Financial Preparation

• Determine your total investment budget (property + transaction costs + reserves)
• Establish a currency exchange strategy (PHP fluctuates against USD/CAD)
• Research historical PHP/USD or PHP/CAD exchange rates to identify favorable timing
• Set up international wire transfer capabilities with your home bank
• Consider opening a Philippine bank account (requires in-person application)
• Evaluate tax implications in both the Philippines and your home country
• Arrange financing if needed (typically cash purchase for foreigners)

Market Research

• Identify target cities based on investment goals (capital growth vs. rental yield)
• Research neighborhood-specific price trends and rental yields
• Join online forums for expatriates and property investors (ExpatExchange, Philippine Real Estate Forum)
• Subscribe to property market reports (Colliers, Santos Knight Frank, Leechiu)
• Analyze infrastructure projects under the “Build, Build, Build” program
• Research tenant demographics and rental demand in target areas
• Plan a preliminary market visit to evaluate areas firsthand

Professional Network Development

• Connect with attorneys specializing in foreign property transactions
• Identify real estate brokers with experience assisting foreign clients
• Research property management companies in your target market
• Establish contact with currency exchange specialists (e.g., Wise, OFX)
• Find a Philippine tax consultant familiar with non-resident investor concerns
• Connect with other foreign investors (expat groups, investment forums)
• Identify reputable developers with strong track records

Expert Tip: The Philippine property market has distinct seasonal patterns, with December-February typically being the most active period when overseas Filipinos return for holidays and often make property purchases. This creates both opportunity (motivated developers offering promotions) and challenges (increased competition). Consider timing your property viewing trip during the “shoulder seasons” of October-November or March-April when you can still access good inventory but with less market pressure.

Legal Consideration: When establishing a Philippine corporation, investors should be extremely careful with the selection of Filipino shareholders to meet the 60% ownership requirement. These arrangements require thorough documentation, potentially including shareholders’ agreements that comply with Philippine law while protecting foreign investor interests. Using close family members or trusted business associates as Filipino shareholders is preferable to arm’s-length arrangements.

Banking Setup

• Philippine Bank Account Options:
  • Major Philippine banks: BDO, BPI, Metrobank, Security Bank
  • International banks with Philippine presence: HSBC, Citibank (limited branches)
  • Savings or checking accounts: Minimum balance requirements vary (₱5,000-50,000)
  • Foreign currency deposit accounts: Available at major banks (USD, EUR, etc.)
• Typical Requirements:
  • Passport and secondary identification
  • ACR I-Card (for residents) or tourist/other visa
  • Proof of address (Philippine and home country)
  • Initial deposit (varies by bank and account type)
  • Two passport-sized photos
  • In-person application (no remote account opening)
• Alternative Approach: Many foreign investors complete property transactions without a Philippine bank account by using their attorney’s client account for the purchase and then setting up property management with direct transfers to overseas accounts.

Financing Options

Financing options for foreign investors in the Philippines are significantly limited:

1. Cash Purchase:
   • Most common approach: 90%+ of foreign purchases are cash transactions
   • Developer payment plans: Often provide 1-5 year in-house financing
   • Typical down payment: 10-30% with monthly installments
   • Interest rates: Higher than bank rates (8-12% p.a.)
2. Limited Local Bank Financing:
   • Generally unavailable to non-residents
   • May be available to resident foreigners with established Philippine income
   • Typically requires 1-2 years of Philippine residency
   • Maximum 60-70% loan-to-value ratio
   • Fixed and variable rates from 5.5-8% (2024 rates)
3. Home Country Financing:
   • Refinancing existing properties in North America
   • Home equity lines of credit (HELOCs)
   • Personal loans or portfolio-secured loans
   • Often more accessible and better rates than Philippine options

Currency Management

The Philippine Peso (PHP) can fluctuate significantly against the USD and CAD, creating both risks and opportunities:

• Exchange Rate Considerations:
  • Monitor PHP/USD and PHP/CAD trends to identify favorable exchange windows
  • Consider working with a currency specialist offering rate alerts
  • PHP tends to follow regional currency patterns but with higher volatility
  • Political events in the Philippines can cause significant short-term fluctuations
• Currency Services:
  • Specialized services like Wise, OFX, or Revolut typically offer better rates than banks
  • Forward contracts can lock in exchange rates for developer payment plans
  • Regular payment services for ongoing costs and management fees
• Income Repatriation:
  • No restrictions on repatriation of capital or profits for legitimate investments
  • Documentation required for large transfers (anti-money laundering compliance)
  • Maintain detailed records for both Philippine and home country tax reporting

Currency management can significantly impact your overall investment returns. The PHP has historically experienced greater volatility than major currencies, with 5-15% annual movements against the USD not uncommon. Strategic timing of major transfers can substantially affect your effective purchase price and ongoing returns when measured in your home currency.

