THE 10 COMMANDMENTS OF THE PHILIPPINE REAL ESTATE

Most of the expensive real estate mistakes aren't about buying the wrong property. They're about owning it the wrong way.

Here are 10 rules to follow before your next purchase.

1. Thou shall think twice before registering as engaged in the real estate business.

ALL your properties (yes, including the personal ones) can then be treated as ordinary assets. Sell one and get hit with VAT and income tax of up to 35%.

2. Thou shall not casually put residential properties in a corporation.

Unless you know what you're doing. The BIR's default view is that a corp's property is used in business, so its sale is subject to VAT.

3. Thou shall think twice before putting commercial property in your name.

Why else would an individual own one, if not to lease it out or use it for business? The BIR will likely tag you as engaged in the real estate business (see #1).

4. Thou shall not sell more than 5 properties in a year.

The count is per title. A condo and 2 parking slots (each with its own title) is already 3. Go beyond 5 and the BIR will treat you as habitually engaged, putting you in the real estate business (see #1).

5. Thou shall secure vacant land.

Fence it. Visit it. Ejecting informal settlers can take decades. In one case, it was the caretaker who claimed the land.

6. Thou shall buy only properties you and your family are willing to visit regularly.

If getting there feels like a burden today, imagine leaving it to your children. It might be interesting to you, but if your kids don't like it, they won't visit it. Distance creates neglect.

7. Thou shall have enough liquidity for estate settlement.

Asset-rich, cash-poor becomes your heirs' problem. Life insurance is one way to cover estate taxes.

8. Thou shall pay your Real Property Tax on time.

And avail of the advance-payment discount. Non-payment can lead to levy and public auction. The last thing you want is to find out, when you sell, that it was auctioned off because you never received the notices.

9. Thou shall work with competent, licensed professionals.

A license doesn't guarantee a smooth deal, but it minimizes the risk. A taga-lakad who doesn't understand taxation might tell you to use BIR Form 1606 instead of 1706 just because you're a sole proprietor. Follow him blindly and it could cost you millions.

10. Thou shall NEVER buy preselling assuming you can flip before turnover.

Have a Plan B and C: pay the balance in cash or qualify for financing. Banks are now reducing their real estate exposure, so even if you qualify, you might get a lower loan amount or a higher interest rate.

Real estate can build generational wealth. But one badly structured purchase can become a generational headache.