Any investment carries risks, and the property market especially – but there are ways to minimize those risks. Members of the Vietnamese diaspora (Viet Kieu) can now buy property in their own name. If you’re one of them, take note of these 8 basic rules to safeguard your cash.
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Many of these rules might be plain common sense to some, but the best routes to a successful transaction are often the simplest. The new law which came into effect on July 1st 2015 has added a new dimension to the property market never before seen in Vietnam: legal ownership options for foreigners.
Mr. Ngo Dinh Han, real estate lecturer at the University of Economics Ho Chi Minh City, is positive about the impact of these changes, but is keen to reinforce good practice in this brave new world. Here are his 8 key rules of thumb for a safe and productive investment:
It’s not enough to have a Vietnamese name. To qualify as a Viet Kieu, and enjoy the same ownership rights as citizens of the country, you need to have your identity documented.
Currently, Vietnamese origin can be certified by the diplomatic missions of Vietnam abroad, the State Committee of Vietnamese living abroad, or regional Departments of Justice. This should be done as early as possible, or your ability to buy as a Viet Kieu will be limited.
If you can’t verify your origin, you can still buy legally on the same terms as non-Vietnamese foreigners.
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If you’re paying via a bank transfer, consult with financial institutions at either end of the transaction to ensure the specific needs of the law are met. There needs to be a paper trail documenting the origin of your money before a purchase can be ratified.
As for where the money comes from, it’s advisable to generate the cash from your overseas base, to limit exposure to Vietnamese banks’ lending rate fluctuations.
Do not part with money without legalities being entirely secured. This means ensuring the property has a “Pink book”, without which ownership cannot be verified. If someone offers you a bargain but doesn’t have the paperwork, run away from them. Quickly.
If you’re looking to buy into a new or developing project, double check both the legalities, reputation and realities of the developer you’re planning to do business with.
Don’t just look at prices and promising rates of return. Is the property what you actually want?
If you’re buying for rental purposes, is the Villa in Thu Dau Mot really your best option? If you’re buying now to live in later, will you want to have a property next to a university or industrial park?
Location, as ever with property, is the biggest factor. But not the only one. If you’re planning to buy without a deep understanding of the area, conditions, prospects and outcomes of similar projects, then – take a breath, step back and do your homework.
A professional, independent brokerage firm might be the wisest part of your investment plans. Regulations and legislation can be cumbersome, and stump even the natives, despite them being long-exposed to Vietnamese bureaucracy.
Engaging a third party to assist in the purchase is vital in negotiating what is still a new, emerging market. A trusted partner on the ground will have up to date insight into the real state of the market, as well as essential knowledge of how to deal with all aspects of the agreement.
By law, new developments must be fully guaranteed by the banks. If you’ve met all of your own obligations, this is hugely advantageous: if the developer fails to deliver as agreed, this guarantees a refund of all your payments to that date.
You can check which projects have been certified via the State Bank, who can tell you which of 33 banks are backing your project of interest. If you can’t get this verified, then do not buy off-plan.
Your investment is only as good as the state of your property. Ensuring the property is well-maintained is vital to securing any kind of return.
If you have family happy to keep an eye on the place and respond to the needs of tenants, great. If you don’t, use an asset management company – it’ll pay for itself in the end.
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If you’re doing this right, then you will have a lot of legalities to manage – your own Viet Kieu origin, dealings with brokerage and asset management companies, not to mention contracts, money transfers and keeping up to date with legislative changes.
Don’t be a hero – get a specialist lawyer you trust, and let them carry the load.
Of course there are things you can’t predict, and bad luck and dodgy dealing can always happen. But with the post-1st July law changes already boosting the market, it’s still a great time to buy – and these tips are a great place to start.
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