It seems like every other week that one sees advertisements for exciting new overseas property investments “opportunities”. Every now and then, we also 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 overseas 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 overseas property being worth much more in a few years compared to what you put in today.
In Singapore, we are used to a high level of certainty in the completion infrastructure development thanks to forward planning and continuity of government. In some countries, priorities (and sometimes even governments) can change overnight.
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 comforting to see an option to sell off your lot in the overseas 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. What’s worst is that in some occasions, it is used purely as a gimmick.
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 the returns are calculated. Does it take into account taxes and fees you need to pay to buy and maintain the property or the exchange rate spreads when you buy and eventually want to sell your asset? You also need to think about how realistic the capital gains or rental returns it forecasted are. 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 putting it in your CPF?
You also need to ask yourself, if the project is in such a great location and potential yield so lucrative, why aren’t the locals themselves investing? 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 tens or hundreds of thousands of dollars in an investment that didn’t quite pan out as expected. Especially one that they could have avoided if they looked into the red flags at the start.
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 jostling in long queues to sign up.
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