Some of you know that my office is in the International District of down town Seattle. It’s different than a China Town. We are surrounded by warehouses, produce markets, and jewelry stores. We are surrounded by commerce rather than tourists.
While prospecting yesterday in a new construction set of housing tracts North of the city it occurred to me that there is an unspoken investment strategy. I call it the Asian Factor because it is fitting a profile that I don’t think most people get. Number one, people from Asia are diverse. There is however a perception of the extended families sharing a house. There is the line of shoes outside the door or immediately inside. Some houses are run down and some you would never know some one had ever lived in.
Most Asian cultures are rooted in Buddhism which has a belief in reincarnation. There is a tendency to think very long term. There is also a kind of partnership mentality that runs along family lines. I have been told point blank that we are looking for houses for myself, then my sister, and my uncle. What is very real to me is that there is usually a down payment involved.
When dealing with Americans there is a saying we have in Real Estate: if a guy tells you he has ten thousand dollars in the bank you cut that in half, if a woman tells you she has ten thousand dollars in the bank you can double that amount. Asians have cash some place. It would be an embarrassment to shop without money. In the Asian community business is done with cash. It’s a matter of having a large happy face to project wealth. When dealing with wealth that wealth is based on cash, or tangible assets.
You can meet very old people in the Asian community that have nothing, some have cash, and some live with relatives. The tangible assets have been given, shared, used, or are the basis of the wealth of the next generation. You may find a very old person living in a building some place who still has control of the family assets, but that would be rare.
The point is that in the Asian community there are many more people who own assets, Real Estate, free and clear. Cars are bought with the idea they will be paid off. Some in the Asian community work two or three jobs to pay off debt. Some others actually hide from debt after creating it. There are very few rules when it comes to money. There is a shame factor. It would be shameful to get caught.
I mentioned that in passing because there is a tendency to believe there is something under handed when some one comes into your office with a hundred thousand dollars in the bank. I never question an Asian who tells me they have one hundred thousand dollars. I do have them sign a Buyers Agency Agreement, but I don’t question the amount. Another thing is that I have only sold Asian people Real Estate. I have never listed a property for sale. The reason, in my opinion, is that to buy a property takes some language skills that may be best spoken by an American. Selling is a matter of price, and money is traded within the Asian community whenever possible.
In the world of new construction an Asian family may buy with the intention of paying the property off. It’s the same as buying a new car. The new house and car is a matter of pride but it is also a stepping stone to wealth. If you own your car and house free and clear the world is open to you. I think anyone of you would agree that having your son or daughter have a nice new car, a nice new house, and a college education, is the best you can provide for them. In the Asian community this is also an ideal that may be for the oldest son or the entire family.
In order to do this there is sacrifice. The purchase price of a property is important but paying it off is the goal. Having disposable income means paying off debt. Putting money towards the principle is something that can be done by the owner or a relative. It’s all about the numbers. In terms of a return, how much down payment, then how much is thrown to the principle adds to the return on investment.
Let’s say you have put a hundred thousand dollars down on a four hundred thousand dollar house. Once the loan is in place uncle pays down the principle balance by one hundred thousand dollars. How quickly could you pay down that principle? Once you have paid the house off the money you would normally pay towards that house payment is now clear. You can sell the house or sell the house when you see the numbers working to pay uncle his investment with a gift of interest. You can work out a side deal to pay uncle from the money you have from the saved house payment.
Let’s go a little further down this road. As Americans uncle takes care of his own children or travels around the world. There’s a pull yourself up by your boot straps mentality. God helps those that help themselves. A stitch in time saves nine and a whole bunch of other worthless sayings about making your own money. Even though huge corporations of thousands or millions of stock holders can determine our financial fate we take a dim view of helping each other.
So, in terms of purchasing property as an investment there is a strategy for new construction, if you pay it off quick enough. One is that there is little to repair, second is that it has all of the current comforts and many times it is set up to be shared. With luck a current new construction house will look good for many years. The important thing is to make a good deal then pay the house down to where you have some cash when selling. With luck the house will go up in value and add to your cash, if not it is a forced savings plan and Buddha will smile on you at a later time.
