How to compute for the projected costs for acquiring, carrying, and selling a property

In my recent post on How to compute for the Maximum Allowable Offer or MAO for foreclosed properties, I mentioned that instead of multiplying the After Repair Value (ARV) with the Cost Factor (CF), you can just subtract the projected costs for acquisition, carrying costs, and marketing costs, from the ARV less Profits and Repair costs, to get the MAO. This eliminates the need to have an estimated CF and takes away the guess work.

In relation to this, I received a very good question from gwapito with regard to the actual breakdown of costs as it seems the projected cost of  10% used in my previous example might be unrealistic. Let me try to answer his question through this post.

Before I answer gwapito’s question (in bold below), let me first post his comment in its entirety:

I’m following your blog since April 2010 & I’ve learned a lot from you without any books, without any DVD’s on how to and without any mentor. I really appreciate the way in which you helped others learning real estate investment which is one of the subjects I always dreaded.

I have queries about Cost Factor (CF) which I am confused, it seems like the cost factor will be more than 10% or approx. 30% something considering that the roundtrip transaction cost/acquiring cost will be shouldered by buyer (i.e CGT,CWT,DST,TT,REGISTRATION FEE,DEED OF SALE,VAT, MARKETING COST). Let say you have a deal worth 5 Million of House & lot:

1.What CF will you be using, lets say you will be shouldering all the above roundtrip transaction costs? Can you give me the exact figure of CF breakdowing into details?

*2.As a seller, what is the provision that I could be exempted in paying Creditable Witholding Tax (CWT)?

*3.What is the comparison between DEPRECIATION COST AND REPAIR COST? Are you using repair cost as a depreciation cost?

I thank you again for all the wonderful work you have done and wish you all the best for your future endeavors.

*I already answered questions 2 and 3 in the comments section of my previous post.

Thank you gwapito for the excellent questions and for the encouraging feedback. Let me try to answer your first question to the best of my knowledge below.

Let me first list down the common major expenses that are usually for the account of the buyer when buying a foreclosed property from a bank. Using gwapito’s data in his question, I’ll assume the property is a house  and lot worth Php5 Million. For simplicity’s sake, let’s also assume that the selling price is also Php5 Million and the zonal value is less than the Selling Price, which means we shall use Selling Price instead of Zonal value for all the computations below.

Expenses for acquiring a property

Let me enumerate the common expenses you will have to pay as the buyer of a property

DST = 1.5% of Selling Price or about Php75,000
Transfer Tax = 0.75% of Selling Price or about Php37,500
Registration Fee = Php4,398 + Php45 for every Php20,000 in excess of Pph1,700,000 or about Php11,823
Notarial expenses would be approximately Php200
The projected total cost for you as the buyer in acquiring the property in this example would be Php124,523.00

Expenses for selling a property

When you as the buyer turns around and sells the property, the following are the related expenses:

Capital Gains Tax = 6% of the Selling Price or about Php300,000
VAT is not applicable in this example assuming you are not YET habitually engaged in real estate, which is also why Capital Gains Tax was included instead of Creditable Withholding Tax.
Marketing – lets assume you will do all the marketing yourself through online marketing because this is supposedly a hot property which is so easy to sell, hence the marketing cost is zero.
Total projected cost for selling the property in this example would be Php300,000

Therefore, total cost for acquiring and selling this property would be Php124,523 + Php300,000=Php424,523 which is about 8.49% of the Selling Price of Php5 Million

Carrying or Holding Costs

Assuming you got this at 20% downpayment, balance payable in 10 years at 12% interest, your monthly amortization would be Php57,388.37 (I just used the mortgage calculator of this site)

The monthly amortization of Php57,388.37 is about 1.14% of the Selling Price of Php5 Million

Putting it all together

Assuming that the property can be sold in less than 1 month, the total cost for acquiring, carrying, and selling the property would only be 8.49% of the selling price, since no monthly amortization needs to be paid. For every month the property is not sold, a monthly amortization will have to be paid, which means an additional cost of 1.14% per month.

