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4 Outrageous Claims Made by Property “Experts”

A Business Times article was published “Property Investment Seminars on CEA Radar” dated 23rd September, 2013.

“There’s a need for the authorities to regulate the content and claims by these speakers,” said PropNex Reality Chief Executive Mohamed Ismail.

I openly praised and support Mr. Mohamed Ismail’s statements for authorities to tighten the content and claims by these speakers, be it in property, stocks, or commodities.

With implementation of cooling measures and the Total Debt Servicing Ratio (TDSR), more Singaporeans are looking at overseas properties to invest in.

From a business point of view, it is enterprising for some seminar providers to tap on this demand pool of potential buyers with enticing advertisement claims.

Having spent more than 2 decades in sales with a majority of that in direct sales, I’ve known and used every 101 sales tricks in the book. If you’ve been to free seminar previews, you would’ve known what I meant. Some speakers are in fact no more than salesman than the ‘expert’ they claimed to be.

From my personal wealth background and experiences, I’ll share and debunk 4 popular outrageous investment claims by property ‘experts’.

Claim#1:

Own Multiple Properties in Multiple Countries

I suspect the real reason these speakers are saying to invest in multiple countries is to make themselves sound like a jet setting international tycoon.

They advocate ordinary folks to invest in multiple foreign countries, although they give no reason for doing so other than their contention that it is easy. These speakers are either a complete ignoramus on the meaning of “sustainable investments” are or just highly-convincing salespeople.

Fact:

You would’ve to learn the real estate portions of the income tax code of each country, numerous real-estate laws and customs and, worst of all, how to value properties in each country.

It’s amazing to know how these speakers know so much of many different countries they claimed to invest in… when they don’t live or born there.

My late multi-millionaire real estate grandfather never own any overseas properties outside Singapore. I mentioned this and he asked, “What would be the point of investing in different countries?”

You would get some diversification against certain nationwide risks like adverse changes in government policies. But most other countries are so socialistic that you would lose far more than you would gain.

Also, owning in different countries does not protect you from multi-national risks like higher interest rates or worldwide recession or depression. I know of a couple of property investors who have a vacation home or two in foreign countries, but no competent investor wants to own rental properties in multiple countries.

Some major developers have decided to “conquer the world” by doing their thing outside Singapore. Not everyone is successful. About the only property investors who should be in multiple countries are owners of hotel chains and theme parks like Disneyland.

Your rental properties generally should be in one specific country you know very well, i.e Singapore – maybe two.

Claim #2

Own Multiple Overseas Properties with Little or No Money Down

Fact

The main reason the mass market gurus push nothing down is to overcome the objection “I don’t have any cash to invest” when they try to peddle their expensive “boot camps” or “mentoring” services.

Gurus do not push little or no money down because it makes sense for an investor. Rather they push it because it helps them market their products and services.

I mentioned this advice to one of my USA friends who is a local multi-millionaire real-estate investor and he said,

“In USA, a sound, long-term investment: in other words, quality properties in good neighbourhoods is much more important than finding a deal with 100% financing.  Even if it’s 100% financed, a bad property is a bad property.”

From experience, “no money down” is not the bed of roses most people think, especially for foreign investors. Just because it’s possible, does not make it probable.

The type and quality of the property offered by sellers willingly to finance is rarely mentioned. Quality properties in good markets, rarely if ever, have properties that can be bought with little or no money down.

A crucial example is my recent successful acquisition of a US$2.2M commercial property in the USA which was financed partially by a US bank with cash down-payment. With tight credit financing in the US, the only reason why banks are willing to finance such deals is because it is a quality property deal with a quality tenant.

Unfortunately, many local gurus have made buying overseas properties with no or little money down more important than buying a quality property.

Ordinary folks would be better off in most cases spending the extra time working a second job and saving money for a down payment instead.

Instead, ask yourself,

“How can I save or work harder for that down-payment?”

Claim #3

Below-Market Value (BMV) Deals are the Norm

This is an old chestnut of property gurus. In the real world, below-market value (BMV) or under-valued deals are very rare. Experienced investors regard them with suspicion. They typically mean the buyer overpaid or the property is just worth what it is.

Fact:

Competent investors always pay market price if it meets their yield returns.

It is much more time consuming to find BMV deals, so it is mainly a strategy for those whose time has very little value.

If you always try to source for BMV deals, you would be forced into a few niches where you would wander the land as a sort of beggar pleading with sellers to sell you their properties at below-market price.

You don’t become rich by being cheap to others.