Property Search Resources

• Online Property Portals:
  • Lamudi – The Philippines’ largest property portal
  • Property24 – Comprehensive listings with filtering options
  • Dot Property – Growing platform with exclusive listings
  • Foreclosure Philippines – For distressed property opportunities
• Real Estate Brokers/Agents:
  • International firms: Colliers, Santos Knight Frank, JLL Philippines
  • Local established agencies: Leechiu Property Consultants, KMC Savills
  • Developer-affiliated sales agents (in-house sales teams)
  • REBAP (Real Estate Brokers Association of the Philippines) members
• Developer Showrooms & Events:
  • Major malls host developer showrooms (SM, Ayala, Robinsons)
  • Property expos in major cities (Philippine Property & Investment Exhibition)
  • Developer roadshows in North American cities with Filipino communities
  • Model units and site visits for under-construction projects
• Expatriate Networks:
  • Facebook groups for expats in specific regions
  • Philippine retirement associations
  • Chambers of commerce (American, Canadian)
  • Property investment seminars for foreigners

Property Viewing Trip Planning

For overseas investors, an efficient property viewing trip is essential:

1. Pre-Trip Research:
   • Identify 10-15 potential properties before arrival
   • Establish relationships with 2-3 brokers/agents
   • Research neighborhoods thoroughly online
   • Arrange meetings with attorneys and developers
2. Trip Logistics:
   • Plan at least 5-7 days per city being considered
   • Account for traffic in urban areas (especially Metro Manila)
   • Schedule viewings in geographical clusters
   • Build in time for neighborhood exploration at different times of day
3. During Viewings:
   • Take detailed photos and videos
   • Ask about association fees, utilities, and maintenance
   • Inquire about building occupancy rates
   • Check mobile signal strength and internet options
   • Note proximity to transportation, amenities, and potential issues
4. Developer Evaluation:
   • Visit completed projects by the same developer
   • Speak with current residents if possible
   • Check construction quality and maintenance of common areas
   • Verify developer’s track record for timely completion

Property Evaluation Criteria

Assess potential investments using these key criteria:

• Location Factors:
  • Proximity to business districts or tourist attractions
  • Transportation access (MRT/LRT stations, major roads)
  • Walking distance to amenities (malls, supermarkets, hospitals)
  • Flood risk assessment (critical in many Philippine areas)
  • Infrastructure improvements planned or underway
  • Neighborhood security and general environment
• Building Quality:
  • Developer reputation and track record
  • Construction quality and finishes
  • Age and maintenance of the building
  • Amenities and common facilities
  • Security systems and personnel
  • Generator backup (important during power outages)
  • Water supply systems and backup tanks
  • Developer’s after-sales service reputation
• Rental Potential:
  • Current rental rates for similar units
  • Occupancy rates in the building or area
  • Tenant demographics (expatriates, young professionals, etc.)
  • Seasonal fluctuations (especially for tourism areas)
  • Upcoming supply in the immediate vicinity
  • Restrictions on short-term rentals (if Airbnb is planned)
• Financial Considerations:
  • Price per square meter compared to area average
  • Association dues and expected increases
  • Property tax rates (varies by municipality)
  • Maintenance reserve requirements
  • Potential capital appreciation based on local trends
  • Currency exchange risk assessment

Expert Tip: When evaluating Philippines condominiums, pay special attention to water systems. Many buildings rely on pumped water systems with rooftop tanks. During power outages (which still occur in many areas), buildings without proper generator backup for these water systems can experience water shortages. Ask specifically about water pressure on higher floors, generator capacity for water pumps, and historical issues with water supply, as these practical concerns can significantly impact tenant satisfaction and rental returns.