If the projected time to sell the property is 3 months, the total estimated cost for acquiring, carrying, and selling the property would be 8.49% + (1.14%/month x 3months) = 11.91%

As you can see, an estimated CF of 90% which means 10% of the selling price is the total cost cost for acquiring, carrying, and selling a property like the one in our example above, appears to be realistic as the 10% cost falls between 8.9%(projected cost if property is sold in less than a month) and 11.91%(projected cost if property is sold in 3 months).

Thank you gwapito for your questions and let me know if you need any clarifications.

~~~

TRQ 2.0 Reminders: Early bird rates ends today!

Today is your last chance to avail early bird rates for the Think Rich Quick 2.0 seminar. Early bird rates ends today, October 7, 2010. Before today ends, you should have already secured your seats or else you will have to pay an additional Php 2,000 to get your tickets next week.

The “two-gives” option where you pay Php3,000 now and pay Php3,000 at the venue is still available -but you need to pay today, October 7, 2010. Get your TRQ 2.0 tickets here. To get the latest updates and see a preview of my bonus for you, check this out: Early bird rates about to end! Plus other important updates about TRQ 2.0!

To our success and financial freedom!

Jay Castillo
Real Estate Investor
Real Estate Broker License #: 20056
Blog: http://www.foreclosurephilippines.com
Follow me in Twitter:http://twitter.com/jay_castillo
Find us in Facebook:Foreclosure Philippines facebook page

Text by Jay Castillo and Cherry Castillo. Copyright © 2010 All rights reserved.

SM to Build More Hotels for REIT

By JAMES A. LOYOLA

September 26, 2010, 2:26pm

SM Hotels and Conventions Corporation, a wholly owned unit of SM Investments Corporation (SMIC), is planning to build at least four more hotels and centers to be able to have large enough asset pool for a real estate investment trust.

SMIC chief finance officer Jose Sio said they need to have at least seven properties to qualify for a REIT. The firm current has five assets including the Taal Vista Hotel, the SMX Convention Center and the Radisson Blu Hotel which is set for a soft opening today (September 27).

“That is a future proposition for the hotel business,” Sio said adding that, “for SM to decide to enter into hotel business, we will follow the same principle that we have followed in SM and that is to look at business in a long-term view.”

Sio said they will eventually pool all their hotel and convention centers into a holding company in preparation for its listing as a REIT. This will take a few more years since a REIT must have a track record of at least three years of profitability.

SMHCC president Elizabeth Sy said they are currently revisiting plans to put up a hotel in the Mall of Asia complex in Pasay City where they had initially planned to put up a Radisson and Regency hotel in one building.

She said they are still planning to put up a hotel with 400 to 500 rooms and may stick with just the Radisson brand although nothing is definite yet.

The firm is also set to open Pico Sands, a 150-room boutique hotel for members of the Pico de Loro Beach & Country Club in SMIC's Hamilo Coast project in Batangas.

Sy said SM is also currently reviewing its planned venture into budget hotels. “We are revisiting that concept and we want to make it more in line with SM, how SM does things and the market of SM,” she said.

SMIC had earlier laid out plans to put up 14 boutique hotels with 50 to 150 rooms near locations of its SM malls nationwide. The company is considering building one in Fort Bonifacio if it wins the bid for the 33.1-hectare military lot.

Published in Manila Bulletin Sept. 27, 2010.

How to compute for the Maximum Allowable Offer or MAO for foreclosed properties

What is MAO?

In real estate investing, MAO is basically the highest or maximum offer or price that you would be willing to pay for a property, where you are likely to achieve your target profit. The MAO helps lessen the risk of losing money by being the ceiling price that you should be willing to offer or pay for, without paying or offering too much.

Why do we need MAO?

Simply put, if you found a foreclosed property priced higher than the MAO, and you decided to buy it, at the very least, you will definitely not meet your target profit, and you may even end up losing money. Therefore, what the MAO really tells you is it answers the question“Should I buy this foreclosed property or not?!”.

On the other hand, if you found a property priced below the MAO, then that property justmight be worth buying. Furthermore, a property priced way below the MAO can be truly a great deal because:

1. There is more allowance for one to make a profit, even if unexpected costs like cost overruns for repairs, increased holding costs due to prolonged time to sell, etc. were to surprise you later on.
