Tips

Filipino Culture

Filipino mentality? Yep you heard it loud and clear!

Before I begin I I’d like to clarify my purpose. I am not writing this blog to bash my fellow Filipino’s in the Philippines but the main purpose of this blog is to give you tips and pointers the differences in culture when it comes to management between north America and the Filipinos in the Philippines. I have a first hand experience dealing with Filipino company and I thought that I’d share you some of this pointers.

My background aside from real estate is supply chain management I have an immense knowledge, broad training and experience in sales, management and leadership so what I am about to tell you is some pointers you should know when dealing with contracts overseas specially in the Philippines.

Of course number one rules when setting up a business including contracts specially from overseas is understanding the culture and the re-coursed that you have should anything were to happen in your business and this includes the choice of law for example, which jurisdiction and choice of law your contract applies to. This part is very very important when setting up contracts especially in a war zone areas.

Let’s talk about the Philippines. Here are the 5 key pointers you should know when dealing with Filipino business in the Philippines.

1. Culture:
Filipinos are known for their friendliness and hospitality. This extends to the business environment. Filipinos place great emphasis on polite language and gentle conversations. This also sometimes translate to passive mentality and most of the time they work in a top down style of management or what I call it introversive style of management. In some cases being assertive can be interpreted as being arrogance.

If you are a employee and are use to face to face conflict resolution you may appear to be arrogant and in-subordinate towards your manager that could potentially put you in predicament situation.

2. Centralized Environment:
Filipino’s likes to be in control of their company so they take pride on their position and sometimes they extend it beyond nepotism where they elect their relatives hire their friends to run their corporations in order to have a complete control of their company.

Cross functional team department is usually centralized where they operate on hierarchy level to get the task completed. Centralized environment is effective when it comes to control of finances but when dealing with customer response time where SLA (Service Level of Agreement) is involved it could pose a real issue.

In north America most successful CEO are good leaders which they empower their subordinate encouraging them to make key critical decision and foster accountability. Mistake is viewed as a learning curve and not a way to be punish. This fact was studied and proven in the Ivy School Business where they found out that most leaders are good thinkers possess with good managerial skills and usually not vice-versa. This is also true in the Japanese style of management which is why most Japanese is loyal to their employer and that loyalty is seen a virtue.

3. Use of Acronyms:
Most of the time when Filipino communicates in e-mail they use acronyms or abbreviations and that if you are not familiar with the subject matter you may be lost. Example PDC (post dated checks), CTS (Contract To Sell), SLA (Service Level of Agreement), Ex-Com (Executive Commitee), Derek (Director), Bossing (Manager) etc. So if you are not familiar with them it will feel like you are reading twitter messages.

4. Application Process:
This is the most I have a hard time understanding it. You will be shocked to know that some company impose age limit on applications and sometimes require a picture on their resume. And by the way they don’t call it “resume” they call it “CV.” So if your company likes to harness talent and foster an environment free of discrimination this may pose an issue. Yep! customer service is known for this business model the more attractive and younger you are the better chance you have.

5. Poor Customer Service Response:
Unless a company is a subsidiary of a north american company customer service is usually poor. If you are a consumer and need to speak to somebody locally from overseas the chances are you will get frustrated. They are very slow in response time, have poor VOIP reception, and a conversation sometimes can be dull and may seem that they are doing you a favor by talking to you. You don’t believe me? I’d like you to try calling a main customer service hotline of a major banks and you will notice that most of the time you will hear somebody gossiping on the background and on top of that you will get transferred 20 times on the switchboard before the line cuts off.

If you are an assertive person and posses a strong tonality on your voice you can be easily mistaken for being aggressive or rude. So if you are Canadian used to calling Rogers customer service about your cell phone bill I’d suggest you tone down your voice a little.

So if you are thinking of owning a business in the Philippines the chances are you may come across with any one of the 5 pointers I have provided. And for some reason that you are not agreeing with the content of my blog I’d like you to make a comment.