Legal Due Diligence

• ✓
  Title Verification: Confirm ownership with a Certified True Copy of the title from the Register of Deeds
• ✓
  Title Search/History: Verify absence of liens, encumbrances, or competing claims
• ✓
  Tax Declaration: Ensure property tax payments are current
• ✓
  Condominium Documents: Review master deed, condo certificate of title, and articles of incorporation
• ✓
  Developer Licenses: Verify HLURB (now DHSUD) registration and licenses
• ✓
  Building Permits: Confirm all required construction permits were obtained
• ✓
  Environmental Compliance: Check environmental clearance certificates for the project
• ✓
  Association Rules: Review condo association bylaws, restrictions, and fee structure

Physical Due Diligence

• ✓
  Property Inspection: Hire a professional inspector for existing properties
• ✓
  Structural Assessment: Check for cracks, water damage, or structural issues
• ✓
  Utilities Inspection: Test electrical systems, plumbing, air conditioning
• ✓
  Flood Risk Assessment: Research historical flooding in the area
• ✓
  Seismic Considerations: Verify building design accounts for earthquake risk
• ✓
  Common Areas: Inspect maintenance, security, accessibility
• ✓
  Area Development: Check for upcoming construction that could affect views or access

Financial Due Diligence

• ✓
  Comparative Market Analysis: Verify price aligns with recent comparable sales
• ✓
  Rental Market Research: Confirm realistic rental expectations (speak to local agents)
• ✓
  Tax Calculation: Determine transfer taxes, annual property taxes, and income tax impact
• ✓
  Association Financial Health: Review condo association financial statements
• ✓
  Running Cost Assessment: Calculate all ownership expenses (association dues, utilities, maintenance)
• ✓
  ROI Calculation: Develop detailed cash flow projections and return analysis
• ✓
  Developer Financial Stability: Research developer’s financial health for pre-completion projects

Expert Tip: For pre-selling condominium purchases in the Philippines, a critical due diligence step is verifying that the developer has obtained a License to Sell from the Department of Human Settlements and Urban Development (DHSUD, formerly HLURB). Developers are legally prohibited from selling units without this license. Also request a copy of the condominium development plan, certificate of registration, and approved condominium declaration. For construction quality assessment, visit the developer’s earlier projects that are at least 3-5 years old to see how they age and how well the developer handles maintenance and post-construction issues.

Developer Purchases (Pre-selling or Ready for Occupancy)

1. Reservation: Pay reservation fee (₱20,000-100,000) to secure unit
2. Documentation: Submit required identification and financial documents
3. Contract to Sell: Review and sign contract, negotiate terms if needed
4. Down Payment: Typically 10-30% of purchase price within 30-60 days
5. Payment Schedule: Follow developer’s payment plan (monthly, quarterly, etc.)
6. Turnover Process:
   • Final inspection and punch list
   • Payment of closing costs
   • Unit acceptance and key turnover
7. Title Transfer: Developer processes Condominium Certificate of Title transfer

For pre-selling properties, the timeline from reservation to turnover typically ranges from 2-5 years, depending on the project’s construction stage. For ready-for-occupancy (RFO) units, the process can be completed in 2-3 months.

Secondary Market Purchases

1. Offer and Negotiation: Typically facilitated through a licensed real estate broker
2. Earnest Money: 1-5% deposit to secure the property during the due diligence period
3. Hire an Attorney: Engage legal representation to handle documentation and verification
4. Due Diligence Period:
   • Title verification and history check
   • Property tax clearance verification
   • Utility bills and association dues clearance
   • Physical inspection and assessment
5. Deed of Absolute Sale: Preparation and signing of final sale document
6. Payment: Completion of purchase price payment (manager’s check or bank transfer)
7. Tax Payments:
   • Capital Gains Tax (6% of selling price/fair market value)
   • Documentary Stamp Tax (1.5% of selling price/fair market value)
   • Transfer Tax (0.5-0.75% depending on location)
   • Registration fees with the Registry of Deeds
8. Title Transfer: Registration of new title with the Registry of Deeds

Secondary market transactions typically take 2-3 months from offer acceptance to title transfer, assuming no complications with the title or documentation.

