my unorthodox ways seems crazy but time always proves i'm correct and i was just ahead of my time. in 2011 i took advantage of the real estate crash and bought cheap fixer upper houses in las vegas and fixed it myself. i got angry at architects and engineers for burying all pipes (water pipes, drain pipes, etc ..) and electrical conduits inside the walls or under the ground. i googled this stupid phenomenon and learned it's really just for aesthetics purposes. but i learned from mrs. alenton in 1st year high school home economics class that functionality should always trump aesthetics (not biden it). i vowed revenge one day i will build my own house where i will coerce the architect to make all pipes and conduits easily accessible so you don't have to break walls, ceilings or floors just to fix them.
recently, i'm starting to notice newly constructed buildings are running pipes and conduits outside the walls and they just cover it with some sort of easily removable moulding to make it look nice. yesterday we ate at newly constructed ayala central bloc mall in IT park and saw the pipes in the ceiling were exposed. then in one of the electronic stores i saw a computer with all it's intestines and internal parts exposed. that's a sign the world is starting to adopt my philosophy. i won the revolution without firing a single shot.
in 2014, a 150 unit (3 floors) bed spacing building (called M5) was constructed near our old house. recently i heard the owner named munoz wants to sell the building because the drain pipes were configured incorrectly and it will be very expensive to correct it because the drain pipes are buried inside the cement floors. the turnover of tenants is very fast because they can't stand the foul smell while they are taking a shower and someone in a nearby unit is using the toilet because aparently the shower drain and toilet drain runs through the same pipe. that's suppose to be a very easy problem to fix IF ONLY THE DRAIN PIPES WERE NOT BURIED UNDER CEMENT or you don't need to destroy the entire floor (which is the ceiling of the room below) just to reconfigure the drain pipes. heck a 10 foot PVC pipe cost only around P250 and it's super easy to remove and install it's like playing with legos.
but i learned that although the turnover of tenants is very fast because of the foul smell, the building is always fully occupied and there is a long waiting list of tenants. bedspacing unit has no kitchen, just a very small room that can fit 2 people and very small bathroom. kitchens are not important because for working folks, karinderias are more economical and convenient. although there is always a common kitchen in case they prefer to cook. rent per unit is only P6k/month or P3k per person. it's perfect for call center agents and even those earning minimum wage (P10k-P15k/month). each unit has it's own electric meter so the tenant has the option to install a low wattage air conditioner, which is just an additional P1.5k/month cost of electricity. there's overwhelming demand for these type of units but very low supply.
i think the reason why there are not enough bedspacing units even if demand overhwelmes the supply is that the affluent community in cebu is a close knit society and their investment decisions are influence more by bragging rights, legacies, and illusions of grandeur instead of investment performance. luxury condominiums continue to prop up all over cebu like weed even if corabes towers condominum near my house only has around 4 units occupied and my uncle who owns 5 units in avida towers told me he can't get any renters even before the pandemic started. ego is very destructive to the health of your investment portfolio.
M5 has 150 units on a 400 sqm lot. that means you can easily build 75 units on a 250 sqm lot and still have ample space for parking the motorcycles of the tenants. let me be conservative and assume i only get 70% occupancy. and i will be even more conservative by projecting my rent is only P4k/month instead of the usual P6k/month. that's still 75(.7) = 52, X P4k = P208k, X 12 months = P2.5 million / year. even if i spend P500k a year on maintenance and admin costs, that's still P2m/year cash flow.
cost of construction will probably be P15k/sqm or P10 million (conservative estimate because there are no kitchens). so total investment cost will be around P12 million. P2m/year cash flow on a P12m investement is 16.5% annual return and a PE of 6. let's say rise in value of your property is 3.5% a year so that's a whopping 20% annual return. hahahahaha !!! the greatest investor of all time warren buffent only averaged 15% a year. and considering the PE of the S&P 500 usually hovers 15-20, it's a steal.
i went on a reconnaissance mission and found out that there are actually many lots for sale in very strategic locations around the city for only around P8k/sqm. that's around P2 million for 250sqm. it's usually along the public transportation routes and close to very dense business or commercial centers. the caveat is that these lots are usually around 50 to 100 meters from the main road and only motorcycles can pass through. in other words, there is no road right of way for cars that's why nobody is interested in buying these lots and so it's cheap. but guess what? bed spacers don't drive cars. they either commute to work or own a motorcycle. with climate change awareness and increased traffic congestion more and more people will be riding bicycles and electric scooters to work. EUREKA !!! an investment can only give you big rewards if you see something others don't. only my imaginary followers will see what i'm seeing becaues they are the only ones who read my post.
the great thing about a bedspacing design is that it's actually flexible. as more filipinos move up the economic ladder, maybe demand for bedspacing units would decrease and demand for studio units would increase. your 50 year old children can adjust to these market forces by simply breaking down a wall to combine 2 bedspacing units into a studio unit where the other unit becomes the kitchen. this can easily be done if all pipes and conduits are NOT embedded inside floors and walls. then as the philippines transform into a 2nd world nation and 1 bedroom units become more in demand, your 50 year old grand children can combine 2 studios into a 1 bedroom unit.
but i'm the biggest idiot of all time because how on earth do you transport the heavy hollow blocks, cement, sand/gravel, and cables to the construction site if it's 100 meters from the road and only motorcycles can pass by the right of way? i have golfing buddies who are contractors and civil engineers who can easily answer this question but if i ask them but i don't hire them i will lose a golfing buddy. so i will just mcgyver a long and narrow cart that can be towed by a motorcycle.
i can hire the very scary looking dads and uncles of my babygirls with their tatoos to be my front man in signing the lease agreements, following up on rent payments, and even evicting tenants (the truth is i don't have the balls to evict a beautiful college girl i won't be able to sleep soundly for the rest of my life if do that). the lease agreement will stipulate that rents should be deposited by the tenant directly to my bank account. the most important thing is no tenant should ever see what me the owner looks like because once they see me, they will never pay rent because i have zero charisma. if i have very strong charisma, people will pay me rent even if they are not my tenants. i'm serious. i saw this filipino dude in san francisco who looks well educated but was collecting alms in the street for quiboloy's church. that's incredible !!!
(for more of my knowledge bombs, click the "ian's knowledge bombs" banner at the top of this article and choose any article in the table of contents that piques your interest)
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