who proclaims himself as ‘the prince of real estate investment’.
Irrespective how lame he may sound, I decided to hear him out. He threw a few punch lines like ‘started investing with only $20K just right before turning 30 and the value of portfolio is now more than $2M…. doubling the portfolio value within 5 years, etc.’ The first adjective I could think of at the time of encountering him was ‘hyperbolic’ and his speech supports my first impression of him was correct after all.
Perhaps about 10 mins passed but he didn’t seem to run out of steam despite how uninterested I appeared. I never doubt that he is young, energetic and passionate about investing in real estate but I was getting irritated by hearing too many empty cliché and famous quotes said by Robert Kiyosaki, Donald Trump and Warren Buffett. Hence I decided to teach him a lesson. This is how the conversation started.
BC = Brendon Cho
TP = The Prince of Real Estate Investment
BC: I found your story is inspiring but I would like to clarify a few things if I may.
TP: Go ahead. I can answer any question you ask.
BC: You better be careful what you wish for (smile). Now I have your blessing, I will ask without hesitation now.
BC: Here comes the first question. I understand that the ‘portfolio value’ means the ‘fair market value’ of your investment properties. Am I correct?
TP: Yes, you are correct (with the look of ‘Duh… I expected the question to be harder than this’).
BC: Thank you. Here comes the second question. What is the ‘equity value’ of your investment properties?
TP: Errr… come again? (with the look of ‘Oh… I did not expect such question like this’).
BC: Maybe ‘equity’ is an incorrect terminology here. You know equity? Asset – liability = equity. In this context the fair market value of your investment properties – what you actually owe to the banks = left over that actually belongs to you?
TP: Errr… I understand the formula but it is difficult to answer.
BC: Ah I see. I have a calculator here. I can help you with calculating the equity value (smile).
TP: Let me go back to the portfolio value again. This is more important than the equity value.
BC: Really? With all due respect, I beg to differ. Allow me to elaborate. Let’s say you have 3 investment properties of which fair market value is $2M. If you owe nothing (to the banks), the $2M portfolio value is a fair and reasonable representation of your wealth. However, if you owe something to the banks and its amount is about 80% that is $1.6M, I would say using the $2M portfolio value is….. purposefully overstating your wealth. Furthermore assuming that the equity value is less than 50%, technically the ownership of those investment properties actually belong to the banks, not to you. Hence pretending to own something that do not belong you is….. a false pretense, isn’t it?
TP: Well…. (having a panic attack he seems) let me answer it differently.
BC: No, you don’t need to. My question can be simply answered in a binary form – yes or no.
TP: It is not THAT simple to answer (voice raised with anger mixed with a bit of frustration).
BC: Then I say we are done here. In the future if you want to give someone an advice, make sure that either you are equal to him or better than him. If I were you, I would seriously reconsider proclaiming yourself as ‘the prince of real estate investment’. And FYI I have more investment properties than you have. And I paid off one in full before your last birthday and I am only 4 years older than you.