2. If you are not too greedy, you can actually sell the property also at below market value which is synonymous with ARV. This will denitely help you sell the property faster.

How to compute for MAO?

Borrowing the formula used by one of my mentors, Trace Trajano (meet Trace in person atTRQ 2.0, click here for more info), in his bestselling book “Think Rich Quick“, the Maximum Allowable Offer or MAO can be computed as follows:

MAO = CF x ARV – Repairs – Profit

Where:

CF – CF stands for the cost factor. A cost factor of 90% or 0.9 means it will take around 10% of the value of the property as the cost for acquiring, carrying, and selling the property. If this is confusing, I believe that instead of multiplying ARV with CF, you can just subtract the projected costs for acquisition, carrying costs, marketing costs, etc. In effect the formula would look something like this (MAO = ARV – Repairs – Profit – acquisition costs – carrying costs – marketing costs)

ARV – ARV refers the After Repair Value. Refer to this article on how to calculate ARV.

Repairs – This is the estimated repair cost you got from the contractor you are most likely to choose. Make sure you get at least 3 estimates from reputable contractors and use the one that is most favorable to you in terms of cost, time for completion, etc.

Profit – Profit is your target profit from this particular deal. How much profit really depends on you. How much profit for you would make this deal worth all the time, money(if any), and effort you will put in it?

Sample MAO calculation

Sample property: After short-listing close to a hundred foreclosed properties, you found a very promising foreclosed house and lot which was selling for only Php900,000 within your village. After some research, you found out that your village is a hot market, hence you use a CF of 90% or 0.9. After following the instructions on how to compute for ARV, you get an ARV amounting to Php1.4M.  Your best contractor submits a proposal with an estimated cost for repair of Php100,000. Lastly, you want your profit to be at least Php200,000, equivalent to about 4 months of your take home pay at your current job, where you are always stressed out. Is this a good deal?

To find out, lets compute for the MAO:

MAO =  CF x ARV – Repairs – Profit

= 0.9 x Php1.4M – Php100,000 – Php200,000

= Php960,000

Since the selling price of Php900,000 is below the MAO which is Php960,000 by Php60,000, then this is probably a good deal.

In this case, do you buy the property since the numbers look good?

Well, my advice would be to test the market first. Will someone really buy the property for Php1.4M? If you arrived at your ARV using comparable properties that were sold during the last 6 months, then it is more likely that people are going to buy at that price.

Another thing to consider would be the accuracy of repair estimates. Is the Php100,000 repair estimate really accurate? Did you get at least 3 contractors? Will the time frame for the renovation(if any) increase holding costs?

How about the cost factor or CF, are you sure that using a CF of 90% is accurate?

Using a CF of 90% means the estimated cost for acquiring, carrying, and selling the property is just Php140,000 ( I got this by multiplying the ARV by 10%). Depending on the payment terms with the bank where you found the foreclosed property, the Php140,000 might not be enough to cover closing costs(taxes and fees, etc), holding costs(your monthly amortizations, if any, for the number of months needed to renovate and sell the property), and marketing costs ( may include professional fees if you decide to hire a licensed brokeror referral fees for successful referrals, cost for advertisements, etc.).

“What if the property is being sold through public auction, how do I make an offer?”.

If it were for sale through a public auction, first you need to check if you can make a pre-auction or knock-out bid. If not, you will have to attend the auction and bid on the property, while keeping in mind that the maximum bid you can make is only up to the MAO (or a little less to leave room for allowance for cost overruns, etc). If someone else is bidding for the same property, and you MAO has been breached, don’t forget to put down your paddle!

Am I making any sense?

I really hope that what I am sharing above is really helpful, but before it can be helpful, it should make sense right? I am teaching how I get my MAO based on how I actually do it in the real world, but this would be worthless if no one understands what the heck I’m saying. Whether you understand this or not, I would appreciate any feedback. Thank you!

To our success and financial freedom!

Jay Castillo
Real Estate Investor
Real Estate Broker License #: 20056
Blog: http://www.foreclosurephilippines.com
Follow me in Twitter:http://twitter.com/jay_castillo
Find us in Facebook:Foreclosure Philippines facebook page

Text by Jay Castillo and Cherry Castillo. Copyright © 2010 All rights reserved.

