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EcoHouse Group placed on the Investor Alert List (IAL)

Saturday, July 12, 2014

Another one has emerged:

The Monetary Authority of Singapore (MAS) has placed EcoHouse Group - an overseas property development firm which specialises in the construction of investor-funded housing for Brazilian families - on its Investor Alert List (IAL).

The IAL is a list of unregulated entities that may have been wrongly perceived as being licensed or authorised by MAS.

Since September 2011, EcoHouse has attracted more than 1,500 local investors, with a total investment sum of S$65.55 million, to its Brazilian property development projects.

Source: The Business Times, 7 July 2014.

"The Company's CEO had invited investors to keep their minimum capital outlay with EcoHouse for three years rather than one and receive immediate 20% returns.  Although investors were under no obligation to accept the longer term, there was reportedly an overwhelming response to the offer. The investment was also supposedly endorsed by several prominent local property websites and investment group."

Source: SGPropTalk

EcoHouse sounds like a great business. Simplistically, imagine giving back 20% of $65.55 million to investors and keeping $52.44 million to be utilised in one way or another.

We must always ask:

1. Where is the source of income?

(How is income being generated?)

 2. Is that income source sustainable?

If someone borrowed $100 from us and gave us a return of 20% upfront, promising to return to us the capital in full 3 years later, we would effectively be lending him $80, not $100. Upfront, we would be taking back $20 of our own money, not his. We haven't made any money.

Whether that $80 would come back later or not is anyone's guess. What? It was supposed to be $100? Oh, my apologies. I have misunderstood. $100 is it.

(Frankly, it doesn't matter whether it is $80 or $100 to AK since the money might never come back.)

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2. Invest in real estate for high returns.


EY said...

Hi AK,

Good reminder that the upfront returns could merely be returning part of the initial capital outlay.

I like this:
"Frankly, it doesn't matter whether it is $80 or $100 to AK since the money might never come back."

This seems to be a bit like the loanshark model. :P Borrow from loanshark, 20% of the loan amount would be creamed off first. Except that loansharks will be collecting the interest regularly and can take extreme measures to recover late interest payment and principal amount. Here, the 'investors' have 80% of their capital fully exposed.

Buyers beware, indeed.

AK71 said...

Hi Endrene,

Very often, it is a matter of perspective. The fact has not changed but changing the way the fact is presented could catch people unaware. This is how many could lose money. -.-"

Take some time to think things through. Don't be too hasty and rush into decisions. I am saying this from experience. I have had my share of cans of worms. :(

AK71 said...

Asked what he believed to be the biggest mistakes he has seen people from Singapore making when investing abroad, he replied, “They don’t know what they’re doing. That’s the biggest mistake when investing anywhere, but especially overseas. Many people wind up investing in Norway when they can’t find Norway on the map.”

Investors, he said, should know currencies, bonds, governments, taxes and the like – everything, in short. “You have to know all that when investing in your own country, but even doubly when it’s a different country,” he said.

“The only thing people should invest in is what they know a lot about,” said Rogers, who has shown he knows what he’s talking about.

Steven Yap said...

Hi AK,

Just saw this on CNA,

Brazil denies links with EcoHouse...

Looks like some people are going to get burn...

Best Regards,

AK71 said...

Hi Steven,

I have friends who know people who were roping in investors for EcoHouse before. I wonder how would they feel now.

Investors feel cheated and angry but what about those who work for the cheats and who are not in the know?

Steven Yap said...

Hi AK,

Haiz.... You never know what hits you until it hits you....

Best Regards,

Andrew G said...

Looks like the Brazilian police are now investigating Ecohouse according to the latest FT artcile

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