Transaction Costs

Budget for these typical transaction expenses:

• For Developer Purchases:
  • Reservation fee: ₱20,000-100,000 (typically applied to purchase price)
  • Documentary Stamp Tax: 1.5% of purchase price
  • Transfer fees: 0.25% of purchase price
  • Registration fees: 0.25-0.5% of purchase price
  • Real Estate Agent’s commission: Usually paid by developer
  • Notarial and documentation fees: ₱5,000-10,000
  • Title insurance (optional): 0.5-1% of property value
• For Secondary Market Purchases:
  • Capital Gains Tax: 6% of selling price or fair market value (seller legally pays but often negotiated)
  • Documentary Stamp Tax: 1.5% of selling price
  • Transfer Tax: 0.5-0.75% depending on location
  • Registration fees: 0.25-0.5% of purchase price
  • Real Estate Agent’s commission: 3-5% (typically split between buyer’s and seller’s agents)
  • Attorney’s fees: 1-2% of purchase price
  • Notarial fees: ₱5,000-10,000

Total transaction costs for foreign investors typically range from 8-12% of the purchase price, with secondary market purchases generally having higher costs due to capital gains tax. These costs should be factored into your overall investment calculations.

Expert Tip: For foreign buyers unable to be present in the Philippines for the entire transaction process, a Special Power of Attorney (SPA) can be arranged allowing your attorney or a trusted representative to sign documents on your behalf. This should be prepared by a Philippine attorney, notarized in your home country, and authenticated with an Apostille stamp (or consular authentication if your country is not a signatory to the Apostille Convention). Have this document prepared before making a reservation to streamline the purchase process.

Administrative Tasks

• ✓
  Tax Declaration Transfer: Register with local assessor’s office for property tax purposes
• ✓
  Utility Connections: Set up accounts for electricity, water, and telecommunications
• ✓
  Condominium Registration: Register with building administration and homeowners association
• ✓
  Property Insurance: Obtain appropriate coverage (required for most condominiums)
• ✓
  Banking Arrangements: Set up payment methods for recurring expenses
• ✓
  Property Management: Engage management services for rental properties
• ✓
  Foreign Investment Registration: Register with Bangko Sentral ng Pilipinas for large investments

Regulatory Compliance

Rental properties in the Philippines must comply with several regulations:

• Business Permits:
  • Mayor’s Business Permit required for commercial rentals
  • Barangay (neighborhood) clearance
  • Annual renewal requirements
• Tax Compliance:
  • Business tax registration with BIR
  • Monthly percentage tax payments (if applicable)
  • Annual income tax reporting
  • Issuance of official receipts to tenants
• Tourism Licensing:
  • For short-term vacation rentals: Department of Tourism accreditation
  • Special permits for condotels and tourist accommodations
  • Compliance with tourism safety standards
• Building Compliance:
  • Fire safety inspection certificate
  • Compliance with building maintenance requirements
  • Sanitation permits for certain property types
• Condominium Rules:
  • Adherence to building lease/rental policies
  • Registration of tenants with building administration
  • Compliance with association rules on rentals

Non-compliance with these regulations can result in fines, tax penalties, and difficulties with lease enforcement. Professional property management can ensure all regulatory requirements are met, particularly important for foreign investors who are not regularly present in the Philippines.

Record Keeping

Maintain comprehensive records for tax and legal purposes:

• Property Documents:
  • Original Condominium Certificate of Title
  • Tax Declaration certificate
  • Deed of Absolute Sale
  • Contract to Sell and all amendments
  • Property tax payment receipts
  • Building permits and certificates
• Financial Records:
  • All purchase-related receipts and tax payments
  • Association dues payments
  • Utility payments and connection fees
  • Insurance policies and payments
  • Maintenance and repair expenses
  • Rental income and tenant deposits
  • Currency exchange transactions
• Tax Documentation:
  • Annual income tax returns (Philippines)
  • Foreign income reporting for home country
  • Capital improvements records (for future capital gains calculation)
  • Business permit renewals
  • Official receipts issued to tenants
• Tenant Information:
  • Lease agreements
  • Tenant identification and background checks
  • Security deposit receipts
  • Property condition reports
  • Correspondence regarding maintenance requests

The Bureau of Internal Revenue (BIR) in the Philippines requires records to be kept for at least 3 years, but 7-10 years is recommended for investment properties. Digital record-keeping systems with secure backups are strongly recommended, particularly for overseas investors managing properties remotely.

