October 7, 2021

Should You Invest in Ready-For-Occupancy (RFO) Condos?

By: Melecio Martin G. Arranz IV

Real estate is among the highly stable investment options. It’s a tried-and-true choice if you want to see the fruit of your hard-earned savings. Data shows that condominium investments, in particular, bring excellent returns, especially for properties in prime locations.

Condominiums are just one of the different types of property investments you can consider besides empty lots, commercial properties, and houses. With condos, most of the units in the market are either pre-selling or ready-for-occupancy (RFO).

Owning a condo, specifically RFO units, offers several advantages whether you’re an owner or property investor. The infographic below discusses the pros and cons of investing in ready-for-occupancy condo properties.

What is an RFO condo?

Ready-for-occupancy (RFO) condos are fully finished and ready-to-move-in units you can purchase directly from developers or individual property owners and move into immediately after finalizing the sale. Most RFO units provide flexible payment terms that make purchasing easier on your wallet.

These condos may appeal to you if you’re targeting immediate occupancy without the inconveniences of construction or extensive waiting periods typical of pre-selling properties. One notable aspect of RFO units is their flexibility in payment arrangements. Many developers offer lease-to-buy options, which can make the acquisition process more accessible and accommodating.

You can also score discounts and move-in freebies with RFO condos. If you’re considering RFOs, here are some things to ponder and tips to help you make the right investment when buying a condo in the Philippines.

Advantages of RFO Units

The attractiveness of RFO units lies in the benefits they offer.

1. RFO condos are already completed

RFO units are fully constructed and finished; some are even fully furnished. Unlike pre-selling units, you get to see what the actual property looks like⎯you don’t have to wait years to see the property and move into it. Essentially, what you see in RFO units is what you get.

2. Available property tour and inspection

RFO units have utilities either on standby for installation or already installed. This lets you see and experience the unit in its complete form and condition. You can assess if it is up to par with your standards and ticks all boxes.

3. Flexible payment terms

You might think appealing discounts are only available to pre-selling condos. However, these can also apply to RFO units. Some developers offer up to 40% discounts, low reservation fees, complimentary furniture and appliances, and other move-in promos to offer a good deal.

4. Move in immediately

Upon finalizing the sale and settling the payment, you can move into the RFO condo unit much faster than when purchasing a pre-selling unit. This setup is best whether you have a family or partner or are a solo dweller who wants to relocate quickly.

5. Available utility services

If you buy new RFO units, utilities like power and water are typically installed. If not, they’re ready for quick installation. Similarly, previously owned units listed for sale and ready for easy move-in likely have utilities installed and ready for use, making your move-in easier.

6. Instant use of amenities

Getting an RFO unit in a completed condo project means immediate access to amenities and facilities. Besides the fact you can move into the unit quickly, you’re also one elevator ride away from a swimming pool, gym, study room, and other amenities.

7. Rent-to-own payment term

Some developers and previous owners offer flexible or negotiable payment terms. Usually, RFOs offer a rent-to-own payment method, where you pay a down payment and move into the home. Then, you continue the monthly payments until you clear the total amount. You can always discuss the payment options, possible discounts, and other services with the sales agent before purchasing.

8. Value appreciation

RFO units sell at a higher price than pre-selling ones. However, the price difference is a positive indication, reflecting a thriving RFO property market. RFO condos hold much more value and are likely to increase over time. Ultimately, RFO units are a strategic investment you can capitalize on if you plan to sell them after a few years.

3 Things to Know Before Buying RFO Units

Here are some factors you must know before buying an RFO unit. 

1. Costs more than pre-selling units

RFO properties cost more than pre-selling units because of their increased value since the completion of the property.  Moreover, the price appreciation for RFOs tends to rise as the development becomes more popular. However, this price appreciation is good news for you since the property has high investment potential.

2. Spot equity is often necessary

Some sellers may require you to pay spot equity or the excess amount of the property’s price that your home loan financing does not cover. Sellers may prefer you pay the equity before moving in, while others allow negotiations or flexible payment terms for spot equity. Fortunately, most developers like Federal Land offer extended payment plans on select developments. 

3. Limited selection of units

If you are lucky and manage to look at RFO units during the early stages, you may have a few options placed in relatively good locations. However, note that developers typically sell RFO units positioned on lower floors. While this is not always the case for all developers, you can get a good RFO unit on your ideal floor. 

Helpful Tips When Investing in RFO Units

Buying an RFO unit is a good investment as you can obtain the property quickly. Here are some practical tips when RFO condo hunting. 

1. Choose a development in a good location

The ideal neighborhood, establishments, and market value of the place offer significant returns in the future. To ensure this, do multiple property visits for a thorough assessment of whether the community meets your needs and preferences. See how the area is during the weekdays, weekends, holidays, etc.

Check the traffic situation and find out if the place is safe. Research the location’s crime rate and the risks for natural disasters like flooding and earthquakes. It’s also best to see its proximity to your office and other points of interest to ensure getting around town is smooth and easy.

2. Think about the unit price

When assessing the price, note the unit’s size and other factors that may affect its value, such as the view and position. This way, you can gauge if the price is too high or good enough for your budget. But before making the purchase, ensure you have sufficient funds to cover the down payment, transaction fees, taxes, and other expenses.

3. Learn and understand the associated fees

The monthly amortization isn’t the only payment you need to make regularly—there are maintenance, association dues, cleaning, and more. Your budget should account for these, too.

4. Review the maintenance management agreement

Condos come with amenities, security, and other benefits. These will entail a maintenance agreement with the building administration. It’s essential to know how the building maintains the property and addresses your concerns as a tenant.

When you choose Federal Land, you gain perks through its dedicated property management arm, Federal Property Management Corporation (FPMC). FPMC runs Federal Land condos’ daily operations and technical maintenance, ensuring they meet your needs and requests. You can call them up any time for hassle-free daily living.

5. Ensure there are no hidden charges in the quoted amount

Before finalizing the deal, make sure the contract has no hidden costs. You can ask the agent for the breakdown of expenses to see every fee you must pay to move in. The goal is to ensure you can afford the monthly amortizations and relevant costs.

6. Verify that the property title is clean

Examining deeds, liens, encumbrances, and other pertinent documents related to the property is part of due diligence that can help you confirm if the property’s ownership history is clear. It should have no outstanding mortgages, legal disputes, or unpaid taxes. 

You can validate the Certificate of Title’s authenticity by obtaining a certified true copy from the Register of Deeds. To do this, request a photocopy of the title from the seller and then submit it to the Register of Deeds for processing. 

Likewise, get the seller’s identification and see if it matches the title owner. If a broker or agent handles the sale, confirm their authorization to sell the property while ensuring the individual who granted them authority is the genuine owner.

These measures for verifying the cleanliness of a property title are necessary to safeguard your investment and ensure a smooth and trouble-free transaction.

Move-In Quick Without a Hassle

RFO properties are excellent investments you can inspect before paying and moving in. The advantages of RFOs also suit many lifestyles, making them ideal assets. If you’re in the market for properties and want a place to move into easily and quickly, consider hunting for RFO condos.

Find premium condominium units that are right for your needs and wants with the help of a reputable real estate developer in the Philippines, like Federal Land. Federal Land offers pre-selling and RFO units in prime spots, including Ortigas, Pasay, and Manila so you can live near major CBDs.

Contact them today to find the perfect RFO unit for your lifestyle.