In an effort to achieve greater diversification, though admittedly without much due diligence, I purchased a condominium unit in the booming Philippine housing market at the beginning of last year.
The situation was just perfect at the time:
- I learned from a friend who’s a real estate agent that one of the most popular condo developers was about to pre-sell a new condo just a few blocks from the most popular shopping mall in the country. As the developer was just in pre-selling stage, I got in on the ground floor.
- I was two years into a job which allowed me to save at an annual rate of around one-fifth the total cost of the condo
- The unit turnover isn’t for another 3 years, and I only have to shell out a fifth of the total cost for each month until the turnover (i.e., one-fifth over 36 months)
- When I signed the contract early last year, I already had total savings of around one-fifth the condo cost. In three more years, if I wanted, I could pay for the whole thing in cash, and still have extra.
On the other hand, what I didn’t completely look into was:
- What I’d want to do with the condo once I got it. If I wanted to flip it, I’d need an exit strategy. I heard you could even flip a condo before the actual turnover, but I never pressed my friend for any details. If I wanted to keep it, I didn’t do enough number crunching to get a feel of the return on investment. Not to mention I know zilch about property management.
- What else I had to pay for if I decide to keep it. Real estate fees? Association fees?
- A real plan on how I’d manage to pay the remaining four-fifths of the condo cost. It’s never a good thing to liquidate income-generating assets to pay for a new untested investment vehicle. In that case, I hadn’t done enough study on where to get a loan.
So why’d I get into such a big investment?
The biggest number on my mind at the time was 3. I have 3 years to do the math, research the options, and make the decisions. When it comes to investing in real estate and businesses, most of the actions and transactions don’t happen overnight, and they involve a lot of players at different stages of the investment. By choosing to get in now, I have more than enough time to get the answers to my questions and arrange for the necessary transactions upon the turnover.
And that means I’ll still have 3 years worth of study to put on this blog.
And incidentally, I just learned that the condo price has gone up by one-fifth the pre-selling price I got it for