Tuesday, June 18, 2019

More insights from attending real estate seminar previews

I'm not a saint.

To become a good trainer I do attend previews from other trainers. When I do attend these previews, I have to with hold judgment on the content being taught and focus on the user experience of previews to figure out how I can raise my game.

This creates a moral dilemma : There is a strong moral push to reveal my inner thoughts on what these seminars teach - I'm human too, I don't like having my time wasted on seminar previews. On the other hand, I don't want my training career to be built on the failure of other trainers.

My latest visit this time is a real "no money down seminar" and, unlike me, the trainer is very attractive and highly charismatic.

Here are some thoughts I have on last session :

a) Purchase of Industrial property should account for 7% GST and depreciation

A major idea in this preview is that industrial property does not attract ABSD unlike residential property. Also, some positive cash flow can result after accounting for mortgage payments and taxes.

I was trying to figure out whether there is a catch to all this and realise that somehow GST was omitted from the calculations. While you avoid the 12% ABSD for residential property, I think you have to pay 7% GST, which can quite punishing.

Also another element not discussed is that industrial leases can be much shorter than residential leases so depreciation is something that needs to be factored into the cost as well.

b) Mechanism for "no money down"

Obviously this was not revealed in a preview, so I want to take a stab at guessing the mechanism behind it.

My first guess is that the 20% funding for industrial property comes from getting a separate term loan from a bank by using the residential home equity as collateral. This is hardly a no money down scheme - that term loan can be invested in dividend stocks if you wanted to.

My wilder guess comes from seeing a trust deed in one of the slides. A trust basically allows multiple investors to pool resources to buy a property and allows some of them to be designated legal owners of the property and others as beneficial owners of the property. This is a highly dangerous as the trust deed will define the legal relationship between the parties moving forward and beneficial owners do not have a lot of power over the property.

( How is this arrangement safer or better than just buying a REIT baffles me. )

c) Some narrative tropes in real estate seminars are a turn off

Apparently, female real estate trainers seem to position pregnancy as some kind of apocalyptic event to gain sympathy points. I have two kids of my own and I just don't buy it. If you get pregnant while your husband is not fully functional as a  breadwinner, this might gain partial sympathy points but from my own experience, having kids is a happy event for me.

Another storyline element which made my blood boil is that some people see financial independence as a way to tell their kids that there is no need to study so hard. This alone would be a reason not to sign up for me. Even if there is no need to study so hard for a job, academic credentials can lead to more social or cultural capital. I don't really want to attract folks who think otherwise to my course. If anything, a good investment course should make you wish you'd study harder for your statistics class.

So some folks who do not want to attend a course may want to experiment with this idea, which, to me, seems to work in theory :

a) Find out whether you can get a term loan from your own residential property, many of us are sitting on quite a fair amount of home equity. If you have an EC like me, it is not uncommon to have $500k in home equity after MOP.
b) Find a real estate agent who specialises in industrial property. Start visiting a few and look out for bargains.
c) Some arbitrage opportunities will arise from property that is particularly run down, you can consult your agent to see how much you need to get a contractor to spruce it up with a new paint job. You can also erect walls to rent out to multiple parties to get more rentals.
d) If you are lucky enough to get away with being cash flow positive, you can see if you can sell the property a few years later and rinse and repeat the process.
e) Just don't ask me why this is better than investing in REITs beyond the high leverage.

If you some insights to share about no money down seminars, do comment on this blog.

I am not surprised that days after attending the preview, my friends alerted me that the company that organised the preview I attended was put under the MAS watchlist.

Well this should be my last article before I fly to Australia tomorrow.

Catch you guys next week !

5 comments:

Lizardo said...

It sounds like yet another scam.

So did you have to pay for this?

I'm definitely sticking to REITs. Industrial REIT even.

And the so-called trainer is always something youngish looking right?

Christopher Ng Wai Chung said...

I paid for it with my precious time !

Sort of youngish, yes.

Unknown said...

LOL! What did you expect from attending such previews? 99% are fly by night outfits & they appeal to humans' base instincts and desires, in order to generate the fastest & mostest profits for themselves before they have to close down & register another company or come up with a new cock n bull story to sell. 😛

Christopher Ng Wai Chung said...

I am a sucker for punishment.

I have one more review to share next week.

gagmewithaspoon said...

very interesting sharing! I would love to go along just to see see look look and examine how people can lure others so easily. But better go with you in case I really end up falling for their traps.