Business Opportunities in St. Louis University Baguio May 2012

Today I woke up with a great idea (and hopefully useful for you) for a blog post series. See I have this hobby of looking for businesses, and commercial spaces with good potential. Strange hobby but fun even if one doesn't have the money right now to invest in them. I was hoping that I'd get a break like that contest so that I would have the liquidity to capitalize. But that's another sad story.

So today, upon searching, I found this very interesting diamond in the rough.

Baguio Real Estate Business Opportunity W/ Instant Leasing Income

Borrowed Image from
The project apparently is located right smack in the middle of the Baguio Central Business District, right beside Saint Louis University. Having been a Baguio City student once, I know that this location is prime real estate. Baguio City is a unique gem in the North which is populated by a lot of students from outlying provinces and even Metro Manila.

A rental property there - specially within the Baguio CBD is almost always guaranteed to bring good ROI for you. I would know because I was once a renter and a seasonal vacationer. It was hard to find affordable and convenient leasing in that area as a student.

Aside from that, of course, it is the Summer Capital of the Philippines. People who want to escape the heat of Metro Manila and the lowlands flock to Baguio every summer summarily congesting it to the point that this once idyllic city of a few thousands becomes engorged with summer tourists. I would have posted our family pictures from the 1980s but it's in our home in Paranaque City with my mom.

Then to my surprise, a familiar face popped up.

Borrowed Image from
It was a long time ago and my father would tell me stories about the Lord of the Mountains. He'd say that the man literally owned mountains.  

He was my dad's law school buddy and I saw him on TV during the Presidential inauguration of Pres. Noynoy Aquino.

Wow, it's one thing to see a familiar face appearing on television, but it's another thing to actually see pictures of my dad's stories of another man coming to life.

The Business Opportunity
Apparently, the business opportunity is more of a condominium purchase. The Developer is Goshen Land of which Atty. Alexander Bangsoy, is the CEO. From their post:

Survey from nearby houses that operates same business (bed space): P3,500-4,000/student
I guess that's for one unit which they estimate to have 4 students each. Pretty, pretty good strategy on the part of Goshen Land if you ask me. I'll tell you why in the next paragraph.

Baguio Leasing and Dormitory Businesses
I remember that there are hundreds if not thousands of dormitory spaces in Baguio City, ranging from small individual houses, to apartment box-type like units which have lavatories and bathrooms only. As a UP Baguio student back in 1999, the rental that I paid for a unit as small as 15 sqm. reached PHP 7,000 a month. The lowest that I paid (I moved every semester) was PHP 2,500 and that unit was situated in the very far Green Valley area. I only had 1 roommate when I rented the 15 sqm unit in Guisad, the other times I was the sole occupant.

It's a good strategy on the part of Goshen land to have the units sold as condominium units rather than lease it directly themselves to the students because they will be receiving guaranteed payments from the investors. The investor would then put out PHP 240,000 cash or payable in terms and the rest in installments. Turn over is last quarter of 2012, making the unit accessible by January when a lot of students start looking for new dormitory spaces.

Risk Transfer
Students are one of the least desirable tenants, I would know because I was a student once. Of course, I was a pretty good tenant to all of my landlords. But I saw a lot of students who aren't. By selling the condo units as individual units to investors - the investors would then be the ones who would have to screen the tenants/students, manage the unit, oversee its maintenance, I don't really know how this would go in the building that Goshen land is putting up, maybe they have a managerial capacity but still - if you buy a condominium unit, it just makes sense for you to have the rights and control of a property owner.

Of course not all students are poor tenants, if you know how to screen your tenants and maybe sign a contract with the students' parents rather than the student himself, it would be better. Also requiring Post Dated Checks gives you a certain level of security though it is not an absolutely infallible guarantee.

*Note: People below the age of majority cannot sign Contracts. Well, they can, but the contract would be null and void.

Here comes the brilliant part - it would be the condominium owner who would be paying the RPT or the Real Property Tax for the rental business. It's brilliant because it reduces the tax liabilities of the entire building and transfers some of them to the individual condominium investor/owner. So here Goshen Land shows its savvy, I haven't seen the building myself since I haven't gone to Baguio for a long looooonnnng time, but I would guess that they would probably be leasing the ground floor area as commercial spaces - do correct me if I'm wrong.

I don't know a lot of details, and I leave it to you to contact the agent via their posting. The business opportunity is promising but there are some things that you need to consider before going into this:

  • How much would you be paying in Real Property Tax?
  • How would you screen the tenants? Or would the condo administration do it for you?
  • Who is in charge of maintaining the individual units?
  • How would you enforce ejection in case of non-payment?
  • Do you live near Baguio City?
In all honesty, this is a very, very good business opportunity if you know how to screen your tenants right. Being beside the largest university in Baguio City guarantees that your unit would not be empty. With income projections of PHP 14,000 to PHP16,000, you stand to make at least an extra 2,000 to 3,000 a month minus the taxes, maintenance and other expenditures. 

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