A huge part of the monthly amortization that we are paying to the bank is being paid for by the tenant.
For most OFWs, a dream condo – probably a humble two-bedroom unit with a spacious living area, kitchen and a terrace with a view – is one that takes time to have, considering other financial obligations.
Joanne Rico, who works at an Abu Dhabi hospital, thought so. “I came from a very meager family. We did not have any background in business or investments, let alone knowledge or experience in property investments. For us, to welcome the idea of investing in real estate is a scary and dangerous place, if not an impossible territory altogether,” she said.
Rico ventured into real property by starting out with the basics. “Prior to investing, we built an emergency fund – for loss of job, health issues, or natural calamities, etc. – and determinedly got protected via medical and life insurances.
Our first jump in real estate investment was on a unit ready for occupancy (RFO) which is, hence, relatively expensive compared to properties under pre-selling. But we decided to acquire the unit because of the character of its location: it is situated in an area where there is a constant demand for rental units. Immediately after paying the down payment in lump sum (we saved this over 3 years), we moved in, furnished the unit, and got a tenant. In effect, a huge part of the monthly amortization that we are paying to the bank is being paid by the tenant.
The second real estate investment is under pre-selling which means it is relatively cheaper and the terms made it easier for us to pay the down payment in 12 months with 0% interest. As soon as the unit was turned-over, we moved in, furnished it and got another tenant. Similar to the first property, a chunk of the monthly amortization is being paid by the tenant.
The third real estate investment is in an emerging project by another high-profile developer in a new area with a promising market. Since the property is under pre-selling, we got to spread the down payment in 24 months with 0% interest. Once the unit is turned-over, the monthly amortization to the bank will be paid by the tenant plus the rental income from the two other units.
“I personally believe that a wise way to invest in real estate is by using the power of leverage: after paying the down payment, loan from the bank (note this is good debt because you are expecting ROI from this loan), pay the amortization over a period of time, while having the property rented. This way, you are not alone in paying the total contract price and the bank’s interest; you have someone else to share the payment for the full acquisition of your property. On a longer term and on a brighter perspective, the monthly rental of each property becomes your streams of passive income,” said Rico.
