This account is not just a story of one person’s misfortune, which came about through trusting and through being taken for a ride because of ignorance. It is a story full of advice on many of the hidden dangers that any property investment investor may encounter. Many traps are not seen until after the event, often far too late to recover financial losses, even an expensive legal fight might not recover anything all. In many cases such things could have been avoided if only a little knowledge had been available to negotiate the traps in the first place. So the aim of this last chapter is to pull together some practical advice and to arm the potential overseas home owner against scamming by promoters, lawyers and contractors. There is no foolproof advice to enable everything to be avoided – one can only be aware of certain things and take corresponding measures to lessen the risk of being caught out. Property investment in a strange and foreign land will always be a risk no matter how good and secure the investment may look.
Research your market.
The most vital and important activity is to research your market. Many buy without checking out anything about the location they have chosen or have been persuaded to purchase in. The more knowledge the investor has, the less likely he will be caught in the spin from agents. Remember, I acted without knowing anything: I trusted. So consider the consequences which I have made an account of here. In my case it has destroyed my home-owning potential, reduced me to only renting, and in 2013 I am running out of money fast.
Research promoter or agent.
If you are using a promoter or agent research them as fully as you possibly can. Remember that you do not really need a promoter these days. Most contractors will have a web site. Find what you like, catch a plane, book into a hotel and go directly to the contractor. Promoters are only middlemen and you will be paying for their cut, which has most likely been added into the price of the property.
Never use recommended lawyers or financial advisers.
Never use lawyers recommended by agents. Take the time to make sure the one you choose is truly independent. Even then lawyers are a big but a necessary risk. It is hit and miss whether you get either a good one or bad one. Choose a lawyer from recommendations others have provided. Lawyers sometimes lie: they may even tell you that you have permission to build when you do not. Unfortunately, you will not find out such things until much further down the line. I have no advice here; maybe there is none. You can only do your best to track down the most honest lawyers available: they are there, so do not be put off.
Never use financial advisers promoted by agents to obtain mortgages: make sure the advice truly independent and cannot be influenced by the agent.
Take your time and never get pushed into buying.
Banks agreements - rental incomes and more.
Do not be bamboozled by bank agreements, rental incomes, and capital growth potentials because I can guarantee that they will be exaggerated. The reason for doing your homework before you go is not to get caught by all these false projections. You will be able to pick out very quickly the honesty of an agent if you are well armed in the first instance. So do not let on how much you already know.
Non-completion clauses, do you fully understand them.
Make sure you fully understand the non-completion clauses in your contract. Make sure there are non-completion clauses present in your contract that cover the return of your deposit if the contractor defaults, and that they clearly state how much you will lose if you fail to complete. Be wary of ambiguous wording.
Restrict personal information.
Do not give too much personal information about yourself to an agent who can then exploit it to feign friendship. If you wish to befriend a local, leave it until all the transactions are completed and you have your property.
Resist the pressure.
If you are going on a three-day inspection trip, the pressure to buy could be intense. Do not let on that you may have access to money to pay retainers. Keep it cool and non-committal. Try to haggle down the retainer fee if you decide to make a commitment, and above all never ever pay a deposit at this point. You need time to think over your actions. You will be hard-pressed to get your money back once you have parted with it. It gets harder as the property market goes into recession, so know where you are in that respect.
Be clear why you want to buy.
Be clear about why you are buying this property – holiday home, rental, making a permanent move – and assess critically what you are prepared to pay. If you are buying in a recession, there is no point buying at a high price as an investment to sell on in a short period of time. If you are looking for an investment go to a local bank and ask about repossessions. Really good bargains can be gained in this way that cannot be achieved through an agent.
Write it down and record everything.
It is good to record everything given to you by an agent. It is useful evidence to give to a lawyer if there is a need to sue a contractor or agent. If you can use a computer, prepare a table in advance and print it out. List a series of questions and record the answers. Ask for the commission the agent is receiving. Record all dates, times and locations. Leave a space to enter any information that you are given that has persuaded you to buy – capital growth rate of your property, rental incomes, mortgage payments, information about the local environment and anything the salesman has stated, even things like, “This is the only property left, buy now before it goes as they are selling like hotcakes.” Once you have decided to buy, ask the agent or salesperson to sign a copy of your record, stating they have dealt with you honestly and truthfully, and that all these facts are correct. If there is reluctance to sign, then think again about buying. Be prepared to make some minor adjustment to reasonable requests about certain elements as some things are outside the control of agents and salespeople. The main object here is to catch out the deliberate lies. At the end of the day it is up to you whether or not to go ahead. You cannot protect yourself totally, but you can seriously reduce the risk.
A little bit of common sense goes a long way.
A little bit of logic and common sense goes a long way. If you are buying in a complex with hundreds or thousands of other properties as rental or an off-plan resale after completion, then be warned. Remember the spin that you have been given has also been given to hundreds or thousands of others. That means there are going to be hundreds or thousands of other rental or resale properties to compete with, all coming onto the market in the same location at the same time. Think about it: common sense dictates you will not fare well. Spin – don’t fall for it. You have been warned!
If you are buying as a permanent or holiday home, remember many others may well be buying for the rental market. That means you will have constantly changing neighbours, and not all of them to your taste. It should be no surprise if you end up with no neighbours at all, just streets of empty properties that have joined the glut of rentals. Not the dream you were hoping for.
Be on your guard against contractors; do not be afraid to approach them directly if you feel the need to do so. Ask them for the commission payment that they are surrendering to the promoter. Again, if they fail to surrender that information consider whether you really want to buy this property. Such payments have a direct impact on your capital gain, which could end up in the loss zone and not the positive one you were hoping for. Can you be sure that your entitlement is not been diverted into the pockets of the promoter through an unjust hidden payment? It could also be advantageous to ask whom their acting lawyers are, do not get caught out in the trap of the same lawyer acting for both parties. Hassle down the retainer fee if you have the nerve to try. You can buy direct from a contractor, there is no need for an intermediary such as a promoter.
Trust is your worst enemy.
Trust is your worst enemy. Trusting blindly in the agent's presentations without research to validate is dangerous for your health.
There is more, so be on your guard.
Finally yet importantly, there are other pitfalls to watch out for that can materialize in different forms in other parts of the world. I have not had the experience of them to provide any insight. It is a dangerous venture, international property investment, for the normal individual. You can only do your best not to get caught out. Some do; others do not. Make sure you are one of those that are not.