20181123 (Fri)
What if the purchaser is unable to complete payment of the 20% loan to the banks?
The previous post we talked about a hardworking house buyer. Now, we talk about a lousy house buyer who cannot even pay off the 20% loaned from bank.
Imagine a RM300,000 property, paying at 20% bank loan (RM60,000) and RM240,000 is funded by Crowd Funding. 5 years into the future, this property will be worth RM400,000 (6% growth rate). Now, this lousy house buyer ended up in debts and unable to continue making payment.
What would happen to the RM300,000 property? By 5 years time, it might not be worth RM400,000 because there has been court cases, lapsed loan payment and lousy maintenance. It might be sold in open market for only RM350,000 – or even below its original price of RM300,000 – say RM250,000! Who is to bear the loss of RM50,000?
Yet, the investors are hoping for a good amount of interest return every year! Nothing less than 10%! Is this being ridiculous? NO! They can choose to invest in other instruments with greater return, so those who left or cut losses might have made back in other means of investments. It is just a free market.
Over and above, by now the fund manager have not been paid a single sen as yet! Taken the same scenario in the mutual fund, they would have asked for 10% yearly return, paying up fund manager fee of 2%, still left with 8% of solid returns!
Who got burnt? The P2P investors. Who got away with the money? The fund managers and the builders. The end losers are the buyer (consolation of a shelter) and worse are the P2P investors (nothing but lost of money)!