Foreign investors are keen on investing in properties in the Philippines. Naturally, they’re more concerned about higher rental yields and capital gains than using their units. Guaranteed yields gets their gander up.
Pre-selling projects? They’d rather give these a wide berth.
What they usually ask about is: who is going to handle their property, who is going to look for tenants, facilitate the lease transactions, lease rates, take care of the tenant’s maintenance concerns, pay utilities, pay insurance, collect payments, inspect the units after the tenants leave, handle the repairs, and refurbishments, pay taxes?
Their biggest worry is…what if there are no tenants?
Vacant units, a no-no
A lot of condominium buyers unfortunately have had the experience of having their units vacant for several months. Sometimes, even with the best efforts of the broker, the unit owner insists on their ideal rental rate, thus losing prospective tenants, not realizing that with each month that the unit is vacant, plus additional cost in paying the monthly association dues, their effective return significantly diminishes. In most cases, these investors feel their agents abandoned them after they got their commissions.
Alejandro S. Mañalac, chairman and co-founder of HAVITAS Development Corp., told the Manila Standard that projects that offer professional asset management have an edge in this kind of market.
“I am referring to a separate company that specializes in managing hotels or serviced residences,” explained the former chairman of the National Real Estate Association (NREA).
“This is the reason why I find it safer now to present projects that offer guaranteed rental yields in one form or another,” he said. “These guarantees can be in form of an actual contract with specific rates of rental yields, or just the mere track record, brand name and actual performance of the hotel/service residence operator. This is already a guaranty in itself.”
Professional asset management
Manalac said that based on his studies, there are a lot of advantages in investing in units that are enrolled in the rental pool of professionally managed service residences.
“They do not have to worry about finding tenants for their units since they enjoy their monthly share of the pooled rental income whether their units are occupied or not,” he poiunted out.
Also more popular nowadays are serviced residences “because they have lower operating costs as compared to full hotel set-ups since they have more long-staying guests and does not require heavy staffing.” Manalac said this translates to higher profits that can be shared with the investors/unit owners.
These operators, Manalac said, professionally market their rooms and have the advantage of existing networks of corporate clients, tie-ups with local and international travel agencies and event organizers.
“Multinational companies usually prefer to house their top expats in these hotels/serviced residences run by reputable operators for safety, security and most of all, convenience,” he said.
Hassle-free ownership
Another advantage of investing in professionally run rental pools is the hassle free ownership.
“They don’t have to worry about paying their bills, insurance, commissions, and utilities; be bothered by maintenance, collections, and refurbishing,” Manalac said. “The units are preserved since the operators see to it that they are kept in very attractive and marketable conditions.
Service residence operators keeps the units in tiptop condition since they are open to buying back the units from the investors at a pre-determined premium.
Manalac warned, though, that in the absence of a guaranty contract, it is important to check out the company that will operate the rental pool of the hotel, or serviced apartments.
“Their brand, track record and careful study of the market are sometimes an even better assurance than a contract,” he said.
Manalac predicted that professionally-run rental pools may be the trend in the next few years.
“Once the market becomes aware of the presence of these options in real estate, those who are coming in purely for investment will be taking a closer look at this,” he said.