Episode 2: Overseas Real Estate: Direct Investment vs Co-Investment

Transcript

0:04
Victoria
You’re listening to “The RealVantage Podcast.” The show provides investors a better viewpoint into the real estate market with your host, Victoria Au.

Today I wanted to talk about what the difference is between investing as an individual into an overseas real estate property as opposed to coming alongside a real estate co-investing company and platform such as RealVantage.

I invited Keith Ong, the CEO of RealVantage to share some of his thoughts, but before I pose him some common questions we typically receive from investors, I’d like to share more on what a real estate co-investing platform like RealVantage does.

At RealVantage, we run an online real estate co-investment platform. Essentially we originate, analyse and underwrite offshore real estate opportunities for our investors.

Our investors invest with smaller quantum sizes into project-specific funds that we manage.

The bulk of our deals is organised as individual projects with a fixed investment period. It could be a year, three years or five years. So, investors are fully aware about the property and duration of which they are investing, and RV members benefit from deals that have been carefully curated, analysed, underwritten and presented on our platform with full transparency and disclosure.

Once the investment kicks off, RealVantage will monitor the project throughout the investment period and provide quarterly updates on the status of the deal.

In a nutshell, we provide direct access to individual institutional-quality commercial real estate assets with greater transparency and lower fees with end-to-end asset management from start to divestment. At RealVantage, we also invest alongside our investors. We have skin in the game for every deal that we put up. With this brief overview done and dusted, let’s move on to the questions!

2:15
Victoria
Thanks for being here with us today Keith. And I’ll kick off with this common query: What are the potential areas to note for individuals when they venture overseas to invest in real estate by themselves?

2:27
Keith
Well, the first is concentration risk. Given the capital nature of investing in properties, you have to put in a large quantum sum into a single asset. Right or wrong, it’s hard to unwind. Next point that they should consider is asset management or property management. When you own a property, it’s a lot of work. You have to deal with tenants, leasing agents, property managers, local authorities as well. All these if not done right, can cause you a lot of time and money.

The next big challenge is tax regulations. Some jurisdictions have complex tax issues such as stamp duty, income tax, withholding tax, and capital gains tax. And, these taxes if not done right, have punitive penalties, if you don’t file them correctly. Finally, limited options. We tend to gravitate towards the residential sector, perhaps due to a lack of knowledge and limited access to deals. So, these are some of the concerns or pitfalls that one should be aware of when they invest in overseas real estate.

3:28
Victoria
Concentration risk, complex tax issues and limited knowledge of different sectors beyond the residential sector are some of the common stumbling blocks. Perhaps we can hear more about why the overseas real estate market still draws investors to seek these opportunities out?

3:43
Keith
Yeah, most certainly. There are many who have benefited richly from investing in overseas real estate, well, as compared to Singapore. Even for large Singapore institutional investors, cross-border transactions are strategic opportunities to assess skill and deploy capital more efficiently. Last year itself, in 2020, there were more than USD13 billion dollars deployed by Singapore investors to the overseas real estate market. And the most popular destinations for outbound capital would include China, Australia,the United States and the United Kingdom. So, these are the top four countries, followed by South Korea and further down the list would be Japan. So this obviously shows that there’s a lot of money to be made in overseas real estate investing.

4:34
Victoria
So, how should an investor select the right markets to invest in?

4:38
Keith
There are many markets out there so it’s very important that one should be well aware of the particular market in which he wants to invest. At RealVantage, we have a criterion when we select a market. Let me just run through this briefly. First is the strength of the regulatory framework. So, having been in investment markets that span both developed as well as emerging countries, we have acquired an acute appreciation of the risk of these markets, particularly those with weak regulatory frameworks. So in certain jurisdictions, while there may be laws and regulations, their implementation may not be consistent across the submarkets. For example, in Vietnam, they allowed foreign property ownership as far back as 2015. However, depending on the location, some who have bought into apartments have not obtained their property titles to date. So, it’s very important to look into the strength of the regulatory framework.