Instead of trying hard to find that magical BMV deal, try asking yourself this,

“Where can I find under-valued areas to invest in instead?”

“Have I acquired enough financial education to know when that opportunity comes along?”

Often, the answer lies in your own backyard.

Claim #4

Anyone Can Play the Property Game, Become Rich or Millionaire

When property gurus peddle their expensive “boot camps” or “mentoring” services to the masses, this would make a very compelling sales pitch.

Fact:

This is the opposite of the truth. Not anyone. As long as anyone is holding on to a day job as an employee, this dream is forever improbable.

I’ve not know of anyone attending those expensive “boot camps” or “mentoring” services become rich or millionaire ever. Have you?

You can become wealthy through investments, but not become rich or a millionaire. There’s a huge difference in those terms.

Wealthy means financially free without having to work as a choice with other recurring income sources. And in property, it means recurring net income after all debts and expenses.

And, you don’t need multiple properties to have it.

All you ever need as an ordinary investor is learn to acquire one or two really good quality properties that will put money in your pocket every month that will help pay off your home mortgage and daily expenses.

Bottom Line

The more important problem is that the novices these gurus target cannot tell which one idea in a sales pitch is a bad idea or a good idea.

There’re NO magic formulas, secret techniques or fanciful investment strategies claimed to be used by gurus to bring you from rags to riches.

For Property Wealth, as in any successful business ventures, there’s only YOUR hard work, constant education and an entrepreneurial mind-set with deep learning curves to successes and failures.

I hope you’ll discard sales advice, get sound advice on property investment through proper education, and follow that.

I welcome your comments if you’re one of those who have been ripped off with these over-claimed myths disguised as wisdom.

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To your investment success,

 

 


About the Author

Gerald Tay Author, entrepreneur, professional investor and loving father, runs crei-academy.com with a tongue-in-cheek approach to property investment - and himself. He is widely regarded in the industry as 'The Common-Sense' Investor. Gerald writes with passion and straight-forwardness, disclaiming wild claims and impractical investment strategies behind lies and ignorance pervasive in the property industry for vested interests. His well-known statement, "All I did is to value my investments with science, logic and common sense.'

Comments (3)
  • Steve Sep 25 2013 - 3:59 pm Reply

    Totally agree with you Gerald. We have been bombarded and conned by too many Property Gurus out there. When the crunch comes, I bet many of the so-called ‘successful property investors’ will fold up.

  • Frank Oct 29 2013 - 9:03 pm Reply

    Hi Gerald,
    Your post has opened up different viewpoints of those seminars and most enlightening.
    Sometimes you are so caught up on the sales pitch and get blinded.
    As a “season investor”, I was one of those who have been ripped off with these over-claimed myths disguised as wisdom. But my case, is more of “Curiosity kills the cat”. I’ve been through a number of property deals and knows without an initial outlay & bank financing there’s no way. For bank financing, you would need an annual income that would support the loan amount (mortgage) & criteria set by MAS (DSR then) . So I fell for the “Little or No Money Down” ruse. I wanted to know why I took 15 years to build my property portfolio of 1 HDB & 3 private while they took only 3 – 5 years to amass 50 – 100 properties. The answer I believe is the $$$ earned from the seminars and commission earned from the so called “under valued” properties sold by them. Some of their properties of course are low values prop – Philippines, Brazil, US etc.
    No money down could also means encashing your present property taking up an equity loan. If property price turns you could be in trouble by over-leveraging.
    Some of the speakers are bankrupt in 1997 property crisis but made a return .. why ? In my opinion, they are just like all the big banks .. Citi etc, too big to go under. Struck up a deal with the banks and survived.
    For a novice investor probably the bank will foreclose your property if you are unable to keep up the repayment.
    If you’re intending to purchase overseas, make sure your have enough cash standby.
    The amount of monies you can loan locally doesn’t mean you can loan the corresponding amount in the country the property was bought. Banks over there have different assessment criteria. I could loan a million here but could only loan one third the amount in the host country. Mortgage rules may also changed from the time property is purchased and time financing is arranged (TOP). That’s an issue with “Deferred Payment”
    Attend all the seminars. Be a “seminar junkie”, life long learning.
    But keep your credit card & cheque at home.
    The above are real life experience that I’ve gone through.
    Caught by the TDSR now & new credit card regulations coming Dec.
    New investment grounded for the moment …
    No think I should consider retiring .. life’s short, live my dream
    Problem is “What’s my dream ? “.
    Travel the world, opened up a food outlet, a reno consultant.
    Still not decided. Ha! Ha!

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