Living in the Philippines — Best “Passive” Businesses to Start
For those OFW’s and foreigners wishing to start a business, but not wishing to involve themselves with the stress of a business involving day-to-day operations, employees, landlords, inventory, and so forth, there are several available opportunities for foreigners living in the Philippines. Buy fixer upper properties, improve them, then rent or sell them.
1. Buy Fixer Upper Properties, Improve Them, Then Rent or Sell Them. This is a great business for those of you who have experience in your home country in buying, fixing up and renting or selling properties. Over the past 10 years, a lot of people got involved in this kind of business in their homeland.
With the overall economic problems in the world the past couple of years, the Philippines has not been immune, and there are a lot of properties in a state of disrepair, as well as lot of distressed and foreclosed properties.
2. Build An Apartelle. An Apartelle is an apartment building where all but one of the units are rented out long term, and you are left to operate on a nightly or weekly basis, like a hotel — hence the combined name of apartelle. These are common in the Philippines.
This business will require a heavier capital investment, yet with the right property and by focusing in the more rural areas or smaller cities, you can construct a small 4 unit apartment building for Peso 3,000,000 — not counting cost of the land.
You would want to rent out 3 units on a long term rental basis, and keep one for short term rentals — for the many traveling salesmen that frequent the countryside. They like booking into such short term apartelle units rather than the much more expensive hotels in the area.
3. Condotels. I have not given this business my “thumbs up” in all instances. Condotels have been heavily touted and promoted the past several years and there have been many, many new condominiums built in Manila, and now even in Cebu and starting in Davao.
The problem is that although the developers offer great down payment terms (usually around 30% down financed over 3 years) and in some cases carry back the mortgage and finance for perhaps 10 years, the interest rates are incredibly high, and the split of rentals with the management team runs around 50%/50%. There is also always a nominal monthly maintenance fee.
What looks like “cheap” entry point and cash flow out each month, in many cases simply becomes a bet on long term property appreciation — finding someone willing to pay you more for it than you paid for it.
This is because with all the inventory on hand, there is a surplus of condos which have been into hotel type rental pools, but not enough visitors to rent them all.
Consequently, what an investor thought would be a good positive cash cow, turns out to be a continuous negative cash flow — not what a new retiree to the Philippines is looking for to supplement his pension or annuity! This type investment will only drain you pension.
However, having written all this, I HAVE FOUND the past several month two exceptional condotel investments which DO meet my criteria of creating good ongoing rental income.
4. Farming. The likely cessation of the Agrarian Land Reform Program (CARP) will give the rural sector renewed confidence to invest in agricultural production capacity. CARP has held back investment in both production capacity as well as farm acquisition. An end to CARP will mean higher land prices since land will be valued for its higher income producing potential.
However, higher land prices are simply a “serendipity”, an added value, to the type of farming business I am writing about. I have found an extremely unique business opportunity, which will generate a great ROI (return on investment) and is completely passive. It has been structured by the developers (all foreigners) to be a one turnkey investment price. The price includes cost of the land, plus all
Clearing, planting, cultivation and harvesting for the first 5 years.
The business has been priced to fit the capital investment budget of the average foreigner retiree, and all landowners will be members of a cooperative which will share the farming equipment (tractors, equipment shed, and others). The farm will be “farmed” by the developer’s management team
The hottest trend now is in organic farming, and yet it is only in its infancy stage in the Philippines. There is one export product in particular which has caught my attention — the pili nut. The Philippines is the ONLY country with which produces and processes this nut in commercial quantity.
The current status of the pili is equivalent to that of the macadamia some 30 years ago. It has huge potential to develop into a major industry. They are in demand not only in Hong Kong and Taiwan but also in Singapore, Korea and Austria.
Do you want to learn more about making money in the Philippines? I have just completed my new book on “Making Money In The Philippines”, which has a section devoted to these and other Offline/Traditional business opportunities for OFW’s and Foreigners living in the Philippines, to include Passive, not requiring day-to-day involvement in the business.
Written by: Will Irwin