For your real estate needs in the Philippines we can also help you. We are Canadian entity and very experience in pre-sale real estate in the Philippines. We are also Filipino but we don’t have a passive Filipino mentality. Our goals is to make you happy with the help that we provide that you’ll gladly introduce us to your friends and your family.

Question:
May I know the most recent Law in Condominium in the Philippines?

If I purchase a unit, how will I be entitled to the ownership of the unit, since most of REALTOR/DEVELOPER that it is income generating.

Is there a specified term or let say 30 years or more, then if it will be destroyed, how then can I claim ownership with it, as there is no land specified in the CCT as in buying a house and lot. Regarding insurance coverage, is there a law that requires developer to have it insured to protect the unit owners? I have spoken with some broker and it seems they are not well versed about it.

Please enlighten me on these concerns.

Thank you.

 

Answer:
As per Condominium Act RA4726, it is said that one of the rights of a unit owner is CO-OWNERSHIP of LAND and COMMON AREAS apart from absolute ownership of his/her own unit.

As to terms,  Section 13 (please see below article) particularly letter “C” which states:

(c) That the project has been in existence in excess of fifty years (50), that it is obsolete and uneconomic, and that condominium owners holding in aggregate more than fifty percent interest in the common areas are opposed to repair or restoration or remodeling or modernizing of the project; or
Lastly, with regard to insurance, remember that as per law developers are required to set up among owners and residents an association to promote and protect the mutual interest. Thus it is the duty of the association to collect dues and to secure a master policy (an insurance which covers the building and the common areas only).

Note: In other words before a condominium can be demolish it has to be mutualy agreed upon. One of the reason a building may be demolish is because it is no longer safe and the total cost of ownership -  maintaining the premises is no longer valid. Statistics shows that a condo unit owner do not stay in their unit for more than 10 years. Also, key point to remember is how well a building is kept and maintain will determine their lifespan. A good property management such as Century Properties have building that still standing past 50 years and still in a good shape!

 

Condominium Act – Read

SECTION 13. Until the enabling or the master deed of the project in which the condominium corporation owns or holds the common areas is revoked the corporation shall not be voluntarily dissolved through an action for dissolution under Rule 104 of the Rules of Court except upon a showing:

a) The three years after damage or destruction to the project in which damage or destruction renders a materials part thereof unfit for its use prior thereto, the project has not been rebuilt or repaired substantially to its state prior to its damage or destruction; or

b) The damage or destruction to the project has rendered one half or more of the units therein untenantable and that more than 30 percent of the member of the corporation entitled to vote, if a stock corporation, are opposed to the repair or reconstruction of the project; or

c) That the project has been in existence excess of 50 years, that it is obsolete and uneconomical and that more than 50 percent of the members of the corporation if non-stock or stockholders representing more than 50 percent of the capital stock entitled to vote, if a stock corporation, are opposed to the repair or restoration or remodeling or modernizing of the project; or

d) That project or material part thereof has been condemned or expropriated and that the project is no longer viable or that the members holding in aggregate more than 70 percent interest in the corporation if non-stock, or the stockholders representing more than 70 percent of the capital stock entitled to vote, if a stock corporation, are opposed to the continuation of the condominium regime after expropriation or condemnation of a material portion thereof; or

e) That the conditions for such a dissolution set forth in the declaration of restrictions of the project in which the corporation, are opposed to the continuation of the condominium regime after expropriation or condemnation of a material portion thereof; or

 

 www.ManilaInvestmentProperty.net

Prime – Grade A Office Rental

DISTRICT

RENTAL RATES

VACANCY RATES

Makati

PhP 780 psm/month

6.89%

Fort Bonifacio

PhP 651 psm/month

3.45%

Ortigas

PhP 542 psm/month

2.34%

Quezon City

PhP 492 psm/month

5.80%

Alabang

Php 481 psm/month

3.16%

 

