Buying/Renting/Building/Leasing property in the Philippines

[fred]

I thought i might post up a new topic about Buying/Renting/Building/Leasing property in the Philippines, from my perspective, and what i have already set in place.

Ok so i personally own 5 Condo's in various locations, the law was that i could only buy into a building where the outright ownership must be at least 60% Filipino, i bought into all 5 when the buildings were already full, and each building was 95% Filipino owned, only a few foreigners owning in each building, and these 5 condo's are rented out month to month to Australian guys who visit the Philippines to sort out their marriages to their Filipino partners, as they usually need to stay for extended periods of time, and renting a condo is usually cheaper than staying in a decent hotel.

6 years ago i leased 30 small 3 and 4 room concrete/bamboo cottages in Palawan, the leases were for 20 years at a set rate per year, which can't be changed by the property owner, i then made some improvements to bring them up to a suitable standard for renting out to tourists from Australia through one of my businesses, i then offered these cottages rent free to widowed mums with kids , and they have full use of the cottages when there are no tourists staying there, when i do rent them out, they must provide 1 bedroom for the tourists, and also provide them with meals while they are there, i provide all food and supplies, and a small salary, this is covered by the rent that i charge the tourists, typical average occupancy is around 50% per cottage.

I also lease 6 beachfront lots (1,000sm up to 5,000sm) in 3 remote locations in Palawan, places that are not flogged to death with lots of tourists, i have a 25 year lease on all lots, and the owner had to clear the lots of pig pens and old shanties as part of the lease arrangement.

I am allowed to build my own cottages on those lots, and i will own those cottages outright, but i can't own the land, so far i have built 20 small bamboo cottages on 3 of the smaller lots, with another 40 to be built by the end of this year on the other lots.

Each one is 40sm with a bedroom, bathroom and a small verandah, which i rent to tourists for PHP1000 per night, and the tourists are provided their meals by the family who i lease the land from, and the tourists pay for their meals direct to the family, i just get the rent, however to comply with the local health laws and regulations, i did have to provide a small commercial kitchen in the family home, consisting of a few stainless steel benches and wall sheets, lino on the floor, 2 sinks for food prep, as well as provide a fridge and freezer, and hot water installed, cold water comes from tank water or via an underground spring.

The kitchens must be inspected regularly by the authorities and have the relevant paperwork stating that they comply with all the necessary health regulations.

After the 25 year lease is up, i can negotiate a new lease with the owner, if he does not extend the lease, the owner has buy the cottages from me at an agreed price, in my case it would be the construction cost only, which is now included in the lease documents, and if he will not buy them from me, i am allowed to remove the cottages myself and relocate them, and clear the land back to the way it was when i began the lease, however the issue with this arrangement will be that the cottages will be old by the time the lease is up, so regular maintenance will be required to keep them up to scratch.

Each cottage is built in a prefab format, so the floor and wall sections, plus the roof frame/trusses are built in one location by a crew of tradesmen and transported to the lot and erected on concrete stumps and tied down with steel straps, this was done to make it easier to dismantle if i ever need to.

If anything happens to me during the lease period, the leases will be signed over to another family member.

One final point i need to clarify, each of the Lots that i lease has a clear title with the property owner, something that everyone should check before leasing anything, as i almost came a cropper before leasing these 6 lots when i almost signed a 10 year lease on a lot without it having a clear title, if my lawyer had not called me when he did, i could have been in big trouble.

As far as my businesses are concerned, i operate one tourist business from Australia, bringing tourists into the Philippines and setting them up with all their tours, accommodation and other needs as required, and i run the tourist rental cottages through my partner, with most of these cottages being rented by the tourists that i bring into the Philippines, a few are rented by walk in tourists, as i don't advertise them on the internet.

