Some people buy multiple properties to keep up with their financial obligations and portfolio, and that’s great especially if it’s for passive income! But when you haven’t used your properties for quite some time now (especially with condos), you know it’s time to flip it into a rental property business or convert it into an Airbnb for tourists to stay for a while or people who just want to have a staycation on a budget.
If you’re starting out on a condo rental business out of your unused condo unit, then it’s time for us to show you the ropes about the business!
How do I Start a Rental Business in the Philippines?
Just like how professional real estate brokers put other properties up for rent, unit owners consider the following factors when they put up their condo for rental business:
Of course in looking out for property seekers, you have to know your market and you have to identify whether you want your condo rental for a short term or long term rental so that you can build a good foundation at the start of your condo rental business.
Short – term rentals mean more for rental income, but more work. This type of rental business can be for people who are spending vacation whether for business or just looking for a place to relax and have a staycation (or a real vacation). A big factor to consider for unit owners going for a short term is the location. Property seekers usually find nearby condo units for them to stay in city centers and that are near tourist destinations so that they can go everywhere within minutes.
On the other hand, long – term rentals mean less income with less work and you’re usually accommodating one to four individuals (students and working people) and small families (yes, even your pets and grandparents).
This also depends on the size of your property (in this case, your condo unit) so that you’ll know how to cater your condo unit and its amenities to the people renting it out.
The second most important thing to consider when you’re into condo rentals is location because it’s important to make sure that your environment is accessible to many places, safe from any harm, and conducive for you to run the condo rental business (and when you look for a property to buy or rent, the first thing you consider is the location), so be sure that the location is suitable for it.
This rule states that you should compute for the 0.8 – 1% from the price of the condo that you bought in order for you to figure how much the ideal monthly rent range should be.
This method is usually used to figure out whether the rent is expensive or not based on the location of the condo unit you’re renting out, and you can reverse its formula where:
Rental Rate = Total Contract Price/12 x PR Ratio (ie 12 – 18)
If you happen to set your PR Ratio below 15, it means that you’re in an area that’s in demand where prices or rent is expensive while if you use 15 and above, then that is the usual rental property rate.
Prevailing Market Rates
This is also known as Competitive Market Rates because you’re trying to price your rent near other properties that are similar in size and in location, and this is usually present when renting out your condo unit or a townhouse.
Of course with the monthly rent comes other fees you need to come up with. You also need to consider in setting fair prices for security deposit (which is good for 2 months of your monthly rental) and the advance rental (which is good for 1 month) and for other fees that other rental properties ask for such as the move – in/ move – out fee, cleaning fee (especially for short term rentals), CUSA/Homeowners Association and Condo dues (which are optional), late payment fee, rental increase, storage fee, commission to broker/tenant referral fee, monthly rental fee, and so much more.
Prep up Your Condo Before Turnover
Aside from making sure your condo is in tip – top shape by cleaning it and fixing whatever’s broken, you also need to make sure that you need draft a lease contract yourself if you’re not one of those rental property holders in booking platforms such as Airbnb, Agoda, and Booking.com, and have it checked and notarized by a lawyer and sign it in every page.
The next thing that you should have is a checklist to make sure that everything is in pristine condition (especially if you’re doing short term rentals or if your tenants want to make some changes that involves tools, nails, and paint for long term rentals, make sure that they put back everything the way it was before they’ve rented it) so that you wouldn’t blame the tenants if something is broken or missing (and they wouldn’t blame you either).
Do the Necessary Paperwork
Like for any other business, you also need to set the paperwork from the BIR and Internal Revenue and a mayor’s permit as well as paperwork from DTI if you’re putting up your rental property in booking accommodation websites. If you have many properties under your name, you need to separate your main property from all of the other properties you own by setting up a mini corporation of your own.
The fun part of the condo rental business is marketing, and what fun way to market your condo rental properties in booking accommodation websites, rental sites, or on social media is to have a good set of photos and a catchy caption along with important information for your future tenants to know what they’re signing up for.
Finding and Getting to Know Your Tenants
You need to advertise your condo rental business by turning to various booking accommodation websites while for long term rentals need a constant drive for rental websites and social media sites if you’re renting it short term. Take note that some unit owners have a tenant screening just to make sure they’re not only following house rules you give as a landlord (and looking for specific qualities so that they know they don’t have a criminal history), but also for the condo building they’re living in. Finding and getting to know good tenants takes time because they are like dealing with good business partners especially if you’re a first time landlord, so it’s better to be safe than sorry in choosing your tenants.
You don’t need to worry about keeping your cash flow and collecting rent if you’re doing a short term rental business because booking accommodation platforms make sure that the people staying in your property are paid before you actually receive the payment (unless someone broke something or violated your rules). But if you’re going for long term rentals, you have to come up with a good payment scheme that works for everyone, whether it’s through a post data check for a year or with the usual rent payments per month with cash or through money transfer via an online wallet platform or online banking.
New Landlord Tips
Treat Your Rental Property like a Business
Having a property is an investment, so you should double check your rental property and set some ground rules to your tenants about the rental property they’re about to have so that they would also treat it like an investment and so that they’re also following the local and federal laws.
Consider Hiring a Property Manager
A property manager makes sure everything is smooth sailing with rental properties (especially for condo rentals), and hiring one will save the hassle in handling the technical stuff from property taxes and sales tax to property management if you’re handling more than one property.
Have A Written Rental Agreement
Now that the deal is almost set, you just need to have a written agreement with everything both of you have set so that everything is laid out for the tenants to sign and seal the deal.
One of the landlord duties you need to know is that you need to keep and update a digital record of deposit, rent, and maintenance receipts as well a log of all your communications with your tenants so that it’s organized (minus the paper clutter) and it serves as legal proof in case a legal issue arises. It’s highly recommended to do this monthly for one year to keep track of everything.
Keep Good Tenants
Of course a responsible and reasonable landlord keeps good tenants with a good tenant – landlord relationship and winning in a 50 – 50 financial situation like in any real estate business, so you need to keep up with choosing the right tenants, tenant complaints, upkeeping, and constant rent collecting for fair prices in order to keep tenants happening.
Modern Living and Steady Passive Income Into One!
For new landlords, it can be quite intimidating to know all of these especially for first time landlords. But when you look at it in another way, you are actually on your way to fulfill your other financial obligations when you offer leasing services with lifestyle amenities and rental rates that are good for your potential tenants’ pockets. It’s a win – win situation for everyone — giving new and responsible tenants a place to live and treating it as an investment for rental income whether it’s for short term or long term! Nonetheless, these are your ‘house rules’ if you want to become a landlord serving it up in the real estate industry!
Looking for an affordable property? Contact us today
A lot of Filipinos dream of owning their first apartment or house and lot. With today’s booming real estate opportunities, there are so many options to choose from.
Here at Vistaland International, we have a roster of affordable property listings from several locations across the country. Whether you’re looking for a place to live in Manila, Cebu, Davao and etc, we’ve got you covered. So contact our real estate agents today!
Vistaland International was primarily created to bring OFW closer to their dream of finally acquiring a home in the Philippines. And with the rising cost of living in the country, OFWs and their families are looking for ways to earn extra cash flow to support their daily needs. Luckily, you can also join the global network of Vistaland International as a real estate professional and earn a commission!
Vistaland International Marketing, Inc. (VIMI) is the international marketing division of Vista Land. Aiming to provide OFWs and migrant Filipinos a home in the Philippines, VIMI has established long-lasting relationships with brokers and clients around the world.