Before 2009, property investors used mainly these three strategies:
- Buy – keep: buy a property to keep for a long term and make a profit from the capital gain.
- Cash Flow: buy a property with an excellent rental yield that produces cash flow each month.
- Buy – Flip: buy an undervalued property and flip it for a quick gain.
(Credit to Dr Peter Yee who summarised these during his recent sharing)
After 2009, there are more sophisticated property investment strategies, namely:
- No money down: zero down payment deals.
- Multiple submission / Loan compression: Get 90% financing for more than two residential properties by tricking the more than two banks to provide mortgage offer seems on the same property, but in the actual case for different units.
- Investment Holding Company (IHC): free up personal individual’s Debt Service Ratio to get even more financing
- Property Flipping (Buy – Makeover – Flip)
- Property Stacking
- Cashback – Negative Gearing: getting extra cash by financing more than the property price.
During a recent online class, Dr Victor Gan (a.k.a. #PropertyDoctor) further explained the Cashback Method. The method usually involves bulk purchase from a developer, who faced problem with poor sales. They would markup the condo price to way above market value to allow buyers to get a higher loan due to the inflated price. In some cases, buyers get cashback when bank release loan more than needed for the real estate construction. Purchasers shall use the extra money received to service the mortgage for several years and hope for the property to appreciate.
But, isn’t that dangerous when you leverage too much, especially when you acquire too many harmful properties, that can’t fetch adequate rental and drain your pocket each month?
Dr Victor Gan showed us the ideal scenario, the grim reality, and the hidden problems that trapped novice investors. For paid Premium Webinar Members (PWM), you can check out the full recording, notes, Q&A and discussion here:
Debunked: Are ‘Cash-Back’ Projects & Multiple Loan Submissions the Fastest Way to Property Investment Success Today?