Luxury Residential Market

VILLAGE

RENTAL RATES PER MONTH

Forbes Park Makati

Php 350K – PhP 450K

Dasmarinas Village Makati

PhP250K – PhP 350K

Urdaneta Village Makati

PhP 180K – PhP250K

Bel Air Village Makati

PhP 150K – PhP230K

San Lorenzo Village Makati

PhP 120K – PhP230K

DISTRICT

RENTAL RATES PER MONTH

Makati CBD (Center Business District)

Php 180K – Php 220K

Rockwell Center

Php 150K – Php 170K

Fort Bonifacio

Php 160K – Php180K

 

Upscale Condo Statistics

 

SIZE in SQM

LEASE RANGE in Pesos

AVERAGE in Pesos

Legaspi Village      

1 Bedroom

40 – 80

60K – 100K

80K

2 Bedroom

110 – 150

75K – 150K

115K

3 Bedroom

150 – 250

100K – 220K

160K

Salcedo

 

 

 

2 Bedroom

110 – 150

100K – 120K

110K

3 Bedroom

150 – 250

140K – 150K

145K

Rockwell Center

 

 

 

1 Bedroom

75 – 85

70K – 90K

80K

2 Bedroom

125 – 157

100K – 140K

125K

3 Bedroom

197 – 247

135K – 200K

170K

Bonifacio Global City

 

 

 

1 Bedroom

50 – 76

70K – 90K

80K

2 Bedroom

93 – 157

120K 140K

130K

3 Bedroom

140 – 306

160K – 210K

185K

 

 

Right to Own in the Philippines:

1. General Rule – Only Filipino citizens and corporations at least 60% capital of which owned by Filipinos are entitled to acquire and own land in the Philippines.

2. Exceptions to the General Rule – Alien acquisition of real estate in the Philippines is allowed in the following cases:

  • Acquisition before 1935
  • Acquisition thru hereditary succession if the acquire is legal heir
  • Purchase of not more than 40% interest in condominium project
  • Purchase by former natural-born Filipino citizens subject to limitations prescribed by B.P. 185 and R.A.8179

3. A Filipina who marries an alien retains her Philippine citizenship (unless the law of her husband’s country makes her assume the citizenship of her husband because of such marriage) and can therefore acquire real estate in the Philippines.

Acquisition by former Natural Born Filipino Citizens:

1. Mode of acquisition is not limited to voluntary deeds (such as sale or donation) but include involuntary deeds (such as foreclosure, execution or tax delinquency sale).

2. Maximum area that may be acquired:

  • For residential purpose – 1,000 square metres of urban or on hectare of rural land
  • For business purpose – 5,000 square metres of urban or 3 hectares of rural land

Foreign Ownership of a Condominium Unit:

In the condominium concept of ownership, absolute ownership by foreigner is allowed not to exceed 40% interest in the project. The unit owner is absolute owner of the place within the interior surface of his unit, but is only a co-owner of the exterior facade of the unit.

This is a very common question I always come across with. “Why should I invest in the Philippines when my life is here now in Canada?”

First, let me answer it by taking  a look at your goal. What is your goal in life? What is it you are trying to accomplish? There are different reason people get into investing in real estate or investment in general be it stock, mutual funds in RRSP etc. Different people always have different reason prerogative and different ideas in life. Some invest in retirement savings such as RRSP others invest in Stocks or Bonds and others gamble in Real Estate.

Depending on which vehicle or strategies you choose from it will give you your end results.  Investment analyst will tell you the higher the risk the greater the reward. So before I answer the question “Why invest in foreign country such as the Philippines” let me differentiate first the difference of investing in stock market vs real estate.

Stock Market: Investing in stocks, derivatives, RRSP, mutual funds etc. has its own classification of risk. Six years ago before the stock market crashed I was licensed to sell Mutual Funds and were a good supporter of investing in retirement savings plan in the RRSP. I played with my own money I followed my trainers advised to take risk and even went into “leveraging” strategies.