Expert Tip: Foreign investors should consider engaging a local accounting professional for Philippine tax compliance. The BIR has specific requirements for rental property income reporting, including the issuance of official receipts (which must be BIR-approved) to tenants. Many property management companies offer integrated accounting services that handle these compliance requirements. Ensure you receive regular financial reports that distinguish between different expense categories to facilitate both Philippine and home country tax filings.

Philippine Tax Obligations

• Property Acquisition Taxes:
  • Documentary Stamp Tax: 1.5% of selling price or fair market value
  • Transfer Tax: 0.5-0.75% of selling price, depending on location
  • Registration Fees: 0.25-0.5% of purchase price
• Annual Property Tax:
  • Real Property Tax: 1-2% of assessed value (varies by location)
  • Special Education Fund Tax: Additional 1% of assessed value
  • Usually discounted 10-20% for annual advance payment
  • Assessed value typically 40-60% of market value
• Rental Income Tax:
  • Income tax rate: 25% for nonresident aliens not engaged in trade/business
  • Monthly percentage tax: 3% of gross rental (if income exceeds PHP 3 million annually)
  • Value Added Tax (VAT): 12% if gross annual income exceeds PHP 3 million
  • Withholding tax: Tenants may be required to withhold 5% from rent payments
• Capital Gains Tax:
  • 6% of selling price or fair market value, whichever is higher
  • Due within 30 days of sale completion
  • Legally seller’s obligation but often negotiated in contracts
• Estate/Inheritance Tax:
  • Flat rate of 6% on net estate value exceeding PHP 5 million
  • Applied to Philippine assets of foreign nationals
  • Tax treaties may provide relief depending on home country
• Business Taxes (for commercial rentals):
  • Local business tax: Varies by municipality (0.5-3% of gross receipts)
  • Barangay clearance fee: Nominal annual amount
  • Mayor’s permit: Based on business type and location

Home Country Tax Obligations

The Philippines has tax treaties with both the United States and Canada which help prevent double taxation. However, the interaction between tax systems is complex and requires professional guidance from advisors familiar with both jurisdictions.

Tax Planning Strategies

• Expense Deductibility: Understand which expenses are deductible against rental income
• Ownership Structure: Consider optimal structure for tax efficiency (individual vs. corporate)
• Tax Treaty Benefits: Utilize provisions in tax treaties to minimize double taxation
• Foreign Currency Management: Plan the timing of income repatriation to minimize currency exchange impacts
• Documentation: Maintain comprehensive records of all property-related expenses
• Capital Improvements: Track all capital improvements to reduce future capital gains tax liability
• Timing of Disposals: Consider tax year timing for property sales to optimize tax position
• BIR Registration: Proper registration can help avoid penalties and facilitate compliance

Tax rules in the Philippines undergo periodic changes, and compliance requirements can be complex for foreign investors. Regular consultations with Philippine and home country tax professionals are essential to ensure continued compliance and optimal structuring.

Expert Tip: Foreign investors should register with the Bureau of Internal Revenue (BIR) and obtain a Tax Identification Number (TIN) even if they expect to have minimal tax obligations initially. Without a TIN, you cannot legally issue receipts to tenants or properly document expenses, which can lead to complications when you eventually sell the property. The BIR has become increasingly stringent about rental income reporting, and retroactive compliance can be costly and time-consuming.

Selecting a Property Manager

Evaluate potential property managers using these criteria:

• Experience with Foreign Investors:
  • Track record working with international clients
  • English proficiency and communication systems
  • Understanding of foreign investor concerns
• Professional Credentials:
  • PRC-licensed real estate professionals
  • REBAP (Real Estate Brokers Association) membership
  • Professional insurance coverage
• Market Knowledge:
  • Specialization in your property type/location
  • Understanding of target tenant demographics
  • Established marketing channels
• Client Communication:
  • Digital reporting systems
  • Regular updates and transparent communication
  • Responsiveness across time zones
• Maintenance Network:
  • Established vendor relationships
  • Emergency response procedures
  • Preventative maintenance programs
• Tenant Management:
  • Thorough screening processes
  • Lease enforcement history
  • Tenant retention rates
• Financial Systems:
  • Transparent accounting practices
  • International fund transfer capabilities
  • Tax document preparation

