Pre-Selling or Ready-For-Occupancy?

These terms aren't jargons, as they're really self-explanatory.  Pre-selling properties are those that are being offered before they're actually habitable or ready to be lived-in, while Ready-For-Occupancy, more commonly known as RFO, are those that are, well, ready for occupancy.  Let's dissect.

Pre-sold properties are definitely way cheaper than RFOs.  Some factors to consider:

• Developers would be using your money to partly finance the construction of the property.  Therefore, it would be to their advantage (and yours) to offer these properties at considerably more affordable prices to encourage "investors" to participate.
• Pre-selling properties are invisible.  In other words, they're all concept, and they only look as good as the artist's render.  In other words, you can never be fully sure how it'll turn out.  Revisions can happen anytime, and worse, it may not even get completed at all.
• Market demand will determine price increases.  If the property is marketed well, and if it's warmly received (meaning even before completion it's already close to being sold out), the price will definitely hike up as more units are sold.  By the time it's RFO, the prices can be as much as double the original pre-selling offer.
• Long payment periods without interest.  More often than not, because the completion and turn-over of the property is 3-5 years away, the developer would provide payment terms that are very easy on the pocket.  The downpayment would usually be stretched by as much as 30 to 40 months without interest, and the rest to be paid through bank financing or lump sum.  You'd be hard-pressed to find an RFO offering the same deal.  
• Time value of money.  More often than not, putting your money in property being pre-sold will yield a better return than putting it in a bank.  I'd give an example, but that would over-complicate this article.  Suffice it to say, that people who purchase during pre-selling and then sell the property when it's RFO will make more money.
• You get first pick.  Suffice to say, if the project is received well because of the developer's reputation, the location, amenities, etc., by the time it's completed, most of the best units would already be sold out.  
• The developer's reputation.  The more well-known and financially-capable a developer is, the safer your investment is.  Such is the case with Federal Land Inc., which is owned by George Ty, the guy behind Metrobank.  Also Eton Properties of Lucio Tan, and Ayala Land Inc. by the Ayalas, of course.

Buying pre-selling properties is a gamble, but one that is very easy to win.  The factors involved are very easy to read: the developer, track record of projects, location, target market, amenities, etc.  In other words, it's more of thinking ahead, planning where and how you'll spend your hard-earned money.  

RFO properties are much less of a risk.  The property is already there, you can see it, check it for structural integrity and/or defects, design, etc.  You can see the kind of people already living there (most probably those who bought during pre-selling) so you have an idea what kind of community will emerge.  You can see how the property impacts the location, if it enhances the value or not.  The only downside is the price, as I already stated.

If you've learned anything from Economics 101, the riskier, the higher the potential return.  If you keep your eyes and ears open, buying pre-selling properties is definitely a little riskier than RFO, but the potential to make more money (if you're an investor) or save money (if you're a home-buyer) is definitely better.  If, however, money is not an issue for you, and you're a little risk-averse, then RFO is the way to go.

Mi casa es su casa,

Jon

PRC REBL No. 0004206