order to hit a P50M mark.

we figured we should at least sell a million copies, that is, taking into the calculation the deductions due to distributors, incentives & commisions, tax, etc.

granting we hit it, i would be glad to share/spend half of it to further my advocacy which incidentally is the concern of the book. i would institute a research center so i can help other ofws and pinoys abroad come up with more concrete business ideas. “ofws” is but one of few groups that have purchasing and investment powers in the country.

providing them access to right information, and giving them enough encouragement at that, would afford them more reasons to come home, build their business empires in the country and eventually help us with much needed investments.

Having 50M allows the Chinese guy to rent that house living on the interest alone every month of his 50M. That is not such a bad idea…if you have 50M.

If i had 50M, i’d give half to charity but not outright. I’ll put up a foundation, investing the 25M in a trust fund for that foundation which would focus on developmental projects for the poorest of our brothers.

The other 25M i will put in a separate trust fund for me and my family, with half of earnings again diverted to the foundation. I presume that on the average the fund would be earning somewhere between 1.5M to 2.5M every year. half of that is more than enough for my family’s needs, living simple lives as much as possible.

There is no use clinging to too much money in this life. For practical reasons, you won’t bring that with you to the grave. Even if you are a nonbeliever, there is wisdom in helping others for it brings a different level of fulfillment that no amount of money can bring.

having a lot of cash is more convenient, earns you more money and provides much better flexibility for investments.however in times of hyperinflation, it may not worth much.another risk is possible loss by scam and electronic fraud.on the other hand, fix assets give more security during bad times and tradable with other assets. however there are associated cost of depreciation and maintenance.best strategy is mix cash & fix assets depending on personal preferences. just don’t show -off too much or you’ll be a target of kidnappers.

Owning or renting a house has long been a debate for personal finance bloggers and advocates. Both sides present good arguments but in the end, in my opinion, it all depends on your financial standing.

If you can afford it, then buy it, you don’t lose the money as your Chinese friend suggests, it just turned into a frozen asset.

For example, if I had 100M, I’d have no problem buying the 50M house. But if I had only 60M, then buying the house would be debatable.

Just my two cents,

Fitz | Ready To Be Rich
http://fitzvillafuerte.com

and which bank do he plan to put his money? did he consider that banks can go bankrupt?

50- Invest in Renewable Energy business
10% - Invest in Forex, Stocks and Commodity markerts
20% - Build my dream house
10% - Pay my taxes
10% - Give to charity/church

if i have 50M.. ill inevst some in my dream house, a little for my business and a ilttle for my savings…

with 50M in my pocket, I’d quit my job in a heartbeat. I’d give some to sustainable charitable projects and invest the rest (I’ll probably mix and match investment options with different related risks and returns - diversify, diversify, diversify)

I’m all for owning my house rather than renting because of the sense of security it brings about. I only see the value in renting, if you don’t plan to spend the rest of your life in that particular house. So I’ll probably get a place that won’t cost me more than 10M.

thanks all for the tips!

I will not use the P50MM to buy a house, rather I will take a housing loan and use part of the interest earnings (from P50MM) to pay the monthly amortizations. This way, I have my P50MM intact for investment purpose while the interest earnings generate fixed asset. Also give some to charity.

hahaha! LOL at hachiko’s comment!

swimming in 20-peso bills…. what a thought!

A study was made from what happens to people who won large amounts of money in lotteries.

Generally more of them lost it all and got into trouble.

Getting a windfall is life changing event.

The example of the Chinese friend did not expound on the fact on whether the guy had other assets elsewhere.

Smart rich people in the Philippines most often hedge their bets with real estate investments in more secure locales and will invest in income generating assets in the country.

Hence they will rent as the cost of capital in this country is high and putting Php 50M in one home is an opportunity loss based on the cost of money in the country.

For one who is set on living here and the Php 50m is all one has…..

Inflation in the Philippines is already institutionalized so most people buy physical assets to hedge. (land and improvements)

With that amount one could start a finance company and double the capital in 3-4 years. But the principal amount (a major portion) would be invested in land and improvements and the rest could start a small lending institution.

The equity markets are narrow and shallow since the total float is small. (easy to rig)

Micro finance companies charges are 36%-48% per anum.

The rule in the Philippine context with structural inflation - hedge and leverage.

Live simply and frugally …..Set a ten year time frame.

This is still a third world country….

Laws on usury have been abolished.

Exploitation is now legit….

