Never Buy Overseas Properties If You’re A Part Time Investor

By on May 20, 2014

You know those secret insider deals that we see so often occur in movies and drama series? Well, sometimes we think so much about being at the right place at the right time that it clouds our judgement on what is a good investment. The frightening truth is that we associate high risks with high returns. So sometimes, the more shady an investment opportunity looks, the more legitimate it becomes as an “insider” early-bird opportunity. And it is with this over-confidence that we often fall prey to promoters who play up the huge returns with their disturbing conviction. You know… those “exclusive” deals that you wonder why such a great opportunity is ignored by the locals in a place like… say for example… Germany. And have to fly their salespeople halfway around the globe to seek funding.

Don’t get me wrong, I’m in no way implying that these people are scammers or highly trained con-artists. I’m sure these deals are genuine and the glossy brochures they come with include details to be as transparent as possible. Just that they include get-out clauses for the project owners should the venture fail. There is also nothing wrong there. But you will have to fully acknowledge the potential risks of losing everything before you sign up for any of these investments. In layman terms, it is like signing up for 100 channels on cable, and you are allowing the cable company to get away without any compensation should they fail to deliver half or even all the channels. Does that sound precariously weird to you?

The more disturbing thing is that we are often receptive to putting money into a project in a foreign place we have never even visited, while being annoyingly indecisive on buying up local properties where we already know so intimately well. And we don’t even think of it as a bad mistake. You see, when we know the local area well, we know every reason not to buy. It could be over prices, the market cycle is shifting to a new phase, master plan is not giving the area any advantage, etc.

And when we do not know anything about a neighbourhood in another continent which has a name too challenging to pronounce, we do not have any genuine reasons not to buy. You don’t know whether the market is overpriced, you have absolutely no idea which phase the foreign neighbourhood’s market cycle is at, you don’t even know where to locate the master plan for the area (assuming there is even one), etc. And because of this ambiguity, people interested in these overseas opportunities make the promoters their trusted source of authoritative information. The very people who are selling those investments. And there is only one direction where information from these sources are going.

overseas property promoterMost of the time, part-time investors have no issues putting their trust in promoters as they are simply too busy to conduct these diligence checks themselves. And a big reason they buy is because they think that they are getting a good deal based on an understandably biased report and sales presentation. But how can anyone even think that they are getting a good deal when they have no intimate knowledge of the property location and area they are presumably investing in?

This is why you should never invest your money in overseas real estate unless you are a full time investors who have the time to conduct your own research and make your own diligence checks with objective sources that have no direct interest in your investments. This also applies to neighbouring countries that you are not deeply familiar with. Let’s put it this way. If you have intimately knowledge on the local market and unable to identify good opportunities here, what makes you think you are going to fare better in a foreign land as a new entrant? Because a real estate agent says so in an advertisement? Please wake up.

If you are investing due to affordability, you should inject yourself with an energy booster to awaken yourself as well. Investing due to affordability instead of sensibility is ridiculous. It such a crazy idea that even Einstein might have a problem comprehending it. Getting affordability in return for sky high risks is not really a fair trade. And taking into account that project owners could possibly relief themselves from liabilities (after taking their mega salaries for managing such a complicated project) by reminding investors of the failure clause ,you should start to see why overseas real estate is a game that you must never get involved in unless you are a fully-fledged international player with direct access to credible sources. Maybe that’s why we will never see high profile investors in those sales presentation talks organised on the pretence of “free training” workshops.

It has become so predictable these days that full page advertisements with “How to own 10 properties for the price of one” types of catchy headlines promoting free seminars are going to end with a sales pitch to take your investment funds somewhere you have never heard of. It is getting so aggressive these days that it saddens me to see inexperienced investors throwing their money at foreign properties when they don’t even understand the local market. It then becomes a tragedy when these newbies assume that there are a lot of similarities with the foreign market compared to how they understand the local one.

If you are in a profession that has nothing to do with real estate, why would you want to put your hard earned money in foreign properties when you don’t even have the time and information to find out for yourself how good the opportunity really is. You are taking the plunge based on details that promoters provide where they have a vested interest in. If you do have the time, why not spend it going deeper into the local market which you already have intimate knowledge about to locate a deal where you can truly buy at undervalue.

It is so tempting to put spare cash in a high growth investment. All one has to do is write a cheque and wait for the recurring income to roll in like a moneyfall. That refers to a hybrid of money and waterfall. No work involved. No landlording headaches. And the best part is that you can declare your sophisticated move boastfully in social gatherings. Your financial savviness score will rise among your friends. You will be known as a sexy risk-taker and people start seeing you in a different light. But do you actually know what kinds of risks you are exposing yourself to? And do you know there are much safer ways to make your money work for you with comparable returns? If not, you are not even ready.

In many ways investing in properties in your local market already requires a huge amount of work and expertise. This multiplies many folds when we talk about international assets. If you are a part-timer, you might feel an exuberance of playing the role of David against Goliath. But in this industry, Goliath usually wins, unless David is an experienced full-timer of course.



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