How to compute for the ARV of foreclosed properties

Real estate investing is a numbers game and one such number that a real estate investor who is into flipping properties needs to determine before buying a property is the ARV. ARV can stand for Approximate Retail Value, After Rehab Value, but the common term often used is After Repair Value.

Isn’t ARV the same as Market Value?

I believe market value is technically the same as ARV except that ARV refers to a futuremarket value, which is the market value of a property after it has been repaired and is already in Ready For Occupancy(RFO) condition to be exact.

Market Value on the other hand is the value of a property at its present condition or the “as-is” value. In my opinion, this “as-is” market value is synonymous to a property’s appraised value.

The obvious difference between the “as-is” market value and ARV is the repair cost plus the added gain in value due to the repairs, if any.

When to use ARV

I find ARV to be quite useful when trying to determine how much one can increase themarket value of a property by simply repairing it, provided a property’s value has declined due to deterioration, lack of maintenance, etc. This is very applicable to foreclosed properties where a lot are in dire need of repair, which is good because this helps lower their selling price, well, most of the time.

By repairing a property, an investor can bring back a property’s value to it’s full market value, which is the ARV. However, the repair cost and the selling price of a property needs to be considered to determine if a profit can really be made because if the selling price or the repair cost or both are too high, this can translate to zero profit.

How to compute for ARV

Based on my definition above that ARV is just the future market value of a property after it has been repaired, then one can simply use the same approaches I talked about in my post “How I estimate market values of foreclosed properties”, excluding the calculation for any depreciation of a property, more on this later.

As mentioned in my article on market values, we can use the market approach and the cost approach. Income approach is more appropriate to multi-unit properties.

Market approach

1. Look for “comparable” houses that got recently sold in the immediate vicinity of the foreclosed property you are evaluating. They should be very similar in terms of lot area, floor area, number of bedrooms, number of toilets and bath, capacity of garage or parking slots, age of property, etc.

2. Ask around the vicinity, or you can get the telephone numbers of all the “for sale” signs that you see and for sure you will find a number of a broker that specializes in that vicinity who will know the current going rates in that area. The same tactic can and should be done online.

For example, you were able to get the price of 3 comparable properties that got sold within the vicinity of the foreclosed property you’re evaluating and their average price is Php2.5M, then Php2.5M is your ARV.

What if the closest comparable property is still quite different, for example, the lot area  is bigger by more than  10% or the comparable property has a corner lot, etc.?

In these cases, you will have to compensate. In the example above, you can subtract the cost for the discrepancy in lot area(just get the going rates for lots per square meter and multiply by the difference), and you can also subtract the premium for corner lots (a broker that specializes in that area can help you with this) .

Cost approach

1. Determine the average price per square meter of lots in the same vicinity of the foreclosed property you are evaluating.

2. Multiply the price per square meter you got above with the lot size of the property you are evaluating. The result is the approximate cost of the lot. For example, if a lot near a foreclosed property in Marikina has a price of Php5,000 per square meter, then the approximate cost of the lot of a foreclosed property that has a size of 300sqm would be about Php1,500,000 (300sqm x 5,000pesos/sqm)

3. The cost of the improvement is equal to the usable floor area multiplied by the current going rates for construction of improvements per square meter of floor area. I currently use a conservative construction cost of Php15,000 per sqm of floor area. For example, if a house has a usable floor area of 100sqm, then the cost for the improvement is about Php1,500,000 (100sqm x 15,000p/sqm)

4. Add the cost of the lot and the improvement to get the total cost. Following our examples above, the total cost shall be Php3,000,000 (Php1,500,000 + Php1,5000,000).

Using the cost approach, the ARV is Php3,000.000. We no longer needed to compute for any depreciation cost as we are looking for the cost for the house and lot in brand new condition, not its “as-is” condition.

The cost approach obviously has it’s limitations. You can only apply this approach to house and lots. I believe it wold not be an accurate tool for condos, buildings, etc.

