By Sim Kang Heong, via dollarsandsense.sg
It seems like every other week that one sees advertisements for overseas property investments “opportunities”. Once in a while, we see news reports of yet another overseas project flopping.
While legitimate overseas investment opportunities exist, shady or extremely risky ones are also out there, and the savvy investor would think long and hard before sending their hard-earned money abroad.
Here are 4 common “promises” that make appearances in marketing collateral and uttered during talks, that you should think twice about.
#1 Expansion and Development Plans
Often, part of the pitch for investing in future property developments is accompanied by detailed and lavish plans of future government infrastructure or neighbouring large-scale commercial projects. These, it is projected, will lead to your property being worth much more than what you put in.
In Singapore, we are used to a high level of certainty in infrastructure development thanks to forward planning and continuity of government. In some countries, priorities (and sometimes even governments) can change.
A planned airport might be shifted hundreds of kilometres or even shelved indefinitely. If you paid a premium based on the assumption that planned developments materialise, then you might have made a loss even before the project is completed.
#2 Sellback Guarantees
It is always a nice to see that there is an option to sell off your lot in the property back to the developer and get back your money.
While the developer might have every intention to honour that buyback promise, if they run into financial difficulties themselves, then the promise does not do you any good.
Check up on the track record of the developer, their financials or key stakeholders. You need to make the determination whether you think they have the fiscal resilience to weather any difficulties as a company.
#3 Projected Returns
When looking at the projected returns tables, you need to ask yourself how are the returns calculated. Does it take into account taxes you need to pay and the exchange rate spread when you eventually want to sell your asset and bring your earnings back to Singapore? Having taken all that into account, how does the investment yield compare to putting the money to invest in some other instruments, or even just leaving it in your CPF?
You also need to ask yourself, if the project is in such a great location and potential yield so good, why aren’t the locals themselves buying? There might be good reasons for it, but that is a question worth asking.
#4 Limited Time Only or Selling Fast!
This promise of availability being time-bound or very limited plays to the fear of missing out, or “FOMO”, as what millienials would say. While no one wants to miss out on a great investment opportunity, no one also wants to lose thousands of dollars in an investment that didn’t quite pan out as expected.
Take your time to research and consider any potential investments with a clear head, away from the frenzy of a convention centre and the “pressure” of seeing hundreds of other people signing up furiously.