Buying My Own House & Lot
I bought my house way back 2017 not for purpose of investment but for settlement. I was already 30 years old by then and yet still clueless of what to do with my small savings in the bank. By the way, I acquired this house and lot through Pag-IBIG housing loan and the one that inspired me to acquire this is my girlfriend. Acquiring a house and lot was a promise I pledged to her as a sign of my sincerity to our happy-ever-after relationship. Yay!
Three years after acquisition, at the office where I am paying my monthly association dues, I found a newly updated list of house and lot prices in my subdivision. To my astonishment, my eyes grew wider seeing how the prices has gone up in just three years. So I hurriedly went back home and check the difference in price of now and then. Below is the comparison of my house and lot price the day I acquired it versus the price of the same house model and lot area after three years:
Just look at the difference of the TCP in just 3 years. It’s a whooping PHP 876,000. Since the total equity I paid is PHP 505,000 and total amortization paid in 2020 is PHP 250,518.40, my total capital would sum up to PHP 757,518.40. If I will deduct this to new TCP of house (2020) and deduct further my remaining balance to Pag-IBIG at the end of 2020 year (PHP 1,690,260.51), my actual gain would be PHP 653,721.09. Just look how the property has appreciated by PHP 217,907.03 yearly in just a period of 3 years. At the end of 2020, my percentage gain is around 87% (if I will sell my property by 2020).
Is there any bank or other financial institutions which can give you this kind of interest in just a short period of time? What do you think of its price gonna be after 5 or 10 years from now? Sounds promising right? But I don’t get too excited for it. This profit is not yet called realized gain because I haven’t sold the property yet. And I don’t have the plan (yet) of selling it since I initially planned it to be my residence. Am I tempted to sell it now? No for I don’t wanna go back renting again.
Is Your House & Lot An Investment, An Asset or Liability?
Now let’s get a little bit deeper to the topic. Let’s answer some few questions that might come up once you have acquired you own house and lot:
Is my newly purchased house & lot an investment? By definition, an Investment is a financial move wherein you allocate your money to buy either time, effort or tangible things in the expectation of some return or benefit from it in the future. So basically owning your house & lot can be called an investment since properties like these naturally appreciate over time more specially the lot value.
Since I’m making my property as residential, can I call it an asset?? No it is not. An asset is a property which generates income to your financial statement. Since I am paying my mortgage and insurance to Pag-IBIG, then this property is a liability since the money flow is going outside my pocket. Is there a way I can make this property an asset while I’m paying my amortization? Yes there is. If I turn my house as a rental property and the rental fee I am getting is higher than the monthly amortization I am paying to Pag-IBIG then my property is now generating income for me and can be called an asset. For that case I’m not only relieved from paying my mortgage and insurance but I’m also getting profit from my property.
But what if I finally paid off my balance loan to Pag-IBIG, can I now consider it now as an asset? No, I still can’t. If I paid off my loan but still not turning it to a rental property, it would still be a liability because I’m still paying for real state tax to the government and I am spending for my house maintenance, utilities and renovations. Cash flow is still going out of my pocket. Sounds like you just get yourself trapped in an endless expenses, isn’t it? Well, that is the reality of it.
Now that you know the differences of these 3 financial terms (Investment, Asset and Liability), the question is no longer about how do you see your house and lot property but how do you plan your property will gonna be. Is it for an investment? To serve as an asset? or to become unwanted liability? If it just for residence, then it’s gonna be a mere liability. If you have the plan to sell it once the value of house and lot appreciated, that would be an investment. But be wary of how you will buy the property and how long you’re gonna hold it before selling it. Not all house & lot properties appreciate over time. For example if the area of your residential house becomes a flood prone area over time, then definitely its price will depreciate as no one would like to live in a submerge house every rainy seasons. What if the area is situated near an active fault zone? Again the price of the properties in that area would also depreciate as no one would live peacefully in an earthquake prone area. Additionally, the other factors that might contribute to depreciation of house and lot property value in terms of location are:
- If the area becomes surrounded with growing factories like power plants and airports which emit air and noise pollution
- Building of busy roads and highways near a residential or subdivisions could also be a concern to home owners as noise pollution from big vehicles will definitely be a disturbance.
- If the area becomes a notorious spot of theft or other violence due to growth in population.
My Personal Perspective of My House & Lot
To me, this house and lot I acquired will be our residence as for now. I may probably still be paying my monthly amortization to Pag-IBIG for this property yet this is far better than just renting a condo or apartment. After all, this property will be completely mine after completely paying my loan balance. Though it may sound financially undesirable as the property remains a liability however on the other hand it feels reasonable and worthwhile knowing that your hard-earned money is going to an investment which someday could give you more profit. And that’s sounds really rewarding! Buying your own house and lot is not just satisfying as having pride on ownership but also fulfilling in one’s financial milestone. After all, owning your very own house is a lifelong dream of everyone else. So when do you plan to buy your own?
