5 Reasons Buying Overseas Property From A Property Show Is A Bad Idea

Posted by Wei Min Tan on September 15, 2020

Buyers of property in top markets like New York, London, Paris, Sydney come from all over the world. As people get more financially savvy and outlook becomes more global, they no longer limit potential investment to within their home country.

As such, developers are marketing their property abroad to potential foreign buyers. One of the most common ways is through property shows held at foreign countries. For the foreign buyer, here are 5 reasons why buying overseas property at these property shows is a bad idea.

Contact:  tan@castle-avenue.com

Read about Wei Min’s style in Best Manhattan property agents and Role of a buyer’s broker. 

High demand properties don’t need to be marketed abroad

Most of these overseas property at property shows have low demand locally. For example, in the New York market, about 70 percent of buyers are local. The most desirable properties will be taken by local buyers quickly. The foreign buyers who buy into these high demand properties usually know local agents who would recommend them. Properties in top locations with strong potential will never need to be marketed abroad.

Think about it. There is a lot of expenses incurred by sending staff abroad to market property. Air fare, hotel, meals, rental of showcase space, transportation of marketing material and building models, time. A developer of a hot property doesn’t need to do all these. When international clients tell me about such and such property they saw at a property show in their home country, I cringe. They are almost always the losers that are having a hard time selling in New York.

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At property shows, you are dealing with seller’s agents

Property transactions in the U.S. have two agents. One representing the seller and one representing the buyer. A buyer’s agent has access to the entire property inventory of the market and would recommend a good property to the buyer objectively. A seller’s agent is only focused on selling the property he is being tasked to sell. In New York, roles are clearly explained through an agency disclosure form at the first meeting with the client.

At property shows, these agents are all seller’s agents. They would say whatever it takes to get you to buy the property they are selling. You don’t have someone representing you and telling you objectively what are the upsides and downsides.

Hard to evaluate multiple one-sided information

Let’s say there are 20 properties being showcased at a property show. This means you’re dealing with 20 seller’s agents telling you why their property is the best. Nobody is telling you the downsides. You are getting one sided information from multiple agents.

Hence, how would you evaluate which property to buy? Through your own google search? Google articles are based on what people write. At best, you’d only get partial downside information on a few of the properties.

Weimin’s article, Investing in a Manhattan penthouse apartment

Sometimes even the seller’s agents don’t know the property

It’s becoming common for developers to partner with a local agent in the foreign country. For example, a New York developer partners with a Singapore property agency whose role is to market the New York property at a show in Singapore.

The Singapore agent would be given talking points but it’s very likely the Singapore agent has not even seen the actual property in New York! Everything is based on looking at a model of the building. The model would not show the building next to it which means it wouldn’t show the real views. These are things only a New York agent who has been to the actual building would know.

Deal example:  Our international client reserved this Manhattan, New York condo at pre-construction stage.  After completion, condo was always rented with strong cashflow, driven by quality of the property and proximity to United Nations, Citigroup Center, Blackstone HQs.

Weimin’s article, Buying Manhattan property to rent out

Are you buying into loser developments because it’s convenient?

Properties being showcased at property shows are always new development projects. Reason is only new development projects have the scale to send staff abroad for marketing. This means you’re missing out on the much larger resale market. In New York, resale accounts for the majority of transactions.

At a property show, you are being exposed to an extremely small fraction of the inventory. What’s worse, these are inventory that are not successful in their home country. It’s very frustrating when I see property agencies who focus on marketing loser overseas properties. They do it because they know developers of these properties would be willing to partner with them, pay for expenses and pay a good commission.

They talk about how the U.S. economy is doing well, show numbers etc. But when I see the New York properties being marketed, they are the absolute losers that nobody in New York wants to buy. People attend property shows because it’s very convenient. Just go to a five star hotel, look at building models and marketing material and that’s it. Ask yourself – why should you spend millions buying into a loser? Because it’s convenient?

What To Do?

Do a google search and engage an experienced local agent as a buyer’s agent. For example, Castle Avenue Team at R New York is a buyer’s agent focusing on foreign and investor buyers in the Manhattan, New York market. By having a buyer’s agent, the agent’s fiduciary responsibility is to you, the buyer. You will have access to the entire inventory and your buyer’s agent would recommend what are good buys objectively.

Of course, people are still going to attend overseas property shows because it’s convenient. But at least I’ve shared some points to be considered, for those of you who took the initiative to research this topic.

What We Do

We focus on global investors buying Manhattan condos for portfolio diversification and long term return-on-investment.
1) Identify the right buy based on objectives
2) Manage the buy process
3) Rent out the property
4) Manage tenants
5) Market the property at the eventual sale

Deal Examples

1) Halcyon in Midtown East.  Represented multiple buyers with deals between $1.7 million to $5 million.  Reserved property at pre-construction stage with 20 percent down.  Balance at closing 2 years later.  Always rented with strong cashflow to owner.

2) 300 E 64 St, Upper East Side.  Top amenity building in the 60s with an amazing roof deck with BBQ grill (pictured), a WOW factor for tenants.  At purchase, the Q subway line extension was in progress and it is now completed.

3) 88 Greenwich, 35th floor waterview one bedroom apartment facing south.  A high floor, south facing, water view is the most desirable view in Manhattan.  While most water view apartments are located further from the subway, this building has a subway station right in front of it.  Property purchased with long term tenant in place hence no vacancy related to finding a new tenant.

Notes:

This article was updated Sept 15, 2020

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Related Links:

New York Property Capital Gains and Other Taxes

The Role Of A Buyer’s Broker

Investing in West Village