Atul Sethi from Farnam Tree gives his insight.

A Brief Summary:

• It pays to think about the bargain you are being offered, especially when it comes to investment and financial products.

• Salespeople will sell you the lifestyle, peace of mind, and your dreams. But you know yourself better than they do, so go home and make your own decisions after reviewing the facts.

• Deal sweeteners like rental guarantees for condo investments are fancy ways of providing discounts to you.

• Make sure you know all the costs involved before crunching the maths. Do not make a mistake because you forgot to factor in fees and expenses involved in ownership.

Beware Deals Too Good to Be True

Things often go on sale to entice buyers. The temptation of a good deal is effective in raising the value – or perception of value – for the person on the other side of the table. This is no different when considering financial and investment products. However, unlike shopping at Zara, there are no refunds. Some products require an obligation on your part over a long period of time. Others may require a long time to sell.

For the purpose of this article, we will use the example of an investment opportunity in a condominium project where the developer guarantees a rental yield for a fixed duration. This is fairly common in both Bangkok and nationwide, and you may have even seen such tempting offers on billboards yourselves.

Examine the Facts

Deal sweeteners like guaranteed rental income usually come with a catch. What happens after the three years your rental income is guaranteed? If you are lucky, you may find a tenant for your unit straightaway. If not, you might have to wait a long time. Rental guarantees are a fancy way of giving you a discount. If someone guarantees you 5 percent of your money back for three years, that is reflected in the amount of money you’ll actually pay.

You Know Yourself Better Than the Seller

Persuasive salespeople sell more than just the product to you. Instead of selling you a condo unit in Pattaya, the salesperson will sell you the idea of being a savvy investor building a diversified portfolio. Do not let them make assumptions for you. The seller is motivated by selling. Your motivations and other options are known best by yourself. Salespeople can be very persuasive, so it is best to review the facts on your own before deciding. If someone presses you to decide on the spot, that is a cause for concern.

Factor in All the Costs

The return being advertised does not factor in costs. In the case of a condo investment, you will have plenty of expenses on your hands. For example, common management fees are borne by the seller. Moreover, in the long term, there will be periods where your unit is vacant. Factor this all in to evaluate what your net return looks like before making any decisions. For condos, you can apply 10 or 10.5 months’ worth of monthly rental as your annual net rental income. There are plenty of resources available online to do the maths and more for investment properties.

Remember That Nothing is Guaranteed

Sellers of financial products are in business because they manage risk well. Promising to pay you guaranteed returns or to provide you with certain benefits no matter what, is not something they like to do. Read the fine print because the salesperson will not read it out loud to you.

Atul Sethi is the founder and CEO of Farnam Tree, a licensed boutique investment firm based in Bangkok.  Atul has over twelve years’ experience working in investment banking and as a research analyst, prior to starting Farnam Tree.