Cautionary Tales: Overseas Property Investments

[shri]

Know what you're getting into... seriously. If it sounds too good, it probably is.

Two stories about overseas property investments caught my eye today. Figured I was getting a hint from somewhere.

Investing in US Rentals

One of the alleged victims Ms Hung bought a ‘newly-renovated’ three-bedroom house at Las Palmas for US$69,400 in 2014 after seeing the advert. ‘The salesperson told me that the properties were initially acquired by an investment fund at foreclosure sale and were typically rented to middle-class office workers,’ she said.

Hung, who flew to Houston to view the houses with some other owners after being hit with a huge maintenance bill once the guaranteed period ended in 2016, said the actual condition was a far cry from what was advertised.

‘The whole place is very unsafe, and some vacant houses were occupied by squatters,’ she said, adding that her property was under renovation at the time, but some neighbouring units were dilapidated, with windows boarded up and rubbish piling up outside.

She is now in the process of selling the house for US$54,000, after having spent more than US$17,000 on repair and refurbishment, resulting in a net loss of about US$27,000.

https://factwire.org/investigation/p...in-us/?lang=en

and

UK Student Housing

Brian Hodgson, a 55-year-old auctioneer in Hong Kong, was one of the investors affected. He bought one unit in College Street Village and another at Scholar’s Court after being attracted by the high “guaranteed” returns stated in emails sent to him.

He paid a total of £100,000 over two years to 2017, or £50,000 each on average, aiming at securing retirement income. He said he was guaranteed £1,010, or a 10 per cent yield, in pro-rated quarterly payments for each property.

Hodgson said he received a full payment in July 2018, and thereafter received a payment of £72.49 in January.

“Nothing in the contracts says they had the right to cancel ­payments,” Hodgson said.

https://www.scmp.com/property/intern...oper-make-good

[TheBrit]

It's hard to feel sorry for greedy investors who don't do their homework. Fools and their money....

[traineeinvestor]

Why anyone buys property (or anything else other than plain vanilla bonds/deposits) which comes with a guaranteed income is utterly beyond me. Whether its property, art or anything else it always seems to be the case that the underlying assets is way overpriced, often of poor quality and the income stream can't be reproduced after the guarantee period expires.

Put it this way: if the asset was worth buying at the price being asked why on earth would the vendors need to offer a guaranteed income in order to sell it?

[shri]

Put it this way: if the asset was worth buying at the price being asked why on earth would the vendors need to offer a guaranteed income in order to sell it?

From what little I understand, the guaranteed income is built into the price / developer's margins. You're essentially loaning them money which they'll use to finance their next project and the trickle their loan repayment to you back as "income".

[Viktri]

From what little I understand, the guaranteed income is built into the price / developer's margins. You're essentially loaning them money which they'll use to finance their next project and the trickle their loan repayment to you back as "income".

I've heard this.

Another aspect is that the guaranteed returns are normally capping your interest income. So if the developer can find a tenant paying above your guaranteed return rate, they capture the upside.

[goodluckduck]

The first woman sounds lucky to have been able to cash out at just a USD27k loss to be honest.

Fools and their money, while true, is a bit harsh I feel. My parent are retired from government jobs, they had solid pensions but had never really had much cash to play with throughout their working life. When they received their retirement bonus it didn’t take long for the snake oil salesmen to emerge from the woodwork.. needless to say I’ve told them in no uncertain terms to run ANY ‘investment opportunities’ by me first. I’m comfortable with investing and finance (partly due to my job) but how many don’t have that support?

[shri]

how many don’t have that support?

Very true.

[freeier]

actually you can't blame alot of Asians..
look at the HKers.. more than half of them doesn't harbour hope of purchasing a property at this juncture in HK, so their 'board the bus' mentality is to buy something and hopefully that thing runs up in value much faster than in hk, and they can then sell their overseas investment and reinvest into hk..

but when you have a mentality that these houses are so so so much cheaper than hk (which, incidentally, is 100% of the time globally), your judgement of what is good/bad/value etc.. get skewed and you get greedy.

then, you have a group of sellers and those involved in the trade (agents, bankers, advertising agents).. all these are unfortunately the greatest economics parasites in this world that doesn't really take into concern the buyer's wellbeing..

so that happens...
see all the property related investments... land banking, student housing, etc.etc..

just part of the whole effect of money printing..

[TheBrit]

Very true.

I do feel sorry for people with dementia or impaired mental faculties who get scammed out of their money - less so for middle class professionals like the ones featured in the article. Twenty minutes research (probably closer to five) on Google would have shown both of those investments to be folly.

[shri]

I searched google for "student housing investment uk" ... and being slightly 'leet, I skipped the obvious ads, skipped a few developer sites and then landed on Knight Frank's website where I'd think one could get a reasonable overview of the market.

Lead to this PDF:

https://content.knightfrank.com/rese...01.pdf?noembed

Being even more 'leet, I skipped the graphs and all the amazing data presented in the pdf and saw this...

In the future, we believe that many of the
largest investment opportunities will be in
partnership with universities to redevelop
older and less fit for purpose stock. Recent
examples of public-private partnerships
include the University Partnerships
Programme’s investment in the University
of Hull’s West Campus and the Bay
Campus at Swansea University.

Yay .. let me find UPP and send them my savings! Or even better, let me call Knight Frank and have them invest my money for me in student housing.

(Its hard to use the googles for good info... trust me!)