It was reported in the newspaper that a number of investors’ investments turn sour in foreign property investments. For example, one person invested a whopping $1 million into two hotel projects only to find he was owned four months of rents because the hotel went into administration.
Others who invest in residential properties are also in danger of investing at the peak. Recently, a parliamentary question was asked about Iskandar. It was disclosed in Parliament that there are 335,838 new private residential units in Iskandar (which is more than the total number of private homes in Singapore!) in the pipeline not counting the 1,400 hectares of reclaimed land near the Tuas Second Link that will come on stream from 2020.
I just do some googling and found a number of news on how some recent property investments turned sour:
- Investors promised much, but gain little
- Is Iskandar still a good bet for investors?
- Reply to Parliamentary Question on Foreign Property Investments
- Failed UK real estate projects: Investors sue lawyers
My comments:
- Some of these investments in properties seem to be more like investing in a business than real estate. Ask yourself whether do you understand the underlying business? If the property agent promise 8% annual yield, how is this generated?
- Are you investing in shares of a company or properties? If it is shares, do you have voting rights? How do you exercise your rights as a shareholder? Where is the company setup?
- Are you relying on the promise of a company to generate certain return? If this is the case, you could be investing in a debenture, not property.
- Are you pooling your money with other investors? You could be investing in a collective investment scheme.
In any case, do not put all your eggs into one basket. Diversification is still the best policy. You may wish to read this related article: Council for Estate Agencies (CEA) warned property agents against selling doggy properties
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Should be dodgy and not doggy.
1st of all, one should not buy any property if he hasn’t lived & worked in that place for at least 2 years. This gives you the time to be familiar with the market, the banks, the available financing schemes, the property laws, the rental laws, the municipal laws, the taxes, the target audience, their preferences, the typical rental yields, the historical property appreciation, the current stage of property cycle, etc.
2ndly if one decides to buy property, to only buy completed properties with ready tenants.