How to Execute Different Property Investment Strategies with RFO Units
By: Melecio Martin G. Arranz IV
Many seasoned investors consider real estate among the safest. Real estate properties appreciate over time, especially properties situated in prime locations. Moreover, they’re relatively stable; most properties held their value even during the pandemic. However, a real estate investment doesn’t return value on its own. You still need the right property investment strategies to reap big returns.
Investing in property without having a strategy is like putting the cart before the horse. When you have a clear idea of what you intend to do with your property investment, you can maximize your finances and avoid wasting resources.
When venturing into real estate investment, many people choose ready-for-occupancy (RFO) properties because they’re move-in-ready. This model means you can start earning from the property as soon as you finalize the sale. RFO properties also lend themselves well to different investment strategies and goals.
But before discussing different property investment strategies, it’s helpful to know why RFO units make sound investments in the first place.
Why Should You Invest in RFO Properties?
Long-term value appreciation and being move-in ready are just some reasons why you should invest in RFO properties. As you dive deeper into their attractive characteristics, you will understand how property investment strategies work and why you should consider them.
1. RFO units are move-in ready
There’s no need to wait for construction to complete; once you receive the keys, you can start profiting from your investment. This instant occupancy makes RFO units ideal for discerning investors looking to generate rental income or capitalize on market conditions without delay.
2. RFO properties appreciate at a higher rate than pre-selling units
Since pre-selling units involve a property that isn’t built yet, you won’t be able to sell and charge as much for it as you will with an RFO property. This reality marks a thriving property investment, giving you the advantage of selling your RFO unit at an appealing profit down the line.
3. Most RFO properties offer promos and discounts
Discounts and promotions are usually part of the deal when you invest in RFO units. Some developers, including Federal Land, offer flexible payment terms, low reservation fees, and promotions that make RFO units easier to begin investing in. These also mitigate the perception of a higher cost for more price-sensitive real estate investors.
4. RFO units offer long-term value appreciation
Including RFO properties in your portfolio is an excellent method of developing a recession-proof investment strategy. It’s an evergreen investment that increases the value and potential returns the longer you hold it.
JLL reports that fewer Filipinos are buying property in 2023, down 4.3 basis points QoQ. Then again, the demand for condos and apartment units in sought-after areas can easily pick up with suitable market conditions. Ultimately, being knowledgeable about different property investment strategies can prevent financial losses.
3 Main Property Investment Strategies
Before pouncing on the next RFO unit you see, keep the investment strategies below in mind to make the most of your money. They’re suitable for investors of all experiences, whether you’re investing in your first property or diversifying your real estate portfolio.
1. Buy and hold
The buy-and-hold property investment strategy involves acquiring and retaining long-term ownership, typically for five or more years. The aim is to generate a sustainable income stream by renting out the RFO unit as your equity increases and the property appreciates.
This strategy is ideal if you’re a patient investor willing to wait for your investment to mature. It may initially involve losses, with your short-term earnings going toward typical condo ownership costs such as utilities and upkeep. But once the property value matures, it’ll be a key element in increasing wealth.
Buying and holding is a lower-effort approach than the other property investment strategies below since it can generate income slowly.
2. Buy, renovate, and hold
Employing the buy, renovate, and hold strategy is ideal for enhancing the returns on your property investment through renovations to increase its rental and market value. Instead of simply buying and renting a property, this strategy involves enhancing its value before you begin taking on tenants.
This strategy is ideal if you’re a proactive investor looking to realize your return on investment (ROI) in real estate without waiting for the property to appreciate.
Suppose you find an RFO unit beside a bustling city or a prime location. But the problem is that the unit’s design is outdated, dark, and unappealing. Buying, renovating, and holding it allows you to capture an entirely new market of wealthier tenants able to afford higher rental fees, affording you more earnings in the long term.
3. Buy, flip, and sell
The buy, flip, and sell strategy in real estate entails acquiring a property—typically needing substantial renovation work—to enhance its market value and then sell it for a greater profit.
Through this strategy, you can generate returns from your properties without relying on long-term market appreciation. What differentiates the buy, flip, and sell strategy from the others mentioned above is that it aims to generate a large profit in one go upon selling rather than consistent payments from renting it out.
If you decide on this strategy, look for undervalued, pre-owned RFO units—often called fixer-uppers—in excellent real estate locations. Flipping and re-listing the property on the market sets you up for a memorable payday.