Which ARV should I use?

A prudent real estate investor should of course use the lower ARV which is based on the market approach in this example. At this point, if you can see that the ARV is smaller then the selling price of the foreclosed property and the estimated repair costs combined, then that property is not a good deal.

A promising property should have enough room for profit even if you consider holding costs.

What next?

The ARV is just one of the numbers one has to get when “doing the numbers” and due diligence. You will need the ARV to calculate for your Maximum Allowable Offer or MAO, which is basically the maximum price you can pay for a property that will still allow you to achieve you target profit. MAO will be discussed next.

Happy investing!

Jay Castillo,

Foreclosure Philippines

Are foreclosed properties good deals?

It depends! Obviously not all foreclosed properties are good deals.

It’s common sense that not all properties are good investments, foreclosed or otherwise, you don’t need to be a real estate investing guru to know this. However, based on the number of times I’ve either heard people ask or get asked this very same question, I feel that a significant number of people out there either have a misconception about foreclosed properties, or they are simply clueless.

Let me make it clear, NOT all foreclosed properties are good deals, and it would be foolish to think all of them are.

Image via Wikipedia

Don’t ever expect all foreclosed properties to be good deals because if you do, you are setting yourself up for frustration, disappointment, and failure, especially when you start finding foreclosed properties that turn out to be horrible deals. More on this later.

“Hey Jay, are you saying foreclosed properties are no good?”, you might be asking.

As I said, it depends. No, I’m not discouraging you, I’m just trying to help with managing expectations. Admittedly there are more bad deals out there than good deals, but there are still more than enough hidden gems out there that can make worthy real estate investments, and the key is finding them. One needs to look at a lot, and when I say a lot, I mean a lot of properties, to find those hidden gems, after all, investing in foreclosed properties is a numbers game.

Investing in foreclosed properties is a numbers game

I’ve said it before and I’ll say it again, Investing in foreclosed properties is a numbers game.

The greater the number of foreclosed properties you look at, the greater the chance that you will find those good enough deals, and even some great deals. However, you will find a lot of bad deals in the process, but that’s just part of the game. It’s okay to find horrible deals, as long as you find out before you bought the property, and move on.

Keep in mind that one cannot just give up after looking at a few properties. I often hearpeople get frustrated with foreclosed properties after looking at just one or a couple of properties, or even with just one listing that really did not have many properties to begin with. And then they give up and say things like “I’ll never find any good deals…” or “The numbers will never work…” or “This is too hard…” or “I’m just wasting my time…”. Sorry, nobody said foreclosed real estate investing is easy! It may sound simple, but it isn’t easy.

The 100-10-3-1 Rule

You basically need to look at a significant number of properties to find those properties that are worth a second look.

How many would that be? The general recommendation would be to find about a hundred properties worth a second look, after doing some shortlisting. Out of those one hundred properties, you will probably find 10 worth inspecting. Out of those 10 worth inspecting, you might find 3 properties that are worth giving offers for or bidding for, if they were for sale through a public auction. Out of the 3, you may end up buying one.

That’s a brief overview of the 100-10-3-1 rule. I’ve read many variants of this rule from my mentors but they are basically the same. You analyze 100 properties, inspect 10, submit offers on 3, and end up buying 1. These are just average numbers and you’d be surprised how accurate this average can be in real life. Been there, done that!

Other numbers to consider

Of course there are other numbers to consider when applying the 100-10-3-1 rule and when “doing the numbers”.

Numbers like After Repair Value (ARV), projected repair costs, target profit, Maximum Allowable Offer(MAO), Cash on Cash Return (CCR), Return-On-Investment or Return OfInvestment(ROI), Net Operation Income(NOI), Cashflow, etc., to name a few, also need to be considered. For each of these numbers, you as the real estate investor will ultimately have to decide what is acceptable for you. These numbers will determine if a foreclosed property is a good deal or not.