 To those who don’t understand the Leveraging terms – it is a strategy where you use other people’s money in order to gain a return on investment. As an example I borrowed money from the bank to invest it in mutual funds. The intension is to double the money in certain period of time. This strategy works very well in a Bull market. I was shown a statistics that in 9 to 12 years my money could double providing it stays in my target 8% yield. This is also known as the Rule of 72 where you divide the interest rate to 72 in order to come up with years to double your money.

I was given a prospectus by the fund company with all the wonderful graphs  and I asked intelligent questions but they all promised me that the only way I could lose money is if the Bank failed. Which at that time the market is hot gold prices were up and recession is unthinkable!

A year later with the subprime mortgage burst the stock market crashed and major banks started to collapsed. I asked the same portfolio manager that gave a presentation a year before that “Bank/Financial Institution simply are impossible to fail” and his reason this time was “we are in the bottom of the recession” hang in tight because If I missed the market swing I will lose the opportunity to regain my loses.

He said the market will starting to climb back up very soon because all the major banks already had collapsed and there is no need to panick because the market is at the bottom of the recession and there is no other way but to go up to recovery. He gave me a historical lesson of market crashes and reiterate that history repeats itself and that now is a good time to put more money in the stock market because its cheap to buy and I can take advantage of dollar cost of averaging! I again followed his advised and stayed put and fast forward 6 years later Im no longer in the business, still in a negative loss, global economy is in the verge of collapse and I haven’t recovered my loses from 6 years ago!

I was now in the dilema to pulled out and cut my loses or to ride the global economy and cross my fingers that in a few years the market will go back up to normal. But my main question is when is the global economy will turn around? Do I have enough time to double my money?

The fund managers are the ones making the money because I pay the fund managers regardless wether I make money or not!

Real Estate: Six years ago had I invested it in real estate in foreign country such as the Philippines I would have had a substantial gain. The Philippine real estate condo is averaging 10 – 20% ROI every year. In the economic point of view this makes a lot of sense. Why?

In the supply and demand point of view when a country becomes scarce just like whats happening in the US or global economy more and more company will depend on austerity measure. What this means is that more and more company will start to cut cost and ship their operation offshore which translate to more jobs overseas. More and more company are now closing their offices which enable them to save money from maintaining and renting a building. 

The Philippines are among one of the English-speaking country that jobs are more likely to be outsourced to followed by India and Mexico which translates to market boom.

RRSP: The benefit of investing in RRSP is you can deduct it against your taxable income. In other words you can lower your income so you can take advantage of paying less taxes. But don’t get fooled by it because is not a free lunch! You will have to pay it all back when you retired. Yes, pay it all back the tax in 100% . Also, if you withdraw your RRSP before you retire you will get into the double whammy taxation where it will get added on top of your taxable income. You can call it a trap but it is design for you to save for your retirement and not to be accesses when you need it. The question is will it make enough money knowing the situation of global economy now? Do you have enough time on your time horizon?

Invest In The US: Question also arise why not invest it in the US real estate market? You can technically purchased a property now in the US for the same amount in the Philippines. You can certainly do so if you have cash money on hand. Try asking a mortgage lender if you live in Canada for a mortgage to invest it in the US and see what type of interest rates you can get. It will cost you arm and a leg if you are lucky to get one! Unless you have money in cash this move is also not favourable!

On the other hand you can buy a condo from a developer without a down-payment in the Philippines. There are different payment terms such as 35/65 percent where you only have to shoulder 35% of the amount in the first 5 years while the condo is being develop and the remaining 65% upon turnover. It breaks down to be $350 CDN for one bedroom unit which is the same cost as if you were to finance a brand new vehicle.  The developer also has a property management division which will handle your unit. The advantages of letting a developer to manage an investment property is they know what they built and they are more likely to cater to quality as suppose to a third-party property management.

