Real estate may be the most important asset you can ever own. If you have property, make use of it by renting it out. Do not let it stay idle.
To make your house attractive to potential lessees, for instance, make sure to:
EYP RECOMMENDS helpful establishments.
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August 26, 2002
Renting Out Your Property
Imagine earning an income without having to work for it. This you can do by renting out your property.
Text by Sarah P. Reyes
In this article:
• Renting out your house
• Finding a renter
• Outside factors to consider
• Renting out empty lots, buildings, and condos
• EYP RECOMMENDS helpful establishments.
Land and property have always been of great importance. Wars have been fought and kingdoms lost over them. As symbols of financial independence and power, real estate may be the most important assets you can ever own or investments you can ever make. If you have property, make use of it. Do not let it stay idle.
EYP talked to Michelle Bautista-Macatangay, a licensed real estate broker since 1997 for her family's business, Filcor Realty, Inc. She tells us how we can make use of our property wisely by renting it out.
If you are fortunate enough to own more than one house, you can have one rented out. Houses are usually for residential purposes. But some houses in commercial areas can be used as office spaces or can be turned into home offices. The advantage of renting out your place for business purposes is you can charge a higher rental fee. Here are the initial steps to follow:
Determine the market value of your house. The next step is to check your property's market value. This involves some canvassing. "Scout around your area to know how much you can have your house rented out or sold," advises Macatangay. The value of your house or property generally depends on the value of others in your area.
Canvassing is important because you may mistakenly price your house much higher or lower. "Baka mag-jack up ka ng price mo to P50,000, yung mga katabi mo, P20,000 lang. [You might jack up your price to P50,000 when everyone else in your area prices their rent at P20,000]." In other words, you can't have Forbes Park, Makati prices for a house in Quezon City.
Another way of finding out the value of your house is to check the classified ads or ask appraisers. The appraiser's job is to evaluate the worth and set the value of your property, among other things. You can find appraisers through banks who regularly make use of their services. Or, you can approach associations of real estate agents/brokers like the Real Estate Brokers Association of the Philippines (REBAP) or the Chamber of Real Estate and Builders' Associations (CREBA). The site PhilippineBusiness.com.ph maintained by the Makati Business Club contains a directory of real estate and other industry associations.
The next crucial step is, of course, finding a renter. Here are some ways to do it:
Get the services of a real estate agent/broker. When you're having a difficult time finding a renter even through ads, or when you don't have the time to entertain prospective clients, it's time to hire a broker.
A broker should be able to do all the legwork, from finding a renter to drawing up the contracts. "It's better to hire a broker to do the work for you," says Macatangay. But it only makes sense to get a broker when you're renting out your place for P10,000-P15,000+ because he or she gets a portion or a commission from the rent, depending on your arrangements.
For rent, a broker's standard commission is one-month rental for a one-year contract. For a sale, the agent will get 3-5% of the sale price. If you are renting out your place for lower than P10,000, a broker can give you referrals from his or her many contacts.
Take time to check out applicants. Finding a good renter is hard. According to Macatangay, first impressions should count. "When you see them, you can know right away whether they'd be good tenants or not. Check out their getup, the way they talk, the background of their work."
It's necessary to interview all the applicants, just so you can make a thorough and fair judgment. Although it's no longer common practice, you can also have your prospective clients answer a questionnaire that touches on how much income they get or where they live. If they've been renting a previous place, you can also talk to the owner of that place. "It's like making a credit or background check," adds Macatangay.
There are issues to consider when you plan to rent out your property because these have a direct effect on how much you can have your property leased or how easy or hard it will be to find renters. These factors include:
Location. The eligibility of your property for renting depends to a large extent on its location. It has to be accessible and, for residential purposes, well-secured. Clients look for a good location and security.
"People are more inclined to rent in areas near schools and offices," says Macatangay. She notes that houses in Xavierville, Loyola Heights are easy to rent out because the area is near Ateneo, UP, and Miriam College.
Makati has always been and is still a hot spot. Other hot spots are: Ortigas, especially in the Acropolis area; for residential purposes, the Scout area, New Manila, and Mariposa in Quezon City; and Malate in Manila. (If you have properties in these areas, take advantage of them!)
The basic principle in real estate is: The more accessible you are to the city, the more expensive your property. The farther you are from the city, the cheaper it gets.
Hook up with big business. For example, McDonald's may want to rent your property to build a restaurant. Or, a company may put up a gas station for say, a 25-year lease. Usually, if you're renting out an empty lot to a tenant to build a structure, you would have a long-term lease.
Under such long-term leases, you can raise your rental fee 10% every year, which is the standard. You can also choose not to raise prices or do so every five years. You can come up with different payment terms with your tenant.
Enter into a joint venture with a developer. Fil-Estate may want
to build a subdivision or a building on your property via a joint venture arrangement, "para kikita ka rin doon [so you can earn from it too]," says Macatangay.
To find out if and how your property can be developed, you can get the services of real estate consultants to study the development possibilities and marketability of you property. You can approach individual consultants or companies like Fil-Estate Realty Corporation, Megaworld Corporation, Sta. Lucia Realty and Development, Inc., and AIC Realty Corporation, among others. These developers also have teams of salespeople who can help you.
Lease the entire building to a company. If you have a vacant building, you can forge a joint venture with a company who will rent your building and turn it into a business area (e.g. a restaurant, apartelle, or office space). Aside from the company's rental fee, you can get 10-20% from the total income or rent of the place, whichever is higher. Rent for buildings is usually computed per square meter of the space to be rented out.
Sub-lease your property. Sub-leasing means your tenant will rent out spaces in the house or building they are leasing from you, for example, turning your house into a dorm for bedspacers. Although many property owners don't normally allow this because of problems that may arise, it really depends on you and your agreement with your tenant.
If you have a big house, you can also partition it (into a triplex, for example) then rent out a part or parts of it.
Target niche clients. You can rent out your vacant condo unit to expatriate executives, for instance, for much higher fees. (Condo rent prices are also computed by square meter.) But you have to make it clear to your tenants that they'll have to pay extra fees like association dues, parking, and utility bills.
Although there is a downside to renting out your property, it's still a better option than letting the property just stay idle, since you can earn back what you've invested in it by way of rent.
A last note: Remember to visit your property every so often. As the owner, it is your right to do spot checks on your tenants and make sure your property is not going to waste.
You can contact Michelle Bautista-Macatangay of Filcor Realty at telephone numbers 687-4479 or 931-2405, and at cell phone number 0917-5347385.
Got an idle property you want to rent out? Click on these EYP businesses and services that may be of help, listed under the following categories:
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Associations
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Consultancy
Contractors And Builders
Dormitories
Government Agency
Housing Projects
Industrial Consultants-Industrial Developments
Investment Advisory Serv
Management Consultants
Newspapers And Publications
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Realty-Leasing
Rentals-Commercial Industrial Residential
Surveyors-Land
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