September 29, 2016 7 Comments
“The owner of this place did hire pretty waitresses around.”
“See the one over there near the counter.”
I looked in his direction and saw a voluptuous figure at the far end of the restaurant.
“That one really looks sexy. But she is, strictly speaking, not a woman.”
“Not a woman? What do you mean?”
At that moment, the ‘waitress’ walked over to our table to serve the drinks. Now at a close distance it was obvious that, behind the heavy makeup, she’s a transsexual.
“How can you tell it when she’s so far away from us just now?”
“Of course I can. Because all women can tell their own kind.”
It’s like the mother can surely tell the differences of her two identical twins. A plastic surgeon can always tell whether a celebrity has a nose job done. A gemologist can infallibly tell whether the stone is a real diamond.
The only ones who have no clue are the outsiders or the amateurs.
Telling real property investors from fake ones
The same applies to property investment.
Some may brag that they have made lots of money from flipping properties, buying high-profile projects or acquiring properties in overseas countries.
Some may claim that they are ‘successful’ property investors going from broke to owning a multi-million property portfolio, buying properties with no money down or using other people’s money.
Some may promise that everyone can get rich quick by going after their exclusive and super high return rare opportunities in any market.
The stories really sound sexy. But they are, strictly speaking, not investors at all. Because they make more money from the commissions and markups of selling these ‘high return’ deals than from the actual income or return of these projects.
Savvy investors are the ones who can spot the hidden gems from the rough. They can naturally smell a good deal. They are a breed apart from the fake version in many palpable ways.
Go to any sales gallery or flat viewing and they know what to look for and how to ask the right questions.
Show them the sitemap and layout plans and they know how to pick the best block and best unit in the whole project (exactly what we teach at How to Buy Good Quality Properties workshop).
Show them the numbers they ask for and they know how to calculate the net return of the property.
Give them the facts of a shortlisted property and they know how to negotiate for a good deal.
Sign on the dotted line on the Offer to Purchase and they know which bank and lawyer to work with to ensure a smooth transaction.
Telling savvy property investors from average ones
Are people who bought high-end properties savvy investors?
Recently, Bloomberg’s article “Saving Singapore’s Wealthy” disclosed how banks in Singapore identify wealthy clients simply by the value of their home rather than their net worth or investable fund.
This selected group of privileged customers are signed up as ‘accredited investors’ and are qualified to invest in high-risk high-return products, despite the fact that they have borrowed heavily to fund their home.
With hunger for investment alternatives amid low interest rates, they bought lots of energy bonds (think the doomed Swiber Holdings). We already know what happen next – children’s college fees, retirement savings and emergency funds are gambled away just like that.
We can’t tell whether a buyer is well-to-do or an experienced investor from his home address. Some people I know have built an impressive property portfolio for rental income but still prefer to stay in an HDB flat. Similarly, people who have purchased several private properties do not necessarily mean that they are very good in the trade.
Below is a table showing the primary differences between a savvy property investor and an average property buyer.
I am still in my journey to learn and train myself to be a savvy property investor. But I can easily tell whether someone is a value investor in properties by asking him three simple questions:
1. What have you bought?
2. When did you buy them?
3. How much did you buy them for?
If he is not keeping the properties for the long-term, a fourth question will be ‘How much did you sell them for?”.
This weekend I am organizing a Property Investor Roundtable Luncheon for Property Club Singapore. I have invited a group of experienced property investors to share their views and knowledge on ‘Opportunities in New Development Areas’. I know all of them personally and I can say that they are all authentic property investors who meet the above criteria.
I look forward to learning from all of them!