from PropertyTalk, in response to someone declaring they’ve been sold a pup by a smooth-talking Kiwi property spruiker running ‘seminars’ in an Asian city (ha! who’da thunk it?) … this good advice-slash-confession from someone who clearly knows what he’s talking about (poacher turned gamekeeper?):
I am sorry to hear that you are in such a difficult situation. During the sales pitch, Mr D will tell you all about ‘positive cash flows’, and how he made his fortunes from a tiny house he bought while he was a student-how easy it is to purchase a property, rest on your laurels and await to reap a hefty profit. Next, he will probably tell you that it is a triple low, low currency, low interest rates, low prices. Maybe even a quadraple low, with taxes at an all time low. All this while wearing a smile on his face with a giggle or two and a spring and a swagger in his steps. Arrogance is the stance.
Such an invigorating and moving speech. After the sales pitch, the agents will move around and call out units that have been sold – like serving hotcakes in macdonalds. You will feel uneasy. Is this a investment of a lifetime? Will this opportunity ever come again ? Mr D is the guru, and if he says buy, we buy. Agents will probably tell you that there have several properties of their own – and more on the way. Envy is the emotion of the moment.
Before you know what hit you, your heart beats faster, and in the next moment, you have signed on the dotted line, and given the agent your cheque/credit card.
Promises of guaranteed yields, juicy returns and triple yields are made. Take a step back. Think. Close your eyes. Think. Would there be such a wonderful investment product? Truth be told, such lucrative investments would have been sold to a private buyers, and not mere mortals – not the man in the street.
Based on the details gathered:
1) Interest rates
Interest rates are expected to shoot up over the next 3-5 years as governments tries to rein in runaway inflation from easy credit. Banks will continue to assess creditworthiness of loans. Is your loan provided by the bank ? Or is it a syndicated loan to sweeten the deal? Doubt the loan can be extended in the near future at the rates promised by them.
2) Guaranteed Returns
Who is the guarantor for the payment of these GRs ? Is it a $2 dollar company in paid up capital ?
What is the market rates of rents for serviced apartments in auckland? Is the yields projected by them realistic/sustainable? Or did they pull them out from their behinds? Based on the occupancy rates of 50%-60% of these serviced apartments, coupled with the steep discounts given to let them out, I anticipate that the yields would be low.
4) Capital gains
Capital gains for such serviced apartments are based solely on rental yields. Do wary that part of the GRs is actually YOUR money paid to YOU during the course of the GRs. Be careful of Lemon-inflated properties.
Is the valuator/ valuation report done up by the bank who is going to give the loan? If it is, it is probably a fair one as they want to mitigate risk of defaults and loss of loan principal by loaning close to true valuation. Be wary if the valuator/valuation is performed by the company-even if they are well known valuators. Hire your own valuator.
If I were you, I’d walk away from this investment and lose the deposit. Encourage your friends and family to stay away from this company. Years of regret and loss will follow suit if you go ahead with the S&P agreement.
Source: Used to sell similiar lemons under Mr D – not proud of it. And have since become an independant financial advisor. Do leave your contact details if you wish to know more.
1.The above information is the author’s opinion given, and should not be taken or construed to be professional advice. The author will not be held liable for any losses, in contract or tort otherwise, arising from actions taken based on the gratuitous advice provided. Please consult your own financial advisor/’independant’ property agent, for investment advice.
2. Information provided is based on author’s best knowledge, and includes certain elements of creative thought. Any reference/description to persons, dead or living, is purely coincidental.
3. Caveat emptor! Beware of the ‘Rich teaching others to be Rich’.
4. Hongkongers are nice and honest people- generally. But there are exceptions. Just like how there are nice Singaporeans and dishonest ones. Becareful with your hardearned monies.