Author Topic: Buying/Leasing land or house in Philippines  (Read 339 times)

Offline Hestecrefter

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Re: Buying/Leasing land or house in Philippines
« Reply #15 on: September 03, 2018, 12:11:28 AM »

I hate to join the chorus of naysayers, but I echo the sentiment that a measure of caution is required. 

The saving grace here is that megapesos are not involved.  Your downside risk is limited.  It sounds like your loss would be no more than one year’s lease cost, plus the money spent on the nipa huts, should the whole thing blow up in your face.  You can walk away and be out of pocket no more than $15,000 or so (I confess, however, that I have no idea what your construction costs will be, but it sounds like not a lot).

I find myself wondering why the “owner” of the property proposed to be leased is willing to lease at a modest P100,000/yr., then to build a few nipa huts on the cheap, and to throw in free maintenance services.  If he can do all that, why is he not already running the proposed business by himself and making P500,000 or more per year?

Another alarm goes off with this bit of info:

EDIT: in response to the last post, we do have several of my Wife's family members in Cavite who would be prepared to move there and run it for us, but i would be curious about how the locals there would feel having outsiders moving in and running it for us, as i got the impression from the land owner that we will employ him or someone in his family to run the accommodation side, but i told him i only wanted him to help us find a local family who can provide meals for the guests at whatever prices they asked.

If we got my Wife's niece and her hubby to run it, we would build 4 cottages so they can live in one, and basically do everything except the cooking of meals.

If it’s the case that the owner wants you to “employ him or someone in his family” (which does not surprise me at all), I can already sense the resentment (and attendant fallout) at you importing outsiders from Cavite to run the show. 

What would be the expectations of “wife’s niece and her hubby”, who propose to pull up stakes and move from Cavite?  Do they already have a stable source of income (I can guess the answer to that) or will they (most likely) expect to eat off the avails of tito Greg’s resort?  My guess is they are not moving there to provide services gratis.  What is their business experience?

A caveat with anyone running the show in your absence is their honesty.  I can see a fair amount of the proposed business being in cash and how will tito Greg know if some is being skimmed?

Earlier, I alluded to the notion that the nipa hut construction costs will likely be small.  Have you come up with any figures?  Whatever they may be, I would not hold out any hope for recovery at the end of the “lease”, assuming the whole thing does not fall out of bed before 10 or 15 years has run.  For one thing, the buildings will depreciate as a matter of accounting practice, regardless of upkeep.  Using the straight-line method to calculate depreciation, I would expect the useful life of a nipa hut used as a rental to be substantially consumed by the end of 15 years.  If I were the owner, being asked to pay you some kind of compensation for the residual value at lease end, I would probably tell you - in fluent Tagalog - to pound sand. 

As others here have suggested, abandon at the outset any hope of finding succor in the courts should things go sour.  It will take forever, cost you a fortune and be unwinnable.  If the plan is to have any prospect of success, it will depend, in part, upon the honesty, goodwill and decency of the participants.  Given that enforcing any contractual “rights” against a recalcitrant landlord will be nigh on impossible, I would consider any contract itself to be a thing writ in water.  If it works out it will be because the parties to the contract are people of integrity who take their obligations seriously. 

Even if you have the good fortune to be dealing with someone who is genuine and not wholly motivated by self-interest, bad things can happen.  As others here have suggested, with non-titled land someone can come out of the woodwork and assert a claim.  Your “landlord” might die during the term of the lease and his executors, administrators and assigns might take a rather different view of any arrangement and may decide it does not bind them at all.  Do you think you can force them into court and get an order requiring them to stay the course?  We’re not in Kansas anymore.

My apology for sounding so negative.  I am a lawyer and I have had a fair amount of personal experience in the Phils and, on occasion, walked away from a sight more than 10 or 15 thousand dollars.  My own view is that embarking on any “business” venture in the Phils should always be regarded as something fraught with risk and you should put up no more than you are prepared to lose.  If a $15,000 hit will leave you smarting, stay out.  A long time ago, when I was training as a CPA, I was taught a basic principle of business accounting: “Anticipate all losses.  Expect no gains.”  Those words ring as true today as they did then.  Time has served only to enhance their meaning.

Offline lost_in_samoa

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Re: Buying/Leasing land or house in Philippines
« Reply #16 on: October 04, 2018, 06:46:14 AM »
A follow up article I ran across today.

Property sold without the consent of the owner

Offline Gray Wolf

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Re: Buying/Leasing land or house in Philippines
« Reply #17 on: October 09, 2018, 11:05:37 PM »
I've been reading this with a good deal of interest but can offer no suggestions except to pay heed to the words of wisdom shared by the other members of this group. I do however have a question (maybe two) that popped up during the reading of this thread. What experience do you and your wife have in running resort rental properties in a far away island? In that same vein, what experience does your niece and nephew have in running rental properties, or any business for that matter? I see too many ways for you and your profit to be separated. Sorry to say, but unless you personally plan to live there and watch over the property, I would say that you have a 99.9% chance for financial failure. Just my ever humble opinion. Your mileage may vary. Good luck!
Louisville, KY USA


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