I totally enjoy the new property workshop on Finding and Managing Residential Rental Properties held last Sunday at the National Library.
The participants were seated in cluster groups to facilitate interactions and discussions. We started by introducing ourselves to everyone and identified our property investing style with different animals.
In general, there are seven common types of investor animals in real estate. We don’t have to belong to only one type. We can be a hybrid version or a combination of different types of investor animals.
1. The Bulls
The bulls are naturally attracted by anything hot in the property market. Just like any waving movement of a bullfighter’s cape can automatically trigger the aggression of the bull.
They invest in a booming economy surrounded by positive economic data, optimistic industrial outlook and upbeat home buyers. They buy when others are buying.
Whether the bulls can make money depends on when they enter and exit the market. They can make money if they enter the market early, buy high, sell higher, and exit in time. On the other hand, those who get in late with no exit strategy often end up holding the hot potatoes.
2. The Bears
The bears are the opposite. There are indifferent to the good news reported in the media.
As a born conservative, they are not excited by any property project that claims to be a good buy and sells like hot cakes. They question any property segment that the market believes to be hidden gems with good potential.
When the bulls are busy shopping, the bears are seen hanging around doing nothing at all. In fact, they do nothing most of the time.
The bears believe in buy low sell high. They only buy when there are few buyers in the market.
They enjoy fishing at the bottom. After a major market correction, they look everywhere for undervalued assets, fire sales and distressed sellers - like hungry bears combing the forest for preys.
3. The Pigs
The pigs are courageous high-risk takers. They are impulsive and impatient. They rush into the market for quick bucks without doing their due diligence.
Similar to compulsive gamblers, the pigs are often driven by their greed for fortune, fear of losing out, sixth sense and intense emotions. When they take the plunge, they strongly believe that they are winning big this time, though they may end up losing big.
A species of the pigs is the guinea pigs. They are open to all novel ideas in property investment.
Guinea pigs are fascinated by future potential of every up-and-coming development district or project: Iskandar, High Speed Rail, new MRT line, Jurong Lake District, Paya Lebar Central, Woodlands Rapid Transit System, Punggol Digital District … you name it.
They are also the first ones to sign up any new property scheme, including deferred payment scheme, stay-then-pay programme, two-year lease option, decoupling, crowdfunding, land banking, etc.
But because these new markets are still in planning, under development, unregulated or unproven, there is a high chance that things might go wrong. As the saying goes,
“Bulls make money, bears make money, pigs get slaughtered.”
4. The Chicks
The chicks are first-time home buyers or amateur investors in the property market. Seeing how other chicks have grown up to be chickens, they pluck up their courage, step out of their comfort zone, and learn to spread their wings in the exciting investment world.
These greenhorns lack the knowledge, experience, confidence and capability to strike out on their own. They are hesitant and undecided. They look around for to-buy-or-not-to-buy advice but can’t really tell who can be trusted.
The chicks are easily frightened. Any unexpected change in housing policy or market situation can scare the shit out of the chicks which leads to irrational investing behaviour. As a result, they are often seen buying under pressure or selling out of panic.
5. The Sheep
The sheep are loyal followers of the herd in buying properties. As I say in my blog post “How easy is it for Singaporeans to fall victim to herd mentality?"
“... buying under ignorance, greed, fear, insecurity, kiasu or herd mentality. Many lack the ability to think for themselves, and differentiate whether the information presented to them is true or false. Instead of evaluating risk and return, they go along with others, thinking that it is safe to follow the majority. And the herd goes around like parrots repeating what everyone is saying.”
When the market crashes, it is common to find others who end up with the same fate. And it is a relief to know that ‘we are all in the same boat’. Are people afraid of missing the boat and can’t wait to jump into the water? Or do they think that the sinking boat is safe provided that the majority of the people are there?
- Property Soul, No B.S. Guide to Property Investment
6. The Roosters
The roosters are proud animals who make use of any occasion to boast their past successes in property investment. Whether they are true or not, nobody knows.
The roosters is a common sight in the property market. They are like ERP gantries in Singapore. You always see one in front. Roosters don’t only crow at dawn, but crow any time of the day and any time of the year.
Unlike bears who mainly keep to themselves, the roosters are generous in sharing their wisdom and expertise in buying into any property project, district or market segment.
However, when ill-informed buyers follow those “expert” advice and lose money, the roosters never admit that it is their mistake. If anything goes wrong, it is not about the roosters, it is about the market.
The market is unpredictable. Anything can happen. Besides, all investments come with risk. Investors are advised to access their risk appetite and read the fine prints before making any investment decision.
If the roosters happen to be company spokespersons, they are quick to turn the tables any time and trim their sails to the wind.
If unfortunately they taste their own medicine and lose their shirt, they may choose to keep quiet and disappear for a white. But before long, they are back in the market and talk cock again.
7. The Monkeys
The monkeys are savvy property investors. They are sophisticated, resourceful and highly-intelligent. They collect their “intelligence” from reliable sources, validate it with the right parties, and take timely actions on their own or through their connections.
They always keep their fingers on the pulse of the property market. They can benefit from a market shift, manipulate the loophole of a property rule, and twist it to their advantage in order to profit from it.
Many monkeys are property traders who flipped properties when prices started to pick up in 2009. They acquired properties under their companies before 2011. They bought homes under their children’s names before the launch of TDSR that targets two-generation buyers.
The monkeys master the trick to get in quick and get out fast, right before the government closes the loopholes. They know how to make quick bucks without being caught.
To achieve this, they reply on a winning team with some indispensable team members: a savvy investor to scrutinise the deals, a banker to provide exclusive and flexible financing options, a lawyer to get the contract terms right, and an accountant to face IRAS on taxation matters.
Differences between the bulls and the bears
At the workshop, many participants admitted that they are bulls and sheep. Some are bears.
I clarified with the class that, in property investment, there is no absolute good or bad for being bulls or bears. Both bulls and bears can make money, provided that you are not pigs.
It is about differences in personal characters and investing styles. Just like in a relationship, there is often one partner who loves the other more. The one who loves more tends to give more and is more loyal in the relationship.
The bulls are more generous in love. They are willing to give their everything without asking for reciprocation in a relationship.
When the bulls find a dream home they really like, their passion and obsession will make them pay any price for the property.
They also tend to be more loyal to their purchase. Because they often buy at a high price, they will be stuck with it for a long time. Or at least it will take them much longer to buy the next one, if it ever happens.
On the contrary, the bears love themselves more than anyone. In fact, they will not love anybody who doesn’t love them in the first place.
The bears only buy from eager sellers in a depressed market. They don’t fix their eyes on one property. They know that they don’t have to stick to one deal. Fishing at the bottom allows them to afford buying more than one property.
They are value-seekers who always buy properties with a comfortable margin of safety. They are unwilling to pay more than their bottom line price. If the seller is unwilling to let go at their target price, they are prepared to walk away to look for the next good deal.
After all, they are shopping in a buyer’s market. They know that the sellers need the bears more than the bears need them.
The bears may be selfish lovers. But no one really hates them. After all, it is a free market with willing buyers and willing sellers.
I am a 100 percent bear. What property investor animal are you?