If this sounds too daunting and tedious for you, I would be the first to say that this might not be for you. But there’s no harm in trying right?! Imagine what could happen if you consistently did this until doing the numbers became a habit and you actually became good at it!

No, I won’t have time to explain all of these numbers now, but one by one, they will be covered here soon.

Sometimes it’s all in the mind

I still remember during the early part of 2008 when I found myself unable to find any good deals in any of the listings of foreclosed properties that came my way.

I was still recovering from feelings of being betrayed after how Dinna Revilla, a former real estate mentor, got arrested and became a “fallen real estate guru”, and in disgust of what she allegedly did to all of us who trusted her(as far as I know, the case is still pending), I just decided to invest in mutual funds instead of real estate.

My respite from real estate investing however was short-lived because I eventually met another mentor, Doctor Jon Abaquin, who was also featured in Larry Gamboa’s book “Think Rich Pinoy”(see page 155), who later challenged me and a couple of my friends to each buy a property within 90 days.

Lo and behold, from the same listings lying on the table in my bedroom where I could not find any suitable properties, all of a sudden I was able to pinpoint at least 3 very promising foreclosed properties from 3 banks and I ended up submitting an offer for the most promising one. Later, that one offer got accepted. That experience opened my eyes and from that point onwards, I truly believed that there were good, and great deals out there, I just had to look a little bit harder!

But what if I do find a good deal but have no money to invest?

My take on this: Financially literacy is a prerequisite to real estate investing and this helps one save enough investing capital so that when that right deal comes, you will be ready. If you think that would take too long, then another option would be to find investors for your deal, although personally, I would recommend that beginning investors to do it by themselves, especially on the first few deals.

Build your track record with your own money first before risking other investor’s money. If you can’t even handle your own money, how do you expect to be able to handle the money of investors?! Sorry, that’s just my opinion.

So how many properties have you looked at?

Have you looked at 1, 2, 3… and have given up already? Are you looking hard enough?

Remember, the more you look and do the numbers, the greater the chance that you’ll find that real estate investment for you.

Next time someone asks you, “Are foreclosed properties good deals?”

I’m pretty sure most of you out there will eventually encounter this question once you decide to invest in foreclosed properties and people learn that you do. Well, I hope to help save you the trouble of coming up with your own answer, which can turn out to be a very long one, just like mine. If you want, you can just send them over here, and I hope my answer above will be of help.

Next question please!

Good luck and happy investing!

To our success and financial freedom!

Jay Castillo

Real Estate Investor

Real Estate Broker License #: 20056

Blog: http://www.foreclosurephilippines.com

Follow me in Twitter:http://twitter.com/jay_castillo

Find us in Facebook:Foreclosure Philippines facebook page

Real Estate Service Coach: New Network of Brokers and Agents in Philippines

Hereunder is a link that any interested Real Estate Agent or Broker would surely love, especially those who are still searching for the rainbow that seems to elude them for quite so long. 

This also in connection with the upcoming Real Estate examination this coming December 5, 2010 to be administered by the Professional Regulatory Commission (PRC) in various parts of the country particularly Manila, Cebu and Davao.

So I am inviting would be agents and brokers to avail of this opportunity while RA 9646 is still not fully implemented. Since the purpose of this law is to professionalized the industry and eliminate the bad eggs in the real estate service which includes agents, brokers, appraisers, assessors and consultants to name a few.

 Beginning this year or after the effectivity of the implementing rules and regulations (IRR) of RA 9646) a five year course related to the real estate service industry will be offered by various educational institutions to answer the needs of people wanting to be a part of the booming real estate industry as their hope for a better future.

And after the required number of graduates have been established, only those who are graduates of  the course Bachelor of Science in real Estate Service will be allowed to practice as brokers, assessors,appraisers and consultant as stated in the above stated Republic Act. 

Real Estate Service Coach: New Network of Brokers and Agents in Philippines

Osmena: Pnoys land use agenda

By Antonio V. Osmeña

