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Be a real estate owner the easy way (4).

Monday, September 23, 2013

This is on the front page of The Business Times today:

"Authorities urged to act as investors are lured with no-cash outlay claims, fee waivers.

"Bold claims by property experts of wielding the secret technique of buying homes with no cash outlay or owning multiple properties have proliferated in recent months, as investors look for ways to circumvent the successive rounds of cooling measures.

"... generating high returns, having the right opportunities identified and served up on a platter, and gaining financial freedom are some of the enticements dangled by newspaper advertisements on a daily basis.

"... Investors .... are not only drawn in by claims that these experts, who range from authors to enterprise award winners, have made millions from the property scene, but also that they get to waive the registration fees which can cost a few hundred dollars."


I believe that there is no free lunch in this world. No one is going to be altruistic enough to help us if there isn't anything in it for them. How to buy a property with no cash outlay? I wonder.

So, if I had gone for a free seminar, told them I was interested to make money from investing in property but I had no money, would they still welcome me? Again, I wonder.

Perhaps, there is such a thing as a free lunch.

Related post:
Be a real estate owner the easy way (3).

14 comments:

Matthew Seah said...

Hi AK,

borrow 100% or more of the value of prperty = no cash outlay.

It's possible in some countries.

AK71 said...

Hi Matthew,

Oh, it is a rhetorical question but thanks for the quick answer. ;)

See:
Be a real estate owner the easy way (1).

Want to try answering the second question? Hint: It is also rhetorical. ;p

I am learning erotica from my shifu, SMOL. He says nudity is crass and I am trying not to be crass. :(

Steven Yap said...

Hi AK,

If it sounds too good to be true, it usually is...


Best Regards,
Steven

AK71 said...

Hi Steven,

Sometimes, even questioning the legality of a proposal is not enough.

In all investments, some people will make money and some people will lose. Can we always make and not lose?

If we second our decision making process to others, we have surrendered control. So, don't even mention owning a property or multiple properties with no cash down (which is actually legally impossible), we won't even have possession and control of such properties. ;)

Bruce said...

hi Ak,

do you read your email, i have sent some question to your email box which you registered w/ this blog website. thks.

AK71 said...

Hi Bruce,

I am afraid not. :(

Could you resend to me or, better, just message me in FB? I will check tonight. :)

Musicwhiz said...

My friends always know me for being very vocal when it comes to real estate and such schemes. I am surprised that it took the authorities so long to finally start to highlight and possibly clamp down on such practices. The same can be said for "miracle" investment schemes which promise huge returns with low risk, and which can (supposedly) time the market with perfect precision.

The root of all this (evil) is, of course, Singapore's passion and never-ending love for all things property. If we examine our love affair with real estate, you would notice that it dates back all the way since Singapore was modernized; many people got filthy rich in this manner, so the mindset has been ingrained that:-

1) Real Estate is THE way to get really wealthy
2) Real Estate can earn you decent passive income
3) Real Estate prices can only go up

With low interest rates coupled with successive cooling measures, it is no wonder such schemes are sprouting up like mushrooms. They are simply taking advantage of people's ignorance and greed and capitalizing on the pent-up demand for real estate investing (though the word "investing" is used loosely here - most of the time people are speculating without any margin of safety - they are playing the Greater Fool's Game). If you add leverage to the mix, it will all end up really ugly some time down the road.

People don't seem to realize that you can very well lose money in real estate. A case in point - today's Life! section interviewed veteran actor Chen Tianwen, who mentioned that he bought a property in 1995 and then had lots of problems with tenants, and in the end sold the property for a loss of $100K+. So not everything is simple and smooth sailing with real estate.

You would need to:-

1) Ensure you get a reasonable loan
2) Lock in a tenant for a good period
3) Ensure the tenant behaves
4) Hope that interest rates do not increase when you roll over/refinance
5) Hope that the Government doesn't slam more rules on borrowing and/or property restrictions
6) Ensure that the rental income is consistent and can exceed your instalments.

With all the above to think about, I wonder why people still consider property investing. Perhaps most of them intend to flip it within 2-3 years without even paying a single instalment?

And the schemes will continue, no worries about that. Just like when gold hit a new all-time high, the number of gold "investment" schemes such as Genneva and Gold Guarantee sprouted out like mushrooms. Seems they are now toadstools (poisonous).

Regards.

AK71 said...

Hi MW,

Thank you for the very detailed comment which I am sure readers will appreciate as much as I do.

So, I suppose you take a dim view of Ms. Wendy Kwek's claim that we just have to be creative and we could become property investors with little or no cash down, avoiding paying any ABSD at the same time?

She is probably the best known in her field with regular newspaper ads.

This was in her blog:

"My mission is to help average people create extraordinary wealth through property investments."

A noble sounding enough mission, no doubt. :)

Well, honestly, I believe that she is teaching people to play with fire. One could be very good at playing with fire but one day, one could get burnt. In this case, will it be the teacher or the students who get burnt?

Of course, for people who got in early and who avoided burns, congratulations! :D

Musicwhiz said...

Hi AK71,

I won't want to get possibly sued if I target any particular person or scheme which was not on MAS' "watchlist" or blacklisted. It may very well be a legitimate scheme (chuckles can be heard in the background). I guess we'll have to wait (literally) and see. I retain my usual scepticism, of course.

Thanks.

AK71 said...

Hi MW,

Well, I have no doubt that it is legitimate. I just wonder if it is sufficient to question the legality or the legitimacy of it all.

Should we not question the sensibility as well?

A 100% LTV = no cash down. It could be legitimate in some places but how sensible is that, for example?

I doubt that the trainers would do the course attendees a favour by advising them to be financially prudent. That would work against the trainers' interests. After all, they want as high a participation rate as possible, logically.

Of course, this comment is an opinion piece and not a statement of fact. ;)

Musicwhiz said...

Hi AK71,

Same goes for sell-side analyst reports. I've never seen one ask an investor to be "prudent", cautious and look for a "margin of safety". Weird but true. When it comes to the world of money, everyone (and I really do mean everyone) has a vested interest.

Call me a cynic, but I'd rather invest my own money using my own efforts and say thank you very much to all these very helpful people who take their precious time to train others.....

AK71 said...

Hi MW,

Indeed so. Appreciate the time and effort you have put in to comment in my blog. Looking forward to more of the same. :D

Solace said...

Hi AK,

In light of this article, it reminded me of an interview which Ponzi Scheme fraudster Bernie Madoff gave to a US financial portal, after he was put behind bars.

Madoff Said: "Wall Street is not that complicated. If you ask an average hedge fund or investment firm how they make their money, they won't tell you. If you don't understand something, then don't invest in it. "

He added: "My investors were sophisticated people, smart enough to know what was going on, and how money was made - but they still invested with me without any explanation."

Some points to think about when approaching a investment that is new to us.

AK71 said...

Hi Solace,

"I am doing it because everyone else is doing it" or "I am doing it because people before me who did it made money" just don't cut it! ;)

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