Next point is market debt. What do we mean by market debt? Firstly, how rich the opportunities are in that market and secondly, how liquid that market is. For that reason, it makes better sense to prioritise markets of meaningful size and debt rather than shallow markets. The depth of a market is a very important proxy for liquidity. An investor trying to realise paper gains needs to be able to sell when he or she needs to exit. So this factor is particularly important at RealVantage, and so we have a specific timeline for all our deals.

And thirdly, it’s about transparency. Real estate investment is a very localised business where information asymmetry can be significant. Hence, we prefer markets where good and reliable data like accurate transacted prices, rental levels, demand and supply figures, is available for us to make sound investment decisions. Data that we look out for includes accurate transacted prices, rental levels, demand and supply figures. So as foreign investors, having reliable information helps us to level the playing field with the local players.

6:35
Victoria
So what are RealVantage’s target countries?

6:39
Keith
So for the purpose of generating attractive risk-adjusted returns for investors, we have identified 4 markets. Our target markets are the U.S., U.K., Australia and Singapore. These are our target markets that, comfortably checks off all the boxes in our market selection criteria and we have been seeing attractive opportunities in these markets. There are few compelling reasons for us to migrate up the risk spectrum at this point of time.

7:02
Victoria
What are the advantages of investing through an investing platform like RealVantage?

7:08
Keith
So RealVantage is all about providing investors with a smarter way to invest in overseas real estate. We provide more choices, we lower risks, and better returns for your capital. So, over the last two years, we have developed an innovative online platform that provides direct access to institutional-grade real estate opportunities. All our deals are organised as individual projects with a fixed investment period. It could be as short as a year or it could go up to five years. So RealVantage investors benefit from deals that have been carefully curated, analysed, underwritten and presented on our platform with full transparency and disclosure. So by aggregating investors into individual projects, our investors will be able to invest with flexible quantum sizes. Once the investment kicks off, RealVantage will monitor the project throughout the investment period, and for some, we do take an active asset management role.

So at RV, we want to highlight 2 benefits that we bring forth. First, provide a range of opportunities which we believe that individual investors might not have ready access to. These include projects in different sectors and different property types. For example, you could be investing in a residential development project or an office building, or a debt facility to a property owner. Our members will invest through tax-optimised investment structures which helps to minimise their tax exposure and enhance their returns.

Thank you!

08:38
Victoria
Keith, thank you for taking us through what investors should be aware of when entering the overseas real estate market, along with key differences between participating on an individual basis and investing alongside the RealVantage team. It is particularly important to have a qualified and experienced investment team that conducts rigorous due diligence and vetting of the project in order to ensure that every deal is sound and well-analysed prior to its release. Just like the quality of an art exhibit follows its curator, the quality of deals is only as good as the real estate investment professional behind them. I’m proud to be part of a team that has a combined experience of 100+ years in real estate fund management, technology and data science, with over USD10 billion transacted in real estate deals across Asia, US and Europe, in various asset types. At the heart of it is really our commitment to give more people the opportunity to improve their financial futures. Till next time, this is Keith and Victoria signing off!

9:45
Victoria
Thanks for joining us this month on “The RealVantage Podcast.” Make sure you visit our website, www.realvantage.co where you can sign up to be part of our investment community and start building your global real estate portfolio today. If you found value in this show, we would appreciate a rating on iTunes and do share this with your friends and fellow investors. Be sure to tune in next month for our next episode.

About RealVantage

RealVantage is a leading real estate co-investment platform, licensed and regulated by the Monetary Authority of Singapore (MAS), that allows our investors to diversify across markets, overseas properties, sectors and investment strategies.

The team at RealVantage are highly qualified professionals who brings about a multi-disciplinary vision and approach in their respective fields towards business development, management, and client satisfaction. The team is led by distinguished Board of Advisors and advisory committee who provide cross-functional and multi-disciplinary expertise to the RealVantage team ranging from real estate, corporate finance, technology, venture capital, and startups growth. The team's philosophy, core values, and technological edge help clients build a diversified and high-performing real estate investment portfolio.

Get in touch with RealVantage today to see how they can help you in your real estate investment journey.

Disclaimer: The information and/or documents contained in this article does not constitute financial advice and is meant for educational purposes. Please consult your financial advisor, accountant, and/or attorney before proceeding with any financial/real estate investments.