They will also find a tenant for you should you happen to elect to rent out your unit while you are abroad and the money will go directly to your bank account in the Philippines which you don’t have to pay capital gains in Canada. This is what most wealthy people do in North America they bring their money overseas to hedge from taxes!

Take a good look around the global economy wealth is now shifting to other countries to former third world countries such as China, India and Brazil. Ten years ago these countries were unknown and but because of  “Globalization” more and more jobs were ship overseas that made these countries to become a leader in global economy today!

RRSP or Real Estate: Should you invest in RRSP or Real Estate? If you are okay in investing in unquestionable rate of return then RRSP is for you. But think carefully! How much rate of return an RRSP will give you? Bonds at 1-2% if you are lucky! If you are a very conservative person and ride a 2 percent rate of return you will lose more money because the inflation will eat it. Just like Robert Kiyosaki says why invest in dollar that lose its value. Think back 10 years ago if you had own a property in India, China or Brazil – how much do you think your ROI by now?

Real Estate is a way to go and fastest way to develop wealth! Not only that it increase 20-30% on year to year basis it is also a tangible asset that you can feel or touch and never decay. Bull or Bear market, recession hits you have a place to live  and retire. Why leave your money in Mutual funds, RRSP, stocks etc. for unquestionable rate of return if you end game is to have a shelter when you retire! Own a property and enjoy the rental income it generates and when you retire you can come home to the Philippines!

www.ManilaInvestmentProperty.net

I came across with many Filipino’s in Toronto, Canada mostly OFW (Overseas Foreign Workers) and Filipino/Canadian Citizens they tend to get confused with the difference between investing in a house, condos or land in the Philippines. So let me dispel the myths and show you the pros and cons.

Coming from a real estate background I understand the importance of “location” when it comes to investing in real estate. But what I also do know is that investing in real estate which is a tangible asset that you can feel and touch is far better than stock market!

So what is the difference between investing in Condo vs buying a House or Land in the Philippines?

If you live overseas and your goal is ROI (Return On Investment) it would make more sense to invest in on Condo property as suppose to buying a House in the Philippines that you cannot personally maintain. Why? For this reason…

When you invest in Condo’s you can hire and let a professional property management company to manage your unit for you while you are away. Even though you have to pay them a fee in most cases you only end up paying one month out of the 12 month lease to the Property Management.

Now you might reason…well why not let family members (Brothers, Cousins, Mom/Dad, etc.) to manage your properties in the Philippines? You can certainly do this but you have to remember the Filipino culture is to pay for everything. When you purchased an investment property you also end up purchasing a liability that comes along with it! 

In most cases you will end up paying for family shelter, for their everyday needs and expenses while they look after your property and they live under your roof. It is often very hard to say no to a family members. Some fight over the control of money and  this is why it is very hard to do business with family members because emotion do get in the way!

Second reason is that if you are away most of the time and cannot personally look after your own property you are inviting thieves to break into your property. Even though your house is in the gated community most of the time thieves are coming from inside the compound.

Third and most important reason is Adversed Possession also known as Squatter Rights. There are certain period of time a person can live in your property and claim ownership of it. This mostly happens on Land ownership where a registered owner let others live (squat) in their property and end up loosing their rights as an owner.

On the flip side of the coin by hiring a professional property management company for a certain fee you can eliminte this hassle. Why? Because they are in the business of looking after a property and that’s what they do best to draft contracts and lease agreements and best part is you can complain to them for being incompetent. But make sure you hire a professional Property Management company that has names and credentials.

One of the few companies that I checked out in the Philippines is Century Properties. I have done an extensive research about the company and their portfolios and visited their past and present projects. They collaborated with brand celebrities such as Donald Trump, Paris Hilton, Versace and renown architects such as IM Pei. So they stay true to their words and that is QUALITY!

In summary it is best to purchase a condo from a named developer that also will manage your investment property for you!

www.ManilaInvestmentProperty.com