How not be cheated by developer deals or investors’ club

Property investment needs higher commitment than other forms of investments, in terms of duration and capital.

One misstep, and you can be on your way down the financial drain in hundreds of hard-earned money.

Many don’t realize they are being taken for a ride by irresponsible parties.

Whoever lacking property investment knowledge will easily become a zombie property investor.

Who is a Zombie property investor?

This is a dangerous trend highlighted by seasoned property investor, Faizul Ridzuan in his Facebook post dated 2 Nov

Anyway, these are the traits of a zombie investor :

1. Paid few thousands to attend an investment seminar.

2. After that, there will be a few more “advanced” courses. This again will cost a few thousands.

3. As part of the benefits, you get to join the insider bulk purchase club.

4. You are being offered to purchase a property X in Johor at 40% discount from developer. Each unit you purchase gives you a 6 figure cashback, or double digit in percentage.

5. You feel it is a fantastic deal because the leader says so. Your peers follow the herd and plunk down their down-payment without doing any research.

Account from Faizul Ridzuan:

An individual who came to see me over 1 on 1 was not convinced about the future prospects of a property she is being presented. I told her that she is right to trust her instincts as I don’t see this property as a viable proposition from day 1. I felt sorry for her as after investing a few thousands to join that program, she was asked to attend a self-help program to “fix” her attitude just because she disagreed with her group leader’s POV on the prospects of this property.

Also read: Good news for renters, not so good news for buyers

Here’s are some common tips on how not to become a “zombie property investor” and avoid buying bad properties that will affect your financial future :

Always assume your group leader gets a commission when they sell you a deal

The commissions from developer can range anywhere between 2% to 5% so their motivation to get you buy multiple units is very, very high.
When it comes to money, you know they are not objective and you can be more careful evaluating on the information given by them.

ALWAYS, ALWAYS do an independant research.

Never rely 100% on these salesman to give you all the information. If they are being paid 5-figure to sell you each units, they’ll even make shit looks like a rainbow.

Remember, they don’t care if you make money or loose money. Victory often have many parents, but losing often is an orphan. They are not going to be responsible for your mortgages later when you are stuck with a property that cant be rented or sold.

Be careful with projects that gives massive rebates ( above 10%).

There’s a reason why they had to give those rebates. Good properties don’t need to offer to much “discount” or rebates because good properties sells themselves. I prefer to pay market values, full down-payment on great properties rather than buying substandard properties with cashback.

Project that offers massive rebates often attracts the weakest form of property investors / owners.

“No-down” projects often attracts people with limited savings and weak holding power. Once the property is completed, these property investors with weak holding power will desperately offload the properties as they cant afford to keep it. Desperate sellers == lower values == lower capital appreciation or profit.

Always ask if there has there has been any similar product in the same vicinity.

Unit that was successfully sold in sub sale market today at prices close to what the developer is asking. An example, I wouldn’t mind paying 600k for a condo in an area if there are other completed condo in the area that as of today selling at min 500k. But if the closes comparison is selling today at 300k in subsales, and developer / investor group try to sell at 600k, I will confirm walk away.

So far, by following these simple principles, Faizul never bought anything wrong that is rented at lower than his monthly mortgage payment installments.

Investing is largely about protecting your downside. Once your downside/risk is covered, the upside will take care by itself.

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