So my mother finally convinced me to get to Tagaytay but there were things we didn’t agree on. But for the most part, I did realize what a great deal it really was. My main limitations as to why I didn’t accept the deal were the following:
- Geography. I don’t have a car and it takes me 6-8 hours by commute from Olongapo.
- Finance. My money is tied down to what I call “Project Alpha.” It will remain there until it reaches its endpoint which is about one and a half year away. I do this deal, I will be set back by 3 years!
- Personal. My mother’s goals were different from mine. Either she straighten her finances or I am going to be in big trouble if I got into the deal.
Here is how I look at the deal:
The name of the game is real estate. Just like in “cashflow” it has 4 components.
- The cost is Php 6,000,000.
- Mortgage will be Php 4,000,000.
- The downpayment is Php 2,000,000. I don’t have this money and there’s six ways that the developers would let me get this amount by 3 years (See the file above). The one particularly suited to me is the balloon payment scheme. Every 6 months I pay 160,000 and 36,000 in between. The house would be built by six months and hence will be available for rent. At that time the rent money will be the one paying most of the monthly payments. This will give me enough time to pay a now decreased amount of ballooned 6-mo payment of 100,000 (consider the net income of the previous 5 months). I only need to save 20k per month. Actually I only need to save 10 because my mother is supposed to provide the other half.
- Then there’s the cash flow or income which will be as follows. If I could acquire it by bank (BPI), I have a ton of options. There is a staggard fixed rate and the classical fixed. Variable rates are very complicated and Philippines has troubles with sudden rises in inflation. Classical Fixed can get me monthly mortgage payments of 36,000 and rentals could get to 40,000 with net of 4k! But there’s a problem of paying the property managers one month worth of rent. So the net is actually 4k per annum.
But if I acquire it by staggard fixed rate, I will have the first 8 years with monthly amortization of approx 28-30 thou! This translates to about 8k per month while considering property manager’s commission. I sell the house and lot before that time and I could probably get more than what I bargained for.
So that’s how I could acquire a Golf-course Tagaytay lot without spending too much money. But I refused. This may be one of the greatest investments I would be passing for now. I just wish I have somebody tell me whether this is a great or foolhardy decision. I cannot trust my mom’s intuition on this one, even though I love her.