PRESIDENT Benigno Aquino III’s declaration to implement land use planning is a must today, as hodgepodge development unfolds in the country.

Several states in the US, including Hawaii, Massachusetts, Connecticut, New York, New Jersey, Washington, Vermont, Florida, California, Pennsylvania and Oregon, have attempted to develop and in some cases have implemented laws for land use planning and control.

Updates on President Benigno Aquino III's presidency

Japan is the only country with comprehensive planning and zoning. The entire nation is divided into five major land use zones: urban, agricultural, parks, nature reserves and forests.

During the 1960s, Belgium, West Germany and the Netherlands passed laws establishing guidelines for land use, but left the actual planning to the localities.

Canada has also developed a fairly comprehensive land use planning program. It’s about time the Philippines has its own land use planning program in order to protect its

environment. To maintain its pristine environment, there is a need to set ecological planning as a goal.

After PNoy’s declaration of a land use program, it is the responsibility of Congress to legislate both urban and non-urban land use and control plans. The first step in the development of a comprehensive land use plan is to gather geological, biological and sociological data on each province and the use of each parcel of land. These data are used to make projections about how Filipinos may need to use the land in the future, and this information is evaluated to determine the best present and future use

for each parcel of land.

Four major methods are used to make projections and develop a land use plan: (1) extrapolation of existing trends, (2) reaction to crisis, (3) systems analysis and modeling and (4) ecological planning. The steps involved in the development of a comprehensive land use plan require a strong political will and sufficient funding for its success.

To illustrate, our country’s desire to boost tourism raises the need to isolate areas where the environment should remain pristine and where no industries that could cause pollution will be allowed to enter.

The artificial political boundaries of cities, towns and provinces bear little relation to the natural airsheds, watersheds and ecosystems in each region.

As a result, land use planning and control in one area may be undercut by lack of planning or by planning with opposite goals in surrounding areas.

The environmental destruction of our country’s resources is one of the major concerns of PNoy. There should, in fact, be ecological land use planning that consists of: (1) making an environmental and social inventory; (2) determining goals and their relative importance; (3) producing individual and composite maps; and (4,5,6) developing, evaluating and implementing a comprehensive plan.

The problems associated with ecological land use planning include difficulties in getting reliable scientific, economic and social data; assessing aesthetic and ecological factors; lack of effective means for implementing land use plans; and political conflicts between those with differing ethical views on how land should be used.

In ecological or any other form of land use planning, decisions to grant permits for residential, commercial, industrial or any other use are normally made by the nation’s thousands of separate city governments.

Unfortunately, these local governments do not have the money, staff and information needed to do comprehensive land use planning.

The political leaders of the Province of Cebu should have the foresight to support PNoy’s declaration to implement a nationwide land use plan, by setting up in Cebu an advisory council of government, to draw up and coordinate integrated land use plans for the entire island.

It is time for Cebu’s civic, professional and trade organizations to lobby the government to support the council for expertise and funds, and to legalize the authority to implement decisions.

Cebu’s self-proclaimed environmentalists could help make ecological inventories of their natural communities and the plant and animal life they contain.

Such information can be useful in development comprehensive land use policies at the provincial, regional and national levels.

Published in the Sun.Star Cebu newspaper on August 4, 2010.

Nominations to body to draft Resa rules up

By Nancy R. Cudis

AS SOON as the implementing rules are out next year, the Professional Regulation Commission (PRC) will regulate and supervise the real estate services instead of the Department of Trade and Industry (DTI).

Real estate practitioners have yet to come up with the guidelines to carry out the Real Estate Service Act of the Philippines (Resa).

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The PRC began last month gathering nominations from the real estate industry on who will form the Professional Regulatory Board of Real Estate Service that will draft the implementing rules and regulations of the Resa.

