GUEST POST: Australian expat on his investments in Asia
In my five years abroad I have designed, project managed and built three houses from scratch. The most recent one, ended up costing half of what the local Pinoy developers quoted me. I seem to have it down to a fine art now. Building anywhere is stressful and the Philippines is no exception. You must be prepared for a unique set of problems you have never encountered elsewhere.
Early Investment Mistakes
My latest project, the duplex (pictured above), measures 100 m² and cost about 1.25m pesos, roughly US$25,000, the price of furniture included. Consisting of local hardwood timbers, stone walls, glass and decorative screen work, its more akin to a large apartment than a traditional house. It also has a large living room, dining area and 2 bedrooms, each with an ensuite bathroom.
The first house I built here was double the size at 200 m² (2150 ft²). I quickly learned that the extra space was a waste as I rarely ended up utilizing it.
This is a common trap for many foreigners arriving in the Philippines.
Joe Sixpack, after just a few weeks in the country meets a 22 year old supermodel living in the thatch hut next door. He falls in love and decides to build the two of them their ultimate dream home. However by the time the project is complete, he finds himself alone in the massive house as his girlfriend ran off with a British backpacker.
My first house was a poor business investment. I fell for the ‘dream home’ scenario as the house was situated in front of a stunning surf break on the Pacific ocean. I eventually abandoned the house entirely. I was bored with the local community. The island was isolated and there was a lack of mental stimulation living there.
I did experiment with renting out the premises but managing it from afar was too great a challenge. I simply could not find honest local caretakers to look after the day to day issues such as small repairs, water supply problems in the dry months and so on.
It is virtually impossible to find a trusted confidante in the Philippines. Any business will require your full attention every single day. The house also ended up with some serious structural issues, pertaining to the unique conditions in this country and the failure of the builders to communicate the nature of these potential problems.
Pinoys will never ever give you bad news. They will instead up-sell and agree to everything you say. Even when you’re dead wrong. I learnt this the hard way.
In my first house, the problems started piling up. First, the top deck of floorboards leaked massive amounts of water inside, as the “green” wood they used on the deck, began to dry and shrink, causing gaping cracks between each board. Second, termites and borers can cause huge problems here which none of the builders cared to mention either.
The house eventually became infested with ravenous mites who started to lunch on my dream home. Typically the builders gave me nothing but a series of smiles, high fives and the Pinoy mantra “yes Boss!!”
Pinoys work for either a day rate or a contract rate. The latter is generally fixed at 35% of material costs. Thus if the materials are 1 Million PHP the labor cost will be 350k.There are pros and cons with both.
At a day rate they will offer more detail and quality. It will also have them trying to stretch the job out as long as possible to make more money. A contract naturally creates the opposite incentives. It will be in their interest to complete the job as quickly as possible but perform sloppier work.
Another problem with a contract rate is you will usually need to pay your workers weekly up to the final amount calculated at 35% of materials.
Which ever way you choose, you won’t win.
The Pinoys will always come out in front. There is always the chance your workers will refuse to finish the job if they have been paid in total but still have not completed the project. They will simply walk off the job to find other work to feed their families, leaving you with an unfinished home and a stretched budget.
I came up with a novel solution. I paid them daily but secretly ran a spreadsheet and kept tally of all my material costs and calculated 35% of that so I always knew if my workers were in front or behind. If falling behind, I stormed around the site in an angry mood, ensuring their noses were down and asses up focusing on their work.
Designing the House
For design ideas I researched 5 star resorts on the internet and collected the most stylish cost effective ideas. I kept to a simple open modern design utilizing plenty of glass and decorative screen work affording sweeping views of our tropical garden. This makes the house lighter and appear larger than it is.
This being the tropics I designed an open pavilion with a lot of walled glass doors and decorative screens, rather than expensive concrete walls, that trap heat inside the house. Humidity is high in South-East Asia so I wanted to make sure the air was flowing throughout the house.
Our land is gently sloping so we raised the house, supported on poles, to allow air to flow underneath and offer more storage space if needed. The Pinoy builders spent a lot of time creating the form work for pole support from expensive plywood . I bought large PVC pipes for the poles and saved over 30,000 pesos in labor costs alone.
