Investing in Apartment Rental Business in the Philippines

Overseas Filipino workers who are looking for investment opportunities can consider establish an apartment rental business especially those with properties located near schools, shopping malls or transport hubs.

One may argue that the business is at the mercy of tenants, some of whom we hear are tardy in payments, unable to maintain the well-being of an apartment or worse, use it as hideout for criminal activities. But we seldom hear landlords sell their properties because of unsustainable business. That’s because such dwelling properties are good investment vehicles, especially for senior citizens and retirees who receive monthly rental income on top of their pensions.

One downside of this type off business is that the amount of investment is far greater than the monthly cash flow (rent coming from tenants). Recouping investment takes longer than many other investment vehicles where risk is higher. While apartment rental business usually don’t go bankrupt, calamities such as fire or typhoon could wipe out an entire investment.

To become a successful investor on property rental business (boarding house for college students and city workers or apartments for families), one must be updated with rental laws especially those that tackle rental issues, rate increases and ejecting tenants.

Learn how to screen tenants. Choose those who have steady source of income to pay. For instance, students are likely to continue their studies and receive allowance to pay for monthly boarding house rental, or shopping mall sales ladies might lose their jobs after six months. Think of their lifestyles as well. Will you consider a family with small children or a father who has game roosters that
might defile your landscaped garden?

Pay close attention on your lease agreement, which is best drafted by a lawyer with relevant experience in real estate lease contracts and reviewed and signed by both landlord and tenant.

Apartment rental business must be registered to be covered by government protection in cases of litigation and other legal disputes.

How to Register Apartment Rental Business

  1. Check if the property you intend to use as rental business belongs to residential zone. Other things to consider include maximum number of floors to construct or waste disposal.
  2. Register the business with relevant government agencies: Department of Trade and Industry if you are the sole owner or Securities and
  3. Exchange Commission if property is owned by a corporation. Prepare necessary documents with assistance of an accountant or lawyer.
  4. Apply for barangay clearance.
  5. Obtain building, fire safety and occupation permit from city or municipal hall.
  6. Register/declare the property with the Bureau of Internal Revenue and obtain certificate of registration that will outline schedule of tax dues.
  7. Make sure to apply for Tax Identification Number if you don’t have one yet, along with authority from BIR to issue official receipts.

It makes perfect sense to get things in order first since investing in real estate properties require a big up front capital, and laws governing it occasionally gets amended.