Other Investment Strategies Worth Considering
The strategies below are more advanced since they involve a solid understanding of the market and a willingness to take greater, more calculated risks.
It’s best to develop your experience with these property investment strategies since you must understand the nuances of how they can deliver value. Once you’re confident in investing in RFO units effectively, you can begin branching your strategies out for potentially more gains.
1. House hacking
House hacking involves residing in a property while generating rental income from it simultaneously. This is achievable by investing in duplex, triplex, or single-family homes with additional rental spaces like basements or guest houses. Renting these extra areas out helps reduce total housing costs.
You can apply this strategy to various property types, including well-located RFO properties, which can serve as both a comfortable living space and a source of rental income.
Suppose you purchase a semi-detached duplex and rent out one of the buildings while you live in the other. This allows you to offset a significant portion of your housing costs effectively. It’s also a savvy way to maximize your property investment, benefiting your financial portfolio and your daily lifestyle.
2. Property subdivision
The property subdivision strategy involves acquiring a large parcel of land and then subdividing it into two or more lots, each with separate titles. That way, you can develop multiple sellable assets from your single investment, increasing your potential profits substantially.
This is an advanced strategy since it requires a deep understanding and familiarity with local regulations, zoning laws, and the current real estate market. You also want to ensure you earn from a single property investment before juggling two or more.
3. BRRRR strategy
The Buy-Remodel-Rent-Refinance-Repeat strategy (BRRRR) is pretty straightforward, as the name suggests. It lets you expand your rental property portfolio early without depleting your cash reserves.
This approach is similar to the buy-renovate-hold and buy-flip-sell strategies since it involves investing in highly undervalued, fixer-upper properties.
However, the BRRRR strategy differs because it entails refinancing the property with a long-term mortgage. You can invest in another to restart the process upon improving the property’s market value.
The BRRRR strategy requires significant endurance and property investment knowledge to hit your ROI goals repetitively. It also requires understanding how to work with financial institutions so you can negotiate and settle on a favorable refinancing scheme.
This strategy works for more than just RFO units as long as you meet the criteria: acquiring property below market value, increasing its potential through renovations, and refinancing and earning enough to do it again.
4. Syndications
Real estate syndication involves partnering with other investors to purchase properties collectively. This is common practice for large-scale projects beyond residential properties, including commercial or development projects like hotels or green spaces.
Syndication can also be either public or private; a syndication marketplace typically operationalizes public syndication, while you must manually manage your investments in private syndications.
The element that makes this property investment strategy flourish is your ability to identify profitable real estate opportunities and find the right people to work with. Most real estate syndications involve knowledgeable developers besides other property investors. You can leverage their experience to enhance the property’s value to achieve your ROI quickly.
Although it’s advanced, this property investment strategy suits you if you want to play a more passive role in earning from your investments. It alleviates the burden of knowing the nuances of the real estate market since you can rely on the professionals you’re investing with to guide you.
Ready-for-Occupancy Investments Ready for Success
There isn’t one correct method for investing in RFO units since it will depend on numerous factors, including your timetable, financial goals, and risk tolerance. What matters most is understanding the different ways you can earn effectively through your RFO investments.
That said, your property investment strategy isn’t everything. You can only do so much with the right strategy for an RFO unit in a less-than-ideal location. Pairing your chosen strategy with RFO units from trusted developers in prime locations is the equation you must follow to succeed as a real estate investor.
If you’re looking for viable RFO units to begin your investment journey or diversify your existing portfolio, consider properties from Federal Land.
Federal Land offers well-built and well-designed RFO condos at strategic hubs nationwide to capture value for you and potential homebuyers.
Whether it’s an RFO unit at Times Square West, promising the excitement of the Big Apple in North Bonifacio Global City, or Peninsula Garden Midtown Homes, nurturing young families with its vast garden in Paco, Manila, Federal Land develops properties you’ll want to have in your portfolio.
Contact Federal Land, Inc. to begin leveraging RFO property investment strategies today.
Melecio Martin G. Arranz IV
Digital Marketing Head
Martin is an experienced marketer with over 16 years of experience across various industries including real estate, banking and finance, technology, and advertising.
Martin has a broad range of expertise in having handled campaigns, brand launches, activations both in the traditional and digital space. Currently serving as the Digital Marketing Head at Federal Land, Martin leads a team focused on managing digital sales and platforms for the residential, estates and commercial business units.