I Bought an Ayala Property, No Downpayment, 300% ROE

This post is not to brag. Being a journal, I would like to write what had happened on my real estate investment just before COVID-19 hit. And hopefully, some aspiring investor might find value in my experience. Because personally, I find it amusing and exciting at the same time.

I am no expert in real estate investing. But I do dabble on it every once in a while. Though my comfort zone in real estate is on house and lot, residential properties, this story I am about to tell you is different. Because in this investment, I didn’t even spent any money.

Let me tell you the story of how it came about. It started with a conversation with my wife. We wanted to buy a property sooner or later that is away from all the in-laws. I remembered that there’s a new development in a town, that is 3 towns away from ours, which is a good spot since its in between the 2 towns of both my parents’ and my in-laws’. The mixed use residential development is from Ayala Land. Keep in mind, we are in the province.

I figured, if its an Ayala company, not only would the property increase in value in the future (as most real estate and reputable developer properties), its both a good investment and a good “personal” purchase.

So I went around the surrounding vicinity. Did some due diligence. And found out that the land values are increasing at around 10% to 15% for the past 3 years. SM has already been built and there are more up coming projects to come. Its in the middle of progress and major real estate players are coming here, SM, Ayala, Robinsons and the Villars.

Knowing that this might be a good real estate investment, I went to the bank and inquired for a loan. I didn’t say housing loan. I just said a loan. The manager was kind enough to give me a personal loan for 6% per year of around 1 million pesos. Right then and there, I can get the 1 million, I just need to sign some papers. I also asked if they could pre-qualify me for a housing loan, since I want to buy a property. They checked, and said yes. I am allowed to loan up to 50 million pesos. “Good.” I said.

The manager asked if I have some investment in mind. I told her, yes. I would like to buy a property that Ayala was developing at “this” town. The manager was kind enough to hook me up with an agent and we can get to see the properties.

I left the bank, feeling good.

On the site, my wife and I chose the mid range property. Not the smallest, not the biggest. The selling price of the property is around P2.8 million, this is a vacant lot. We need to make a downpayment of 236,000 and the rest are loaned from the bank. So I went to meet the bank manager, hoping to solve this problem.

Here’s what happened. The manager is willing to give me a personal loan for 236,000, which is around 10k for 3 years. And then they will give me a housing loan for the rest of the amount. With some promo at that time, the loan amount was reduced to 2.4 million, with monthly of 21k for 15 years at 6.5% interest.

With those 2 loans, I have bought a property without spending any money. This was pre-COVID and banks are very kind to give you money.

Today, I checked the property values. The broker told me that the properties are now selling at a higher price. If I do the math, my property is now worth 3.2 million. It somehow matched the growth rate that I knew because of due diligence.

I have been paying the personal loan for 5 months and the housing loan for 4 months. Let’s do some math and find out what is my return.

Personal loan monthly: 10,000 x 5 months = 50,000
Housing loan amortization: 21,000 x 4 months = 84,000
(it took 1 month for the mortgage to process)
Total cash out: 134,000

Market price of property: 3.2 million
Bought: 2.8 million
Equity: 400,000

400,000 / 134,000 = 298.5%

At this point I could sell the property and flip it. Because there are many city dwellers that are now moving to less crowded provincial areas. But right now, I kind of like the feeling of actually imagining myself living in that area. So I might keep it and let the value of the property grow. I do like to be diversified more into real estate if I can.

You might say I fell in love with the location. And you might be right. But the point of this article is, yes, you can buy a property without a money down. But make sure you could pay the amortization.

This was an exciting experience for me since I didn’t knew I could do that. My thought has always been to save for a downpayment and the rest, loan from the bank. It’s still the recommended way. But never in my mind to imagine I could even loan the downpayment! I just have to make sure that the money I didn’t spent on the downpayment would have to return much better than 6% to make this all worth while. And even thought this is not a real “real estate investment” since there’s really no cashflow, the experience of going through all of that I think is worthwhile.