SM Residences - as investment?

[jhnkvn]

vinj definitely helped me out sa mga Real Estate 101s ko and looking back a few months I really valued his opinion so I'll also chip in my opinion on the matter after studying it.

ROI of renting out a condo is typically around 8-12% per annum based on rental income. In other words, you typically get your investment "back" usually after 10-12 years after paying out expenses such as brokerage charges and other miscellaneous fees. This is usually consistent with the appreciation of the condominium unless you tied yourself over a long-term lease agreement (ex. condo price +10% after year 1, usually rents follow a +10% increase too). The bad thing here is that we're computing that you won't have a problem in leasing out the unit.

The good side is that you have condominium price "appreciation" to fall back to and asset "appreciation" has gained enormous momentum since 2009 (everybody nowadays wants to go to real estate). I'm unsure if flipping is a rampant practice thanks to the supply of units. Remember that it isn't all roses and flowers, one.. accidents may occur that will reduce the value of investment (ex. the scare of Serendra's explosion) while any asset that increases slowly isn't to your best interest thanks to inflation.

Of course it'll be an investment better than stashing the cash away at a bank thanks to our historically low rates. Besides, it's not like our recent real estate buying spree's unjustified in a sense that it'll cause a bubble in the future (for those who studied the Asian Financial Crisis, you should know that our real estate was the most heavily hit).

[vinj]

^ Good inputs

Re. flipping, it is common as people try to jump on the real estate bandwagon. IMO, you only do that when you can purchase a good and definitely marketable property at well below market value, or at market value in an area that is fast developing, and that you have the cash and holding power to support that purchase even if you don't sell it off immediately. Marami kasi sa condos and new developments, people buy up at pre-selling then try to sell it off immediately once the selling price of the developer goes up. You won't earn from that as fees and taxes will just eat you up and people would prefer to buy direct if the development is still being constructed.

On another note, i heard that SM is dropping Megawide from its projects.