Emily Amie Cabillada, president of the Philippine Association of Realtors Board Inc.-Cebu Realtors Board Inc. (Pareb-Cereb), said the board will be created this month or early next year.

President Arroyo signed Resa into law last June 29. The law, which is designed to develop the real estate industry through proper and effective regulation and supervision, took effect on July 30.

Cabillada said that 90 days after implementation of the Resa law, the DTI will turn over its responsibility of real estate services to the PRC.

But the PRC cannot carry out these functions because the Professional Regulatory Board of Real Estate Service has yet to be created.

Although the DTI and PRC reported to have signed a memorandum of agreement to address this matter, the details of the agreement have not yet been disclosed, said DTI 7 regulatory division chief Josh Carol Ventura.

While waiting for an order, the DTI will help out the PRC and the real estate industry, especially during the turnover of functions, through its trade regulation and consumer protection office, she said.

Cabillada said the DTI will still assume some functions while the board is being created.

According to the Resa law or Republic Act 9646, the Professional Regulatory Board of Real Estate Service will be composed of a chairperson and four members who will be appointed by the President from the list of names recommended by the PRC.

These recommendations are based on the list of nominees submitted by the accredited and integrated professional organization of real estate practitioners.

The licenses of real estate consultant, appraisers, brokers and salespersons cannot be renewed until the board and the IRR are created.

There is, however, a provision in the Resa law that gives them a grace period of two years while the board is being formed, Cabillada said.

Also, the board is to conduct licensure tests for the practice of the real estate service profession.

Real estate law confab

A SYMPOSIUM on the Real Estate Service Act (RESA) will be held tomorrow, Saturday at the Cebu Rajah Park Hotel from 8:30 a.m. to 11:30 a.m.

The RESA law or Republic Act 9646 was recently passed to professionalize real estate practice.

The resource speaker is Ariel Martinez, a lawyer, realtor and real estate reviewer.

Martinez will answer various concerns of real estate practitioners regarding license renewal, especially those that will expire on Dec. 31, application for real estate salesman’s license, continuing education program and real estate review and licensure examination.

He will also explain to the participants some provisions of the RESA.

The Philippine Association of Realtors Boards Inc.-Cebu Realtors Board Inc. (PAREB-Cereb), the event organizer, invites all real estate practitioners, developers or anybody who wants to know more about the law to attend.

The registration fee is P600, inclusive of snacks and handouts. Interested parties may call Emma at 2323940 or text Tita at (0922) 3297225 and Purie at (0917) 5462508 or email at cerebinfo@yahoo.com.

Property firm going public in 2010l

Philippine Daily Inquirer

GLOBE ASIATIQUE REALTY HOLDINGS Corp., a big player in the affordable residential property market, is planning an initial public offering of shares worth up to P3 billion and may be the first company to sell new equity in the Philippine Stock Exchange in 2010.

GA founder, chair and president Delfin Lee said in an interview Wednesday that the property company would tap the capital market to sustain the company’s robust expansion, which is being driven by a huge backlog of low-cost housing supply in the country.

The application for IPO, worth at least P1 billion to as high as P3 billion and equivalent to about 15-26 percent of the firm’s outstanding stock, is now only awaiting approval from the Securities and Exchange Commission and the PSE. The debut on the local bourse is estimated to happen by February next year, GA executive vice president Dexter Lee said.

BDO Capital and RCBC Capital have been mandated as underwriter for the public offering.

The company sells housing units for as low as P400,000 in its township projects. It distinguishes itself from competition by offering affordable residential units that offer amenities seen only in more expensive developments. “They don’t look like low-cost housing at all,” the GA president said.

“These projects gain market acceptability because they have assured financing from Pag-Ibig. The beauty of this project is our focus on the real market, the end users,” he added.

About 70 percent of its business comes from the low-cost residential market and only 30 percent from the high-end market. GA welcomes the entry of bigger players into the affordable housing market, given that the property industry, at present, could produce only 300,000 housing units a year or a small fraction of the more than 3 million domestic backlog in housing units. Doris C. Dumlao