How to avoid the pitfalls of investing offshore
*This content is brought to you by Wealth Migrate
Investing offshore can be a great way to create wealth, but is not for the faint-hearted or the unprepared, so take some time to make sure you are up to the task before making the leap.
Here are six ways to get ready for the offshore challenge:
1. Do your homework: The right information will set you on a path to success, but the wrong information can be ruin you. This is because poorly informed investors make poor decisions. You must find trustworthy sources of information, and not blindly follow what salespeople tell you about the latest, must-have development.
2. Partners can make or break any deal: No matter what you do, you need strong partners, and property investment is no different. Before putting your money into an offshore venture, you need to know that the people you have teamed up have your best interests at heart. Luckily for property investors there is the Association of International Property Professionals (AIPP), an international body that is committed to regulating the industry. If you partner an AIPP member, you are assured that they have been vetted and approved. AIPP membership is the stamp of approval for international property companies. It's a reminder to you that AIPP companies are following professional industry standards and working hard to deliver customer satisfaction, through honesty, integrity and accountability.
3. It's all about the rent: Don't let big discounts blind you to the real costs involved. It makes no sense, and will cost you enormously, if you cannot find any tenants for your space. A building that is being offered at a 60% discount becomes an extremely expensive mistake if you find that the market is oversupplied.
4. Contact details: Before you sign up and hand over your money to the foreign salesperson who has wowed you with his fancy PowerPoint presentation, check that the organisation has offices here in SA as well as abroad. There are too many stories of people "investing" in a fabulous offshore development and then never being able to contact the salesperson again. You do not need to make this costly mistake.
5. The trouble with finance: Finance can give you the means to grow, but a bad deal can destroy everything. Tread with care before committing yourself to a finance deal that looks too good to be true. When you invest offshore, you are already on the back foot in terms of knowing the ins and outs of how institutions work. Before deciding on how you will finance your deal ask these questions:
- Who is organising the finance?
- How did they fare before, during and after the Global Financial Crisis, and how did they secure financing during this time?
- How can they mitigate risk for me?
- How did they arrange finance for their most-difficult client?
- How often are they successful in helping people get finance?
- Am I able to invest, subject to financing?
6. It is easy to get caught up the optimism around your new investment and forgot that you will need to have someone guide you through the whole process: Many salespeople are interested in only closing the sale. Before passing the point of no return, make sure you get answers to the following questions:
- How big is your after-sales team and who will help me make sure the property transfers timeously into my name?
- Do you have an after-sales professional with many years of experience, who understands the nuances between South African property and overseas property?
- What happens when the property is ready? Who will help me with the transfer of the property and inspections?
- Can you show me referrals from people who were happy with your service?
Investing offshore is a big step to take, which is why many investors choose to do so via an online platform like Wealth Migrate as this can take a lot of the pain out of the experience. However you decide to invest offshore, you can use these six steps as a way to prepare yourself; this will go a long way in ensuring that you do not end up with a lemon of an investment.
