Peter Churchouse is the founder of Portwood Capital, a leading real estate investment company. With more than three decades of experience in real estate investment and research he is widely considered one of the world’s foremost authorities on Asian real estate markets. He is also author of The Churchouse Letter, his financial newsletter which provides investment and wealth building strategies. In this 8-part series, he highlights key rules he feels investors should follow when purchasing real estate. This is Part 4 of the series.
I did this once. It was a small property. I ended up getting an adequate return on my investment. But I was lucky.
I have lost count of the number of friends and acquaintances of mine who’ve been badly burnt doing this.
It happens a lot in Asia. This is a juicy market for developers in cities like London, New York, San Francisco, Vancouver, and Sydney. Asian buyers are cash rich and love luxury new-build property. They love owning real estate - full stop. And they like to buy properties in countries that have lower political and legal risk than they experience in their own countries.
Asian buyers are also used to a fast market. Hong Kong property investors will sign sales and purchase agreements within 24 hours of a viewing. Often they’ll sign there and then. Overseas developers and agencies love to tap into this trait.
Cities in Asia are constantly hosting agents and developers flogging shiny new properties “off plan”. Investors may have a general idea of the area they are buying into, but many don’t. They become victims of a sometimes sophisticated and fancy sales exercise.
The glossy brochures don’t show what’s happening on the ground.
They don't mention that smoke belching factory just down the road, or the noisy freeway running past the end of the block, or the rail line rattling past the back window.
Just think about it. Why is the developer peddling his new building off-plan to buyers located thousands of miles away? Simple. He doesn’t want you to visit the site. Why go to all the expense of advertising his London or New York property in Hong Kong, Singapore, or Beijing? Because he reckons the overseas punters will pay a price that the domestic market won’t, often because of location issues.
Judging by London property advertisements I see in the local media in Asia, I’m amazed at just how big “Prime Central London” has become!
If it looks too good to be true, it almost always is....
This concludes Part 4 of the series. I know that if you make an effort to follow even a couple of the rules that I outline in this series, you will be in a better position to successfully invest in property. If you have any questions or comments, I’d love to hear from you. You’ll find my details here.