Management Agreement Essentials

Ensure your property management contract includes these key elements:

• Scope of Services: Detailed description of exactly what is included and excluded
• Fee Structure: Clear explanation of all management fees, commissions, and additional charges
• Contract Term and Notice Period: Duration of agreement and termination procedures
• Reporting Requirements: Types of reports, frequency, and delivery methods
• Maintenance Authority: Spending thresholds requiring owner approval
• Tenant Selection Criteria: Parameters for approving potential tenants
• Rent Collection Procedures: Methods, timing, and handling of arrears
• Security Deposit Management: Handling, documentation, and release conditions
• Insurance Requirements: Coverage expectations and liability considerations
• Dispute Resolution: Process for addressing disagreements

Request references from current clients, particularly other overseas investors, before signing with a property management company. This provides valuable insights into how they handle properties for remote owners.

Expert Tip: When selecting a property manager in the Philippines, inquire specifically about their tax compliance services. Many foreign investors encounter challenges with Philippine tax requirements, particularly the need to issue BIR-approved receipts to tenants and file appropriate returns. Top management companies offer integrated tax compliance services that handle these requirements, including BIR registration, official receipt issuance, tax calendar management, and preparation of tax filings – saving you significant complexity and potential penalties.

Exit Options

Sale Process

When selling your Philippine property:

1. Pre-Sale Preparation:
   • Property repairs and presentation
   • Professional photography and virtual tours
   • Market value assessment
   • Tax clearance verification
2. Agent Selection:
   • Choose brokers experienced with foreign-owned properties
   • Verify PRC license and credentials
   • Discuss marketing strategy for your specific property
   • Agree on commission structure (typically 3-5%)
3. Legal Preparation:
   • Engage a real estate attorney
   • Prepare required documentation
   • Verify clear title status
   • Resolve any outstanding liens or issues
4. Marketing Period:
   • Online listings on major portals
   • Targeted marketing to potential buyers
   • Property viewings (managed by broker)
   • Offer negotiation
5. Sale Transaction:
   • Earnest money deposit (typically 5-10%)
   • Deed of Absolute Sale preparation
   • Tax clearances and certificates
   • Final payment and closing
6. Post-Sale Requirements:
   • Capital Gains Tax payment (seller’s responsibility)
   • Documentary Stamp Tax (buyer’s responsibility)
   • Transfer Tax (buyer’s responsibility)
   • Title transfer processing

The Philippine selling process typically takes 2-3 months from listing to completion, assuming no complications with the title or documentation. Foreign sellers may need to appoint a representative with a Special Power of Attorney if they cannot be present for the closing process.

Market Exit Timing Considerations

Several factors should influence your exit timing decision:

• Philippine Property Cycle: The market typically follows 7-8 year cycles; selling during upswing phases generally optimizes returns
• Currency Exchange Rates: Monitor PHP/USD or PHP/CAD trends; a strong peso significantly enhances returns when converting back to home currency
• Interest Rate Environment: Rising rates can dampen buyer demand, while falling rates typically stimulate the market
• Political and Regulatory Climate: Elections, tax changes, or foreign investor policies can impact optimal timing
• Infrastructure Development: Major completed projects near your property can boost value
• Seasonal Factors: December-February typically sees higher market activity from overseas Filipino buyers
• Tax Considerations: Timing sales relative to tax years in both Philippines and home country
• Competitive Inventory: Selling when similar inventory is low improves negotiating position

The most successful investors establish clear performance benchmarks and regularly evaluate their Philippine property investments against both local and global alternatives rather than making decisions based solely on market timing.

Expert Tip: When planning to sell a Philippine property, consider offering seller financing to Filipino buyers as part of your exit strategy. While this creates a longer cash-out period, it can command a premium of 10-15% on the selling price and may significantly expand your buyer pool in a market where bank financing can be challenging to obtain. Structure the arrangement through a Contract to Sell, retaining title until final payment, and include appropriate security provisions. A 20-30% down payment and 3-5 year payment term is typical. Consult with a Philippine attorney to ensure proper documentation and protection.