My not-so-good experience buying my first rental property (condo)

[Ava G.]

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $70,000

Cash invested: $30,000

First rental property I bought was a condominium from a good property developer in the Philippines. Still bought despite all the red flags (yup, from BP members!). Nothing wrong with the property/developer itself. Just that the Philippines has very high loan interest rates (due to high inflation) and the monthly rentals are not enough to cover the mortgage + assoc. dues. The property is not cash flowing although it seems to be appreciating in value. Last resort is to sell and start over.

What made you interested in investing in this type of deal?

There are more people renting condos than landed houses due to poor commuting conditions. Expats also cannot buy their own homes and are likely to rent condos. It's also in a good location.

How did you finance this deal?

Through bank financing at 80% of the purchase price.

Lessons learned? Challenges?

1. I underestimated the 'misc.' costs that have to come out of my own pocket. About $11,000 was used, not for the actual price of the property, but for renovation, furniture, closing costs, holding fees, etc. If I don't make it cash flow soon, my expenses will just balloon over time.
2. I didn't research the rental rates properly and had a too optimistic estimate. As per BP, a good rental rate is 1-2% of the purchase price. However, my unit can only be rented for 0.6% or lower.
3. Shouldn't over-renovate.