Airbnb house or Condo or Build and sell Company

[guk]

Hi!

For background: I live in the US, 28, single, and make a little more than 4k USD. I save about half that amount per month. Our Family recently built a mini mansion w/ a pool in SF pampanga and I was the architech/interior designer(yes I learned how to use sketchup haha) and I'm inspired to build my own lol. But also because i wanna invest my money since it's just sitting my savings account(4.5% gain).

I have 1 mil/20k USD in PH to invest/down. Below are my options:

Option 1: Condo - 2.5-3 mil. The reason being is because I recently stayed in an airbnb in my last trip and i kind of liked the City life and I feel like it would be a decent investment.

Option 2: House Airbnb w/ pool in SF Pampanga - 5 mil. I own a 300 sqm land( bought for 1.75m in 2021, same street as where we built our vacation house)Build my dream airbnb there from scratch.

Option 3: Invest in my cousin whos experienced in the build and sell business with a promise of 15-25% gain annually. My borther who recently invested 40k USD had an 8K gain, which is 20% in less than a year.

I'd really appreciate any advice or experience or even in criticism regarding this.

For people who say invest in index fund, i have some Index funds but I'm looking for a riskier investment with higher returns. I also don't like stocks since its basically gambling.

Cheers!

 

[resjudicata]

@guk Option 1 - real estate is a long term investment and you are obviously investing in yourself living the city dream so go for it.

Option 2 - i am an abnb host and cohost (for my sibs and partner) since 2018. Ab is not really doing well generally because hotels are keeping up. It would only work if your place is near tourist spots, airports, ports, concert halls, and malls. I dont think u can even breakeven with this esp it's in SF. My sister had to convert her AB there as our fam's vacation house instead. Since Azure North was built in SF, we received less and less guests. It's understandable though. That hotel has a man made beach inside lol.

Option 3 - you'll lose your money and a family member. Don't do it.

 

[guk]

@resjudicata Appreciate the advice! Funny thing, i also booked an bnb in azure but i think the markets too saturated for that type thats why im thinking of building something bigger than just a condo/small bnb type. Regarding option 3, i hope not hahah he has a lot of assets and I trust him enough since ive seen his work and ongoing projects.

 

[hobster777]

@guk Option 1: It's hard to say that a condo can still be an investment nowadays. Remember that a condo bldg deteriorates. Airbnb is also not as active now as before. Compute how much the average rent is on the market for a particular location and how long you can afford it to be vacant and see when you can break even and earn profits (likely over 10 years). If you won't rent it out, are you sure you can sell it in the future at a higher price?

Option 2: This is more feasible, I think, with great interiors and some good marketing. However, this is not a passive venture. For businesses like this, you need to be present and hands-on. It likely won't prosper if you only let some relative or taga-alaga manage it for you.

Option 3: Money deals with relatives are always risky. Better avoid and save yourself from the headache.

I know parang sirang plaka, but you're in the US and a US tax resident. You should take advantage of that. Are you a US citizen already? Even better. There are so many investment opportunities open for you there. Have you read the Wikis of r/personalfinance and r/fire? There is even a comprehensive step by step guide about which investment to consider next on that Wiki. Are you maxing out your employers' match on your 401k? Do you already have a Roth IRA? Are you considering maxing out the yearly limit for your 401k? Why not a mega backdoor Roth, if you're a high earner? How about HSAs (different from HYSAs)? You have so many opportunities there to build wealth in a decade or 2 while getting tax benefits and just sitting pretty. Read the Wikis.

Btw, there are ways to access retirement accounts before normal retirement age, if you're planning to retire early. Remember, most Filipinos don't have access to those types of tax-advantaged accounts. Again, read the Wikis and search the sub for gem posts.

If you're looking for a riskier investment with higher returns, next to index funds would be industry specific funds/ETFs like QQQ, then individual stocks/REITs, then crypto. Like you said, ayaw mo nun bec it's gambling. If you think about it, investing in real estate without much domain knowledge is also gambling, but a very long-term one. Pag nalugi, you risk wasting your precious decade/s, which could've earned you decade's worth of compound interest in index funds or simple MP2.

If it were me, I'd put my pesos in Pagibig MP2 (~7% p.a.) and focus on US investments like 401k, Roth, HSA, mega backdoor Roth, whichever is more profitable to pursue first (there's a sequence to this, it's in the Wiki), or even allocate something to a fund like QQQ. I'd rather just sit back, relax, travel wherever, and actually live my life while my money is working for me.

 

[guk]

@hobster777 This is very informative! Thank you!

 

[sydwalters]

@guk I say option 3 if you really trust them, and only to learn about the business and how things work in the country. You can move forward from there.

 

[guk]

@sydwalters Got you! The nature of business can be brutal. i definitely did ‘some’ homework but i know i can ask more questions.

 

[justindavidcampbell]

@guk I don't know how the 401k etc works in the US and you mentioned you don't like index funds.

Index funds do seem like the safe way. Set it and forget. You mentioned you want more risk. I think the 15% might be a lucky streak.

Why not allocate 20% to this investment and keep 70 index fund and 10% in bonds? Or adjust a little depending on you confidence in your families business. If ever anything goes wrong, you still have you building blocks in place

 

[deusartemlux]

@guk Option 3
Ponzi vibes haha pag tumakbo si cousin haha

 

[guk]

@deusartemlux My bro cashed out and he’s a current ceo of a real estate company but i get where youre coming from haha

 

[deusartemlux]

@guk I have a real estate company as well:
You can get clean loans for 12-14%

And collateralized ones for 7-9%

Kaya that’s so sketch haha

 

[guk]

@deusartemlux Ahh i see!