Rental Business 101: The Basics, Benefits, and Best Property Options

One of the common ways to earn money from real estate is to buy a property and let it appreciate. But you can do better than that. If you’re seeking additional, passive income, running a rental business is the way to go. 

As with other ventures, starting a rental business is no easy feat. But it’s well worth the time, money, and energy when done right. Learn the basics and benefits of this business, and make sure you choose the most profitable property out there. 

How to Start a Rental Business in the Philippines?

If you’re starting from scratch, it’s essential to learn the basics first. Here’s how to turn your dream business into a reality in four steps: 

1. Narrow Down Your Options 

With various properties available, how do you know which ones are worth investing in? First, consider the location. You want your property to be in a place with a growing population to maximize returns. Think urban areas or cities in Metro Manila.

Next, consider the property type. What’s in demand among urban dwellers? There’s a piece of data that answers this question: condo demand near central business districts (CBDs) has been increasing since businesses went back on-site in April, according to Lamudi.

2. Consult Your Budget

When buying a rental property, choose what you can afford. Metro Manila properties, especially brand-new ones, are growing in prices. Still, it’s possible to own well-located properties without going over your budget. 

This is where foreclosed condo units come in. These properties may cost as low as Php 2.3 million. And because they’re usually bank-owned, you also get to experience the convenience of loaning and buying a unit in one place. 

3. Do the Math

Once you have a specific property in mind, it’s time to run the numbers. Smart investors use various metrics to check the potential returns from a rental unit. This could include a combination or all of the following:

  • Gross rental income 
  • Loan-to-value ratio 
  • Net operating income 
  • Operating expenses 
  • Occupancy and vacancy rates 
  • Internal rate of return 
  • Appreciation and rent growth

4. Learn Property Management 

A well-maintained unit is irresistible to prospective clients. Conducting rental visits or checking up on your tenants once or twice could help you assess the state of the property. In your lease agreement, make sure to clarify who’s responsible for what. 

Having a routine maintenance checklist can also help you track upkeep tasks that must be done monthly or yearly.

What Else Can You Get from a Rental Business?

Besides passive income, owning a rental property offers you the chance to sell at the right time. An exit strategy is important when investing, so when the right time comes (or the property appreciates), you can sell it at a higher price.

With a rental unit, you can also diversify your portfolio. Diversification is likewise crucial for investors, as the more markets you invest in, the lesser the overall risk. 

Best Foreclosures for Kickstarting a Rental Business 

As mentioned, bank-owned properties are worth considering if you want to start a rental business in Metro Manila. They’re sold on an “as-is-where-is” basis, and you can make upgrades as soon as you complete the documents and initial payments. 

Quezon City, a consistent property hotspot, has foreclosed condo units costing around Php 3.1 million and below: 

Pasig is another city preferred for its rental options. A portion of the Ortigas Center is located here, and from this business district, one can easily access Mandaluyong and Quezon City.

With such a central location, Pasig is a popular destination for young professionals and business travelers. Include these markets in your prospective tenants by acquiring one of these units:

  • 24-sqm unit in The Exchange Regency Condominium, Ortigas Center 
  • 50-sqm units in Palmdale Heights Condominium, Brgy. Pinagbuhatan (there are two bank-owned units for sale in this condo, one on the 2nd floor and one on the 8th floor)
  • 22-sqm33-sqm, and 34-sqm units in Villa Sole Condominium, Brgy. Santolan / Manggahan 

Cities in the southern part of Metro Manila, such as Muntinlupa, Parañaque, and Taguig, are also ideal locations for property investments. Muntinlupa is just minutes away from Pasig and offers numerous career and lifestyle opportunities. One of its developments, Presidio at Britanny Bay, has foreclosed units in 26-sqm30-sqm, and 37-sqm floor layouts. 

Meanwhile, Parañaque properties make a great choice because of their consistent appreciation. The rapidly growing city has bank-owned units in Goldfinch Residences Luxerville CondominiumOne Metropolitan Place, and Chateau Elysee Condominium (in 36-sqm to 40-sqm floor layouts).

And finally, if you seek to attract the high-earning workforce within Taguig’s business and lifestyle hub, consider buying a foreclosed unit in Ridgewood Towers. It’s right across McKinley Hill, providing future tenants easy access to workplaces and upscale leisure destinations. 

With these options and the basics of a rental business in mind, you can confidently make your way toward financial success. 

For more bank-owned properties to inspire your new venture, check out this page.

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