How to Turn Your Property Into Passive Income in 2022 and Beyond
Filipinos are always on the hunt for income opportunities, so they won’t have to depend solely on their day job’s income. This is where the value of passive income or the money you earn while you sleep comes in.
Passive income is so flexible. First, it can prepare you for any significant life change, and second, it cushions against any emergency. A passive income helps build savings, set up and build a retirement fund, pay off debts, and fund a college education. Creating passive income is a great way to build wealth and achieve financial freedom, allowing you to stretch the peso that you have already earned.
The question is, how do you turn your property into passive income?
The simplest answer is: rental. For instance, if you’ve recently bought an affordable condo in Cebu , you may start renting it out.
Renting out a condo
The Philippine real estate market is steadily growing, except for the slight halt it experienced due to the coronavirus pandemic. Nonetheless, it is on its way to recovery. Experts assert to give it two to three years, and the industry will fully recover. Some economic analysts even encourage investors to buy residential properties to lease out later to tenants.
However, buyers and investors are encouraged to buy condo units from the most trusted real estate developers. Otherwise, their investment would not yield the returns they expect them to.
Furthermore, investing in pre-selling condo properties provides the best investment value. Although there’s a catch一the downside is you have to wait for the residential building to finish before acquiring the unit. So, there’s a waiting period before you can lease the unit out.
How much can you earn from renting out your condo unit?
Many factors can affect the expected income—for example, the monthly rental fee. The fee is influenced by a host of factors like its location, whether it is near commercial districts, shopping malls, or public parks. In addition, the unit’s configuration, such as how many bedrooms and the key features and fixtures within the unit, must also figure into the amount. Finally, the available facilities and amenities in the residential building would also influence the rental rate.
More facilities may lead to owners commanding a higher rental price, primarily when the building is located within or near a technical park or a transit hub. In essence, when leasing out a condo unit, the more conveniences the rental may endow the renters, the higher the expected monthly fee.
If you want a ballpark figure, the average rental rate of a one-bedroom condo unit within the business district starts at Php40,000 per month. The further away the condo building is from the city center, the cheaper the average rental rates are. For example, the rental rate in Taguig is Php42,000; in Mandaluyong, it’s about Php32,000 whereas, in Alabang, it can be anywhere from Php12,000 to Php22,000.
More tips on how to maximize your condo unit rental earnings
If you are planning to rent out your condo unit, you might as well follow these additional tips.
-Be ready to become a landlord. Yes, we’re talking about passive income, but you will have a role in managing your rentals if you will manage it yourself and not hire a third party to do it for you. One common mistake of newbie rental business investors is failing to build the mindset. This is a business, and so you should approach it like that.
-Devise a marketing plan. It should be clear to you who your target tenants are. Do you cater to young urban professionals, college students, or starting families? Promote aggressively with the target tenants in mind.
-Decide whether you want short-term a la Airbnb or long-term rentals. There are pros and cons to each. For instance, renting out your condo unit for at least one year means an assurance of having a steady passive income source. Also, this lessens the need to market the unit again and again to find new tenants.
-Foster good relationships with your tenants. If they renew their lease contract, you won’t have to spend anew promoting and processing the documents for new tenants each time the lease comes to term.
-Have enough cash flow. Not because you are targeting a residual income from your condo unit, rental you will leave it be. Your goal is to earn a steady cash flow, but please remember that the market fluctuates over time. It is best to have adequate cash flow so you can take good care of your condo rentals.
-Screen tenants diligently. One secret to maximizing the residual income is finding the best tenants. Don’t be afraid to say no because you worry about having the unit vacant for long periods. Non-paying tenants can be a liability and would be more expensive than having a vacant unit instead. Eviction can be a lengthy and costly process, too, so make sure to screen applicants and check with their references.
-Collect monthly rental fees promptly. Write out rules and hold your tenants accountable一they must follow these rules from the start of the lease. The last thing you want to do is discreetly encourage your tenants to be late on rent payments by being too kind to a fault. As such, don’t wait too long to collect monthly rent. Remember that any delays in the rental fees will hurt your cash flow.
Renting out a condo unit is one of Filipinos' most lucrative passive income sources. It more than pays for the amount you invested in initially. No wonder the OFWs are very keen on investing in rental properties such as condo units. They can rent them out while they are still abroad and recuperate their investments and still have a place to live when they finally decide to stay in the Philippines for good.