"Get rich" scheme or "Get suckered" scam?

By The Folks @PropTalk - May 27, 2015 No Comments

Many of you would have read the news about this 50-something property agent who had gone missing with more than $60 million of her investors' money. The said investment, which had been going on for 15 years, supposedly bought into distressed properties in prime districts to be sold at a profit to overseas buyers. Investors were promised returns of up to 30%. What was touted as a "high margin, zero risk" investment scheme then was now alleged to be a ponzi scheme.

It was not too long ago when our local newspapers had reported on another scam - EchoHouse. The company, which supposedly specialized in the construction of social housing in partnership with the Brazilian government, went bust during the early part of this year. Hundreds of Singaporean investors had lost more than $50 million in what was again alleged to be a ponzi scheme. Coincidentally, one of the major local property portal were actively promoting EcoHouse when they first setup shop in Singapore to market their investments. But they were also the first to distance themselves and started running various negative reports about the company when problems started unfolding.

While not all such "alternative investments" are necessarily scams, one should really be extra careful these days before handing over his/her hard-earned money. While most experts would advise against investing in products that one does not fully understand, the wife and I found that it is not always possible to know everything about that property investment that we are interested in. 

However, we have lived by the following rules that had served us rather well thus far (* we probably have jinxed it now). These may sound elementary but looking at the two recent cases when investors were duped of millions, we feel that they may still be worth sharing:

1. If the investment sounds too good to be true, it probably is - this may sound cliche but anything that promises 20 - 30% return with little/no risk should start raising alarm bells in your head.

2. Do as much homework as you possibly can - you be surprised how much information you can actually get just by goggling on the company, the person running the investment or the project that your investment is going into.

3. Be proactive in "owning" your investment - for each overseas property investment that we have made so far, the wife and I will proactively inquire with the agent (sometimes even with the developer directly) about the ongoing status of the project rather than wait for them to come to us with news. We will also try to keep tab with sound-bites about the project by scanning the media and internet. Although this is not 100% foolproof, it will at least ensure that we are not the last to know if shit hits the fan.

4. Do not invest simply because your family member, best friend or supposed "experts" had done so and assured you that it's a "sure thing" -  while most of them may start with noble intentions, it may end up to be a case of "the blind following the blind". As per most cases in life, you have to work for your keeps so do your own homework!

5. Finally, only invest with what you can reasonably afford to - if having that money stuck in some fixed assets such as property for a prolonged period (or worse, losing it altogether) will necessarily mean that you have to sell the house that you are living in or take an additional loan just to make ends meet, you probably should not be making that investment in the first place... much less "alternative investments".

The wife and I will like to end this piece with a recent story: A Singapore-based developer that is supposedly doing government-backed, low-cost housing projects in the US has contacted us recently to explore avenues for mutual co-operation... advertorial, sponsored articles etc. ...to promote their company and projects. When asked, we were reassured that their business model is genuine with guarantee of relatively high returns for their investors under minimal risk (since they have the support of the US government). But being the curious creatures that we are, we scoured the internet and found some rather unflattering stories that are indirectly connected with the company concerned. After we confronted them with these stories, we have not hear back from them since...


Caveat Emptor!


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