Sourcing Building Materials
Basic materials are easy to source but an eye must be kept on quality every step of the way. Hollow-blocks (hand made cement blocks) can often crumble as some builders will try to cheat their customers with an incorrect ratio of sand to cement.
Fittings from hardwares must always be tested, as must power tools. The scams here are endless. A hardware store may replace a Makita power drill motor with a cheap Chinese clone and pass it off as the real deal. Cheaper Chinese imports may save you money initially but will often break after a few months so invest wisely in quality Japanese or European fittings. Especially when it comes to water pumps, pressure tanks, faucets, refrigerator etc.
I sourced rare second hand 1930s narra floorboards from a junk dealer in Cebu city and some italian ceramic basins from the Makati Shangrila project. I also got two stunning narra sliding doors and some shower screens all from he same dealer. Know that second hand wood can be hard to source here and also requires a lot of paperwork from the Department of Natural Resources to ensure its not illegal hardwoods.
Pinoys are masters of cement form work and rendering. For our flooring we purchased marble dust and mixed it with white cement. This creates a cold smooth shiny floor, perfect to help keep your home chill in the hot summers.
Bureaucracy & Project Management
Once my design was created in Photoshop I sourced a local architect to reproduce the drawings as CAD models on blueprint paper to satisfy local administrative requirements and the multiple permits the whole undertaking required. I submitted the documents and sketches to the local administration and waited for approval before the builders commenced the project.
These regulatory requirements was about 20k pesos ($500). You will need special legal paperwork to prove to administration that you are entitled to build. In this case I had full rights in my lease on the land as well as power of attorney assigned by the title holder
Early on in the project I was approached by a local builder offering to work as “foreman”. This was a profound mistake. He wanted to work for a fixed rate contract. After some months I realized he would never complete the job on time and the risk was that he would simply walk off the job once my money had run out.
You must instead always manage your own project.
Watch the workers like a hawk and be hard on them. Pinoys will take you for a fool if you appear generous and trusting. If you do not watch your workers closely they will start to goof off and try to stretch out the job for months.
Wages are low here. Fully skilled or partially skilled carpenters ask for about 350 pesos a day ($7). Keep in mind that Pinoy builders are best with what they know. If your house has advanced engineering concepts or tricky design areas you will have to explain this to them and work out how to build all of it yourself.
Pinoys simply cannot conceive abstractly. I heard one story of an expat leaving the plans to his workers before going home to America. When he came back, they had built him an entirely different house and explained they simply could not understand his design!
Electricity, Plumbing & Furniture
Make sure your house is grounded. This will be a tad more expensive. It’s common not to earth the electricity sockets here to save money, often with disastrous results.
Plumbing is another tricky component of house building in the Philippines. Mainly as there is really no such thing as a qualified plumber around who understands the physics of water pressure.
We sourced our water from a local village tank structure that is fed from countless hoses into everyone’s yards. Well water is very common here. All you’ll need is a properly constructed well, a strong pump and a pressure tank.
If living in close proximity to the sea, rust can pose a real problem. Not just for the pump but also your expensive flat screen TV. I had to throw a brand new Samsung away after a year of living 50m from the high tide mark of the pacific ocean.
Furniture can be designed and made locally. The shops will double charge you when they see your white skin so best to use your carpenters from the house project or get a girlfriend. Or a local friend whom can negotiate with the shop owner for you. Pinoys are practical and can usually construct anything you can design, including artistic light fittings.
Once complete we experienced a few minor issues with our new home. Leaks or water seeping in during the ferocious wet season typhoons for example. All flaws were easy to track and repair for a few dollars.
Although Bruce is living in the house himself, he did note that smaller builds rent for about 18 000 Pesos ($400) in the same area. For those willing to stick it out on the ground in the Philippines, which having lived in South East Asia myself I consider an absolute must if you are to invest in that region, the prospective gross rental yields of roughly 17%, granted you could secure a tenant, should prove worth the effort.
ABOUT THE AUTHOR
Bruce, P. is a 48 year old semi-retiree who left Australia for the Philippines 5 years ago. He lives with his partner and maid on about $500 USD per month. Content not having to contest the Western rat race, his favorite aspects with regards to his newly adopted country includes; the cost of living, the easy fun loving nature of the locals and cruising from one pristine white sandy beach to the next in his new pickup truck.