I also have a 50% share (silent partner) in a few small eateries in a few tourist locations, all managed by the Filipino co-owners and employ local Filipino employees, i provided capital to set them up and the Filipino owner shares the profits 50/50 with me after bills and taxes are paid, it is based on 100% trust in the people who i invested with, and in 3 years i have never had any issues, the employees share the monthly tips, and also receive a bonus each month if the eatery meets a set profit margin during that month, so far only one eatery has not met the profit margin for only 3 months out of the 36 months they have been operating for, the rest are hitting the mark 100%.

If you look after the locals, they will look after you.

Well done..You deserve a lot of credit.
Many so called experts on social media tell us it`s not possible to start,maintain and grow a business here..
Obviously,they are wrong!
That said,business in the Tourist sector will be dead as a dodo for another 3/4 months IMO.
You must also be aware that the DENR have become far stricter in regards regulations and issuing permits since the Boracay closure.

[bridgyguy]

Well done..You deserve a lot of credit.
Many so called experts on social media tell us it`s not possible to start,maintain and grow a business here..
Obviously,they are wrong!
That said,business in the Tourist sector will be dead as a dodo for another 3/4 months IMO.
You must also be aware that the DENR have become far stricter in regards regulations and issuing permits since the Boracay closure.

Thank you, i spent 2 years researching every facet of my arrangements in the Philippines, and even after all that, i still missed the boat regarding leasing land that is not titled. and this is why you must have a very clever Lawyer working with you, and one who is local to the region that you are investing in, as many regions are very different to each other in many aspects, but the common law states clearly that a foreigner can only buy a condo in a building wher 60% or more are owned by Filipino citizens, they can live in it themselves, or rent it out.

Land, house, business ownership is impossible, you can do it thru a Corporation (this is very complex to set up and mostly it will be doomed to fail) or thru a Lawyer (got to find one you trust) or a Filipino national (wife or otherwise) but in any case, you will never own any percentage of those properties, so unless you trust those in a corporation, your Lawyer or Filipino national (wife etc) DO NOT buy land, a house, or a business.

Leasing is by far the bet option as far as a house, land or a business goes, and if you are not married to a Filipino, and want to get into an existing business, offer the owner a lease for a set period of time, making sure that you have had your lawyer go thru every bit of paperwork and financial documents, and structure the lease in such a way that you know you are going to be making money all the time, because if you fail, you must still pay out the lease on the business to the owner.

In my case with the 4 eateries/cafe's that i set up, they were new businesses, which i was not allowed to own myself, so i set the businesses up and they are registered to the managers who operate them, and we initially split the profits 60% me and 40% them for the first 12 months, this was done so that i could recover most of my setup costs, and after that, it reverted to 50/50 which allowed them to own a business without the need to pay for the cost of setting them up, a win/win scenario for them and for me, and if i ever want to walk away, the manager takes over and i get nothing, and we look after the employees as well.

As far as the DENR goes, things changed dramatically after the closure of Boracay in mid 2018, and they set about making massive changes to all high volume tourist regions, including El Nido in Palawan Island, which at the same time that Boracay was closed, also had major issues with sewer and grey water pollution, which had been getting worse for many years.

El Nido is one of the biggest tourism disasters of all time in my opinion, they allowed the town to build concrete hotels and shops along the beachfront, in many cases only 10 metres from the high tide water mark, they were finally doomed for demolition with new buildings requiring a 25 or 30 metre setback to the high tide mark, but even as of now, nothing has been done, every building remains in place, some were burnt down (deliberately) and ironically many building owner along the beach front near the town centre are actually adding onto their building, or doing renovations, which i found astounding when i was there in August last year.

The places where i have chosen to set up my cottages are between 30 and 60 minutes by boat away from crowded tourist locations, which allow the tourists to reach my places quite easily from those tourist towns (just outside Port Barton and up at Diapila Bay in Palawan are 2 locations that i have already set up)

Just to setup a tourist cottage business requires a lot of paper work, and then you have the food/health side of it which is even worse, but in some locations nobody seems to care, you can still pay a bribe and have them turn a blind eye, however i set my places up according to every single rule, and then some, as i don't ever want to risk the health of any tourist that stays in any of my cottages.