How to know if a property is good for rental?

Question

We are thinking of buying a condominium at a highly urbanized district in the Philippines which would rent at about $1000+ a month. It's just a walking distance from huge malls / parks / commercial buildings. This location is also near the central business district of Manila (about 15-20 mins drive).

The neighborhood is composed of expats and urban professionals who have mid-high range salaries. I've also looked at other rental properties in that area (condo units also) and they're renting at about $1000-1700 a month for the same unit type.

However, I'm very new REI and I'm not sure if this is too expensive. With salaries in that range, will people just buy their own units rather than rent? Is it better to buy a cheaper rental property (still a good location but not as "prime" as being in the center of the urban hub), thus cheaper rent, and therefore, more prospect renters?

(The US and PH market may be different but in general but I think there'd be a general rule when it comes to what constitues a good rental property.)

Nickson Rio · Answer

@Brian Johnson , it depends on the City and the property type bri, In my City, Davao. Based from my market analysis the average rent the local people can mostly afford and willing to rent is $100-200 per month, for foreigners, you can find $400-$600. In Cebu, you can find mix and middle of that.. In Manila, you can find more than that even double. I'm not sure in Manila and Cebu cause they are not my markets. These are just assumptions and maybe wrong.

Manila - High Rates

Cebu - Middle Rates

Davao - Low Rates

Brian Johnson · Answer

Very good point.  I wonder how much of the rent up front is often required in the Philippines?

Nickson Rio · Answer

@Ava G. though I'm from a different city, In Manila, where TRAFFIC is really a problem, more people that can afford would prefer condo living since most of the developments were in the Central District Area/Business Are. While these type of properties will attract Foreigners with the right marketing, staging, and management.

As an investor perspective, you should look first at your numbers if it's okay. Since you said you already made the 1% rule which equate to $1K/month. Ask some question first, can you easily find a person earning as much as $3k per month or more? Most of the time when considering a tenant, it's earning capacity should three times the rental rates to minimize vacancy rate.

Based your investment with your numbers and market analysis. We don't know that $1k-$1700k were losing money.

Nickson Rio · Answer

Hi @Ava G., Have you try to talk to a rental manager usually RE agents of that condo. Most of the condos had their property management team and they cater marketing and finding tenants. In your case, you're market will be high income earner individual and foreigners. For High Income Earner local, you might need to offer a LEASE with OPTION to buy or RENT-TO-OWN so he/she might not think of getting a housing loan. For the Foreigners/Expat, they can't actually own a property in Philippines for 100% so chances of them buying a property is low.

Nickson Rio · Answer

Well, that;s good @Brian Johnson, I'm not really from Cebu yet I know that Cebu is a good market. If the land is outside cebu and not one of the major cities in the philippines then what you can only do with that land is agricultural business only.

Nickson Rio · Answer

I'm not a lawyer, but that's the way I interpret it.

Nickson Rio · Answer

@Brian Johnson, are you planning to invest in Philippine market? You can only buy a portion only of the land by 49%. In terms of condo, foreigners can buy a unit since it's only a parcel of the overall project. Though, you better check the numbers and really find a good partner you can trust.

Brian Johnson · Answer

Gave,

I have looked at the condos in IT park.  We always stay at the Waterfront hotel across the street.  We look for a rental in the condos for a 1 month stay.  We saw a couple listed around $60 to $80 per day.  Which is pretty good.

Gabe G. · Answer

is it in cebu, or manilla?And in a nice area that caters to foreigners? Possibly around IT Park?

If so, then 1k rents, can be had. Anywhere outside of there, 1k, is not going to happen.

How to know if a property is good for rental?

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