Manila REI Meetup Updates — Build and Sell; and the importance of Investment Goals in Real Estate Investing

Build and sell a building — — or something smaller

Hi fellow investors!

This week was a pretty exciting and new experience to the group. We tried changing up the format a bit and got some interesting results. You’ll see the changes in the upcoming Meetup schedules, especially of topics and formats.

I’d also like to give a mention on our plans to start a LEARNING SERIES, designed to give members something more structured to learn from and also serve as a launching pad for action and real investments to happen. We will have more concrete announcements before the end of the month so stay tuned :)

The May 13 Event was attended primarily by newcomers, and everyone had interesting perspectives to bring to the table.

While the topic started on basic financial calculations on real estate, the topics evolved into Build and Sell and Investment Goals. Let’s explore them a more below.

Build and Sell — Concentrated Profits

An expert in Build and Sell attended the Meetup and shared loads of learnings about his experience and a general idea of how the business is done. He also does mentorship, so maybe you could connect with him in the near future.

In any case, here are some of the points he made about the Build and Sell business, combined with some of my takes on it as well based on what he mentioned.

  1. Concentrate on a selected location and know the field

This will you give you the advantage of knowing the right brokers, the right land prices, and the right suppliers for the construction that you’re going to make.

With practice and as you build more in a certain location, you’ll get brand recognition, word of mouth marketing, and economies of scale. You’ll also develop “shortcuts” on whether a particular piece of land is worth building on.

2. Build on subdivisions with good supporting infrastructure and amenities

People are not only buying houses, they also buy into the community where that house is. With good infrastructure in place, the overall costs of building a new house in a developed community is usually lower for a build and sell developer than a first time construction.

Moreover, the resulting product will have a good and lasting value in the eyes of potential buyers, lowering the build and sell developers overall risk.

3. Construction and marketing sales teams are very important

When you build and sell, it is important that you have the right teams in place. With each project costing many millions of pesos, you can’t afford to increase your risk with subpar construction teams and low performing marketing and sales teams.

There are even certain cases that, due to the brand you have built through the quality construction teams you have, houses can be pre-sold even before construction. This significantly lowers your risk

By doing all of the above plus other principles, the expert has amassed multiple projects in Southern Manila, to tune of more than Php 100 Million in ongoing projects.

It would be worth seeing if this could be replicated in other areas, and whether the Meetup members can work together to make this a viable investment effort.

Investment Goals matter first before the investment vehicle

Questions were also raised about Evo City by Ayala. Evo City is a new and upcoming development of Ayala Land that, in my opinion, seeks to replicate the success of Makati in southern Metro Manila. With the huge interest in the location, it’s initial residential lot inventory reportedly got sold out in 7 hours.

One of the attendees posted a question as to whether investing directly in Ayala properties, or investing in nearby properties make more sense in the long run.

Based on the experiences of the attendees, the following answer emerged: it depends on your investment goal.

  1. Investment Goal is Cash Flow = Ayala /Masterplanned Property— it may make more sense to invest inside Ayala properties and buy either a commercial space or a condominium. The characteristics of the property types lends itself to this type of investment.
  2. Investment Goals is Speculative Capital Increase = Outside but Near Ayala/Masterplanned Property — investing in nearby properties could take advantage of the development and the price differential between the property inside the masterplanned area and lands outside it.

Of course, there are other considerations. As a general rule though, the above seems to me like a sound filter for decision making.

NEXT WEEK

I’ll be out next week, but since some of the more active members are coming back, I’m not cancelling the Meetup. I’ll try to post notes here after they finished and see what I can do for you.

ABOUT THE AUTHOR

Ian Mallari is the founder of Manila REI Meetup group. It is composed of various types of investors, professionals, and specialists involved in Real Estate Investing. Manila REI Meetup meets every Saturday in Makati. Join us by signing up here.

He is also the lead consultant of the financial consultancy firm. He works with medium and large sized corporations/businesses in securing funding for their businesses. Right now, he works mostly with AA and AAA contractors for private sector projects. Visit ianmallari.com for more details.