3 things Singaporeans must consider when investing in overseas properties

As I was flipping through the papers, I noticed there seems to be abundance of investment. Personally, I am always open to taking a look at investment opportunities but to all the buyers, we need to first arm ourselves with ideas on what to look out for and not jump at every opportunity (assuming that we can afford all of them).

A friend of mine, holds the idea that he looks at 100, study 30, filter to 3 and eventually buy 1. Using this simple steps, he now has more than a 6 figure passive income and it all started with the first one.

But what do we look out for? That literally could be a "million dollar" question.

Let me share a 3 point check list which I use for my own purchases of overseas properties and in fact regardless if we are looking at property investment overseas or local, these should help us make a comparison and a better judgment.

#1: Location, Location, Location

By now, most of us already know that "Location" is the game in property investment. But what exactly about the location are we asking for?

a. Growing Economy
When looking at a particular location, look at the economy of the place. I want to invest in a property where businesses are thriving because this will translate to more jobs and more real demand for properties. I had some years back invested in a property located in Rochestor New York where their main business is imaging.

So Kodak, Xerox are one of the key employers. Guess what happens now that Kodak has declared bankrupt? Just imagine that you are living there and are an employee of Kodak. Now you are laid off and can hardly make a living there. What will be your next move? Perhaps move out of the town to... say, Singapore, a thriving nation?

Of course a supportive tourist location will help but make sure the drivers are sustainable. Olympics is a good tourism driver but it will last for a short period. Is it fair enough to assume that once people visit that location during Olympics, they will spread the word of how nice the place is and which publicity will draw in more tourist? Maybe. But once Olympics is over, such hope may or may not happen.

b. Density and Livability
The next question you will want to ask is if the location has just too much land as compared to population. Even if it is a good location in terms of increasing employment, the property prices or rental may not increase if the supply of properties is so much more due to abundant land space.

That being said, there is also a limit of how many properties can be squeezed into a favorable district. So while Australia or Philippines have a lot of land, there is only so many number of houses that can be within 1 km of a good school or the business development area.

#2: Management

After zooming into location I am comfortable with, the next portion is the management. The people managing our property can really help us or harm us big time especially when we are talking about overseas properties. I had experience dealing with management that are doing such a poor job filling up tenants that I had to pay more for another management company to get rid of the existing ones.

The horror story is the existing management left with a bang by evicting all my existing tenants, causing my lost of rental income for a few months. Even filing of complaints will not help me in this situation plus given the fact that it is so many miles away from Singapore. On hindsight, I will safeguard myself by the following:

a. Find reputable management with good track records.
Well, I guess reputation comes with good track records. But how do we find out if they are good. This may be an over simplification of research, but I personally like to google and research managements on forums.

Forums are the places where people just let it out and either complain or compliment. Of course, they may not be totally accurate, but I get a better feel and will form my judgment.

b. Use an escrow company.
As much as possible and whenever it is financially viable, i will use an escrow to hold payments to agents and management until they finish the job. This is a must when you are dealing with huge amount of money.

c. Pay your partners well.
I will also choose to pay my agents and management a premium above market rates. Why? Guess which customer will the agent approach first when he/she finds a good deal? And also, it will not be worth it for the management to mis-manage my property because it means they will lose a nice paying customer.

#3: Yield

A lot of us may start hunting for investment opportunities based on yield. This is indeed attractive, but is means nothing when the above 2 criteria are not in place.

I will not dive too much into yield, but we want to make sure that the yield plus potential yield should beat what we get locally significantly otherwise why should we put our money in places we have so little contact and control. In current conditions, my aim is for at least 9% and above.

So here we have 3 point checklist. I hope this blesses you in your shopping for overseas properties.