In my case as I already owned a house, I will used the monthly interest for renovation and maintenance. Get a franchise to keep me and my husband busy. And as we are already in our late 50s, my husband and only child would like to travel once a year to enjoy the last remaining days of our lives. And live as simply as we were before. And hope to leave the P50m intact for my daughter.

sometimes it makes sense to rent than own a house.. especially if the person is like 55 years old and has 50M. IMO for that scenario, it makes more sense in renting than buying a house.

Does the philosophy sound good to you? It depends on the potential value appreciation of the house vs. interest earned in the bank. If you find a house in Dasma for 50M, that’s a terrific deal, buy it. If you’ll spend 50M for a house in white plains, that’s not a good deal. Money in the bank might be better until you find a good deal.

“16
nina Says:
August 26th, 2008 at 6:24 pm
… If I want to stay in Manila, I’ll just rent. The price of properties in Manila is outrageous. I better rent na lang.”

14
hachiko Says:
August 26th, 2008 at 6:20 pm
“… oh yeah, in case it’s P 50M in cash: go to the bank and withdraw it all in 20-peso bills. isaboy mo lahat sa loob ng kwarto mo. lumangoy-langoy at palipad-lipadin mo ang kwarta mo! hahaha pag nagsawa ka na, invest na. okey?”

I just love those 2 comments.

I would also love to swim in those money. Just invite me over for a swim party.

15% sari saring investments
15% high risk investments but with a high return then reinvest according to market movements
10% buy a boat - would be my home and office while i travel the world
the rest - fund something like a productive project or send some kids to school

->“After all, he tells me, would anybody know that house is not mine?” he adds.

Hi! I would just like to comment on the statement above.

I don’t think anyone should buy a house or try to be rich for that matter just so he/she can show it off to others. (not that i’m saying that this guy is doing just that … okay ^^ I’m just basing my opinion on the statement.)

As my mom would say, the basic things that everyone needs is food, clothing, and shelter. A house of your own falls under the 3rd category. Invest in your own house (doesn’t have to be 50M worth! that’s too much, unless you have 100 kids, I suppose). So if ever anything happens (like say you got swindled big time or you lost all your money on a bad business deal), you’ll always have a house to go home to, to provide you with shelter, a place where you can comfortably think of your next moves.

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If i have 50M today, i will spend 10million to buy the basic things I still lack for my family to live a decent life. For the remaining 40M i will place in a realtively safe, high-yielding investment. BUT i’ll still work my butt off, this time i’ll try to learn and look for a job in areas that are truly my PASSION (eg.photography,travel/tourism,forensics,UN volunteer,moviemaking,paleontology,basketball coach etc.) jobs that wont entail too much pressure on me even if i’ll live from paycheck to paycheck or even if my boss will fire me anytime, knowing that I have “enough”. I want to enjoy the rest of my life being productive and happy at the same time. Life is too short.

i know several of my friends with this setup.. their investment & business income pays for their expenses and savings

I am also a renter.. if i buy a house today, it will be a major portion of my net worth. I don’t think having such a big allocation tied to 1 entity is wise. imo lng.

another plus is, you dont have to pay for maintenance, RE taxes..

i wish someday sa hotel na kmi mag reside para full service galore. ^_^

people, please note that we don’t need to expose ourselves to high risks if we have more than enough moolah.. ofcourse prerogative nyo yun.

I’m just saying, for those of you who are new to personal finance, risk taking should be at par with your cash needs.. if you don’t have enough then you need to risk more to gain wealth..

if you have more than enough money (lets say sobra2x na ang 50mm), you can take it easy sa risk area.

I will create 3 basic pots:

1) 10% - cash accounts (CD, TD, etc)
2) 40% - fixed-income investment (bonds, money market, rent ) to support the first pot
3) 50% - growth investment (equities, real estate) to support first and second pots.

Renting at P85k/mo for a P50M house is a steal. Just do a simple math, at 6%interest rate, the P50M earns P3M/yr or P250k/mo, and you only pay P85k/mo in rent, a savings of P165k/mo. Its a smart move for the renter but not a smart move for the house owner.

i dont know how much interest banks are giving nowadays but if the figures given by dann is true, i say i’ll go with dann. banks because i think its the safest venue for putting/placing your money. but then of course choose a well stable bank and not the smaller ones that tend to offer higher interest but lacks stability.

what am i going to do with my P50M =)

im going to build a foundation for the young and old, school for the poor filipino children and a livelihood for the poor parents of the philippines.