Advertisements with headlines such as “How to Invest in Properties with Little or No Money”, “How to Buy 10 Properties for the Price of 1” and “How You Can Make Millions in Properties with No Money Down in Just 24 Months” are common and frequent. The messages tout that property investment is the fastest and easiest route for anybody who wish to become extremely wealthy. There are of course disclaimers (in very fine prints at the bottom of these advertisements) stating that all investments carry risks and may not be suitable for everybody. But how many potential investors take notice of such disclaimers cautioning them on the risks involved? Buyers beware - if an investment opportunity sounds too good to be true, it probably is!
Is making millions from property investment really that quick and easy? Will course participants likely become millionaires just by buying properties using the strategies taught to them? I certainly don't think so! Otherwise, the number of millionaires in Singapore would be growing at a steady rate year after year. Although Singapore remained as a city state with the highest concentration of millionaires in the world to date, the number of millionaires actually fell 7.8% to 91,200 last year (as reported in Asiaone on 21 June 2012). Going by the success of such property investment seminars, isn't it illogical that the number of millionaires drop in 2011 after thousands of people have learned the “secrets” to become millionaires using the "proven" strategies? The truth is that the seminar organizers are fast becoming millionaires and not the course participants! These property investment “gurus” probably make more money out of conducting such courses than applying the property investment strategies for themselves. Just to illustrate - a property investment course costing $3,500 per participant with an estimated 600 participants per year would bring an annual revenue of $2.1 million ($3,500 x 600) in course fees collected. Assuming expenses including newspapers advertisements, cost of seminar rooms, food and other marketing costs to be $250,000, the seminar organizers would reap a profit of $1.85 million annually. Not bad at all!
Little or no money down strategies taught at property workshops involve creative financing schemes that are definitely not for the ordinary property investors. These little or no money down schemes work mostly in a market environment where property prices are on an upward trend. However, do you really believe such upward trends would continue for many years to come? Do you think the current exceptionally low interest rate, averaging at 1.5%, offered by banks in Singapore would remain this low forever? Are you able to hold on to the property for a long period of time without defaulting on loan repayments to ride out a recession? The associated risk that comes with little or no money down schemes is simply too high for comfort for many retail property investors. Most investors using such schemes make very little money, if any at all. Some may even lose their entire lifetime savings if market conditions and other economic factors turn against them!
All my investment properties, both local and overseas, were never transacted with little or no money down. I paid the necessary down payments, stamp duties, legal fees, renovation expenses, furnishing costs and other upfront fees. I spent a great deal of time researching and seeking out properties of good value to invest in. Before committing to an investment property, I have always looked thoroughly at the financials and crunched the numbers to ensure that the investment makes good sense. In fact, my investment properties have been providing me with good positive cash flows month after month. My properties have also gained good capital appreciation over the years. To minimize risk exposure, I choose not to be highly leveraged. The mortgage loans for all my properties never exceeded 50% of their market value and some of my properties are already fully paid-up. I would therefore be able to hold on to the investment properties during economic downturns that could result in property values falling sharply.
Buying a property with a good return on your investment involves patience and hard work. Do your own research and homework. Don’t just purchase any property that is featured at property seminars or in newspapers advertisements. This is especially so for foreign properties where you’re unfamiliar with the locations and have little knowledge on the laws of a particular country. Don’t rely solely on the advice of property agents (majority are not property investors themselves) as they may not have your best interest at heart. Ironically, many property agents may not have a clue of what would constitute a great investment property! Always invest with your mind and not with your heart when purchasing an investment property.
Yes, you can certainly make money with little risk in real estate investment provided you know what you are doing. Spend time educating yourself to become an astute investor before investing in properties to build your wealth. Property investment is never a get-rich-quick investment scheme. Accumulating massive wealth through real estate investing will involve many years of hard work, focus and commitment. There is simply no short cut!
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