|
I see a few people and media talking about buying off shore since the South African property market is depressed.
But here is my take.
First of all off buying off shore can be a good property investment, but it is only good if the deal has value in it and will give the investor the returns they are looking for.
However that said, there is a problem.
Most of the off shore advertised properties I see (and not all of
them of course) are in boom markets. In other words, markets that are
doing so well that the prices are high and will go even higher.
Which spell out immediately the problem: PROPERTY SPECULATION
I find it hard to understand that most people still do not see nor
understand the difference between property speculating and property investing.
To put it in simple words, the overseas markets that are sold are in
boom markets. In other words you rentals will NOT cover the bond.
This also means that you are exposing yourself to stronger currency
shortfalls. In simple words you pay MORE for the pleasure of risking
your money, when you could do it just as well at home with less risk if
you are into taking risk in the first place.
I really don't understand why people are so blind to shortfalls and so
blind to the fact that you make money when you BUY. That of course is
not in boom markets.
You have to buy low enough to make the money when you buy, but you can’t buy low if the market is a boom market = high.
Yes, of course if you are a multi-millionaire and you can buy
outright and keep for as long as you wish and you don't really care if
you lose it because these buys are speculations (in case the markets
will not go further up in some boom areas) - then it is not a problem.
(Side note: all things being equal - which they never are - usually people with a lot of money know what they are
doing, and yes, there are professional speculators in the market are
making fortunes, but they are not the majority of the public that wants
to invest in property and create wealth through this asset class).
I see these places are sold to hard working people with high salaries.
A salary is a salary and a shortfall is a shortfall and it HAS to be
sustained not to lose the property.
Most people still don't get the difference between speculation and investing and will pay a high price for it.
Many investors that did not understand the difference between
property investing and property speculating are already paying a high price for it in South Africa
for buying high and wanting to sell to the "last fool in line" (as they
say on the stock market).
All you have to do is check the repo lists and auctions in execution to see the state of the affairs.
Now the market is depressed here in South Africa so we are looking to make the same mistakes overseas. How does that make sense?
Really, there is no rocket science here, it is simple maths and knowing how to calculate your property deals and the risk you are taking.
To all the people that want to invest overseas, I suggest they learn
and learn and learn and learn as much as they can about property
investing, then about the country they are about to invest and make
sure they are making an educated decision and NOT follow one “hot
market” after another to keep buying high and end up never seeing financial freedom.
There are so many deals right now in South Africa that can build a
solid property investing portfolio that is hard to count anymore.
So, why risk your money in a territory you don’t know enough about and a currency that may “kill” you financially?
These are just some points to think about when investing in property offshore.
|
