With an estimated total population of 100,981,000 and an area of 136,606 square miles, one can easily say that our country is overpopulated. This might be a huge problem, but not for someone who is thinking of putting up a boarding house business. With most of its cities crowded with people either working or going to college, it’s easy for a boarding house business to thrive and find tenants all year round. Here's a complete guide on how to build a boarding house business in the Philippines.
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What is a boarding house business?
A boarding house business is where you have a few rooms inside your own house to be rented to someone. It can also be an entire building filled with rooms and complete basic amenities that you can rent out to people who needed places to stay for a particular period of time.
The difference with boarding house and apartment is the price and size. Apartment, along with its more costly price is roomier.
Boarding house business is perfect if you don't have enough money to build an expensive apartment building but still want to benefit from a stream of passive income without without toiling in an office job eight hours a day.
Why should you start one
With the current economic situation of our country that it is continuously developing, now is the best time to have this kind of business. Having a boarding house business at the right location offers a high possibility of profit.
If you already own a piece of property within the city that is next to a commercial complex, all you need now is to build a boarding house in the property.
Your return on investment (ROI) depends on the number of rooms and location. Location is very important; it will determine the amount of rent you can charge to your tenants.
Estimated cost to start a boarding house business
This question will depend on the following scenarios.
- Do you own the property?
If you already have the property (piece of land) then it will only cost you around P 800,000 - 1,000,000 to build a fully furnished boarding house that has the following:
- 5 - 6 rooms
- 2 bathrooms
- 1 common area
- 1 kitchen
- Do you need to buy a property and build a boarding house?
If you need to buy a piece of land and then build the boarding house, the following is the estimated cost:
- P 5 – 6 million for 500 land size (m2)
- P 1-1.5 million to build the facility/boarding house
With this land size, you can build a 2-3 story fully furnished boarding house with:
- 10-20 bedrooms
- 4-6 bathrooms
- 3 common area
- 2 -3 kitchen area
The good thing about buying the property is the price value will continue to go up as the years go by. You can also raise the amount of your rent based on the developments you will be doing on your property.
You must also remember that before you start constructing your boarding house, make sure that you adhere to all the regulations in your municipality.
Prices quoted are based on current land pricing and construction materials in Manila Philippines.
When is the best time to start?
Once you find the the best location to put up your boarding house business, then by all means, start right away.
Like most businesses, location is the most important aspect of putting up a boarding house. You want to be closer to the areas where your possible tenants are, such as schools, offices, and malls are.
The perfect location to build a boarding house.
The closer your boarding house to establishments like schools, malls and workplaces, the higher you can charge. Who wants to deal with a heavy traffic?
University belts and malls in the heart of the city, they'll give you profit 12 months a year. The second best strategy is to know where the future developments will be.
A perfect example of this is, how the then called Fort Bonifacio area in Taguig was transformed from a sleepy soldiers camp to one of the most developed and busy cities in Manila.
Millions of people are now crowding this area mainly for work purposes and almost 70% of this people come from far places and needed a temporary place to stay. Needless to say, as long as there are people in the Philippines, the boarding house continues to boom and remains in high demand.
The estimated expenses and yearly profit
Expenses and profit will depend on what kind and how big your property is. A decent boarding house with maybe 4-6 rooms can earn you 240-360 thousand pesos yearly.
If your property is newly built then you wouldn't need to worry about big repair expenses until 3-5 years down the road. There'll be expenses here and there but they won't be that much. The estimated yearly expense for the 4-6 rooms is 20,000 pesos.
As long as there are students going to school and workers need to go to work, you'll never go out of business.
Excellent source of income
Whether your boarding house is mainly for students or workers, this business is always an excellent source of income if you are in a great location. You should also know how to take care of your tenants.
If you maintain all repair as the money comes, you shouldn't feel the burden of the repair cost. Repair cost alone isn't much compared to the profit you'll make once all rooms are occupied.
Also, for a brand new property, you don't need to shell out money for repairs for a long period of time. This allows you to save up for the repair cost in the future.
Another point: since boarding house isn't as costly as an apartment, tenants don't expect it to be in perfect condition. Most care about their proximity to school and workplace. Just make sure you comply to the building requirements by the government.
Risk of damage or theft.
No matter how you careful you are in screening your tenants, you can't be sure all of them would treat your property as their own.
From time to time, you'll spend money to repair broken house parts or appliances due to their neglect. Some might treat your property as their own literally and just walk out the door along with your property.
Dealing with young tenants
This disadvantage is mainly for a boarding house for students. Though I am not saying that adult tenants are all well-behaved, young tenants are more prone to getting in trouble.
You may encounter reckless teenagers which is sadly, very common these days. You'll have to deal with noise, littering, and unpermitted visitors from time to time.
Building a boarding house business, like any other businesses requires serious attention to every single detail. Do not just aim for a quick return of investment as well; aim for a long term success. Lastly, once you find the right LOCATION applied with the smart business management, success and profit will follow.
If you're interested in building a business with less capital for now, read: How to Build a Profitable Pisonet Business in the Philippines.
Hope this helps!
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