HANNA MUSIDI:
Hi, my name is Hanna and today we have our US tax expert, Derren. We also have our US real estate and legal expert, Jay. We will be discussing Us real estate forensic.
VOICE-OVER:
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HANNA MUSIDI:
Hi, my name is Hanna and I’m based in Indonesia and currently, I’m working in a US tax firm. And today we will talk about your US real estate forensic with Jay Knight and Derren Joseph. Would you please introduce yourself, Derren?
DERREN JOSEPH:
Thank you, Hanna. So this would be the third installment series on US real estate for Asian investors. My name is Derren Joseph and I’m a tax professional, doing international tax in general but US international tax in particular. And in this context, we’re talking about investors in US real estate.
HANNA MUSIDI:
Jay?
JAY KNIGHT:
Alright, thanks, Hannah and Derren, thanks for having me here again. It’s great to be back. My name is Jay Knight. I’m a licensed real estate broker from the State of California, and I work with Asian investors who want a pathway to deal with someone in America to help them purchase the property. So that’s a little bit about my background and looking forward to our discussion tonight.
HANNA MUSIDI:
Would you please introduce the case, Derren?
DERREN JOSEPH:
Right. So we did some searching in some online databases, legal databases, where you can, because when a matter is taken before the court in the US, for the most part, it’s exceptions, of course, but for the most part, they’re a matter of public record. So we’re going to talk about a relatively prominent Indonesian family who invested in the US real estate attempted or has invested into the US real estate. We won’t name names. We don’t want to embarrass anyone. Everything is freely available online, but we don’t want to use any names in this conversation because it will be distracting. What we want to do is focus on what happened and perhaps the lessons that would be learned that will be applicable to anyone.
HANNA MUSIDI:
Do you have anything to add Jay?
DERREN JOSEPH:
Okay, cool. So, Jay, I mean, you know, this is your wheelhouse, so do you want to paint the scene?
JAY KNIGHT:
All right. Yeah. This was a very tragic situation, although it probably isn’t all that uncommon. If we did a little bit more searching, I’m sure that we would find quite a few of these, and basically, it is a real estate scam. One-on-one maybe not be that egregious because we don’t know the actual intent of, of the, of the, in this case, the defendants, but it sure seems like that from an outside look. And basically what happened was, was a very well-to-do Indonesian family had invested some money after going to a real estate seminar that was held in Indonesia, and they were convinced to basically invest some money in what would be a limited partnership, which that limited partnership would then buy bulks of properties in the state of Michigan and America. And as a result of this limited partnership and the amount that they invested, which was going to be over a million dollars, they were promised that they would be granted some sort of visa that would allow them a pathway towards a green card and then future residency. So that was really the impetus to this whole case was they wanted to invest the money and they wanted to, they were very enticed by the fact that they were promised high returns and good investments, and also that they would have a pathway to this residency in America. So that’s kind of like the outlining area of what happened, right. So maybe you want to add a little bit more, but that’s kind of in a nutshell in terms of the overview.
DERREN JOSEPH:
Okay. Sounds good
HANNA MUSIDI:
I know we will talk about unlicensed professionals. So I guess with this Jay has more to say, would you please Jay?
JAY KNIGHT:
Okay? Sure. Well, unlicensed professional, it almost sounds like an oxymoron, right? I mean an unlicensed professional, although there are probably some unlicensed professionals and in this case, we want to be very, very clear that, you know, people that are not licensed and they’re doing are holding themselves out to do certain business. We have to be careful with, I mean, not to say that there are very important people that do certain things that maybe they’re not licensed to do, but when we’re dealing with, you know, anything, we want to make sure that we are dealing with trusted licensed professionals. So in this case, again, we, we have a very similar problem is that the people that they were investing money with this couple, from Indonesia that was investing money in this investment company, investment company, it doesn’t have to have a license to be an investment company, right. They can just hold themselves out to say, hey, I’m a real estate investment company. All right. I’ve known a lot of real estates investment companies. Some of them are legitimate. Some of them are not, but they’re not licensed. There is no license in that area. So you want to make sure then that, even if you’re going to invest in an investment company, that you get a licensed professional to work and represent you in doing so, so they can make sure and do all the due diligence that maybe you don’t have the expertise or the knowledge or the insight, or even just the know-how to do so. Working with licensed professionals is really important just from a due diligence standpoint, but also from a legal standpoint because if you have a licensed professional, you have a governing agency or a governmental board that you can go to and double-check to make sure that they are licensed. And also you can make a complaint against them because when you’re dealing with a licensed professional, the last thing that they want is to lose their license. And so most of the time they’re going to do things the way that they’re supposed to do them because they’re, they, you know, most of them are probably ethical anyway, but, you know, they don’t want to have any kind of repercussions or reprimand from the government body. So dealing with licensed professionals, again, very, very important part. And again, in this case, was a very, very key element or why they ended up in a situation that they did.
HANNA MUSIDI:
Derren, do you have anything to add?
DERREN JOSEPH:
Yeah. I think Jay had everything. Somehow they must have skin in the game. They must have some sort of risk as well. So that if things, they have an incentive to make sure that everything goes smoothly, because they know if things do not go smoothly, they can lose their license, which is how they are given permission to practice, whatever it is they’re practicing, whether it is as an attorney or a real estate broker or accountant, they must have some sort of professional accreditation. They must have oversight. And when you have no oversight, you have a dangerous person because that person has nothing to lose. Never do business with someone who has nothing to lose. And another red flag you have seen and looking at people pitching real estate investments from the US is if they only go to unregulated jurisdictions, they will only come to Indonesia. They’ll only come, go to Thailand, or they’ll only go to Vietnam. They will not put their foot in Singapore. They will not put their foot into Hong Kong or London or Sydney. Why not? Why not? Because they know if they were to ever be caught out and they ever, and again, we’re not saying that there was any intent, but if ever there was to be a misunderstanding with a resident of Singapore, the government will come after you. You’re not just dealing with a Singaporean and you’re dealing with a Singaporean government. They will make it difficult for you to come back whereas when you’re in a jurisdiction like Indonesia or Vietnam or Thailand not so much you could probably get away with it or Dubai but they tend to stay away from more regulated jurisdictions you flew all the way to Indonesia, you flew over London, why didn’t you stop in London. You flew via Japan, why did you stop in Tokyo, why are you deliberately targeting unregulated unsupervised jurisdictions so just this whole idea of not only not being licensed but avoiding any jurisdiction with a licensing requirement huge red flag.
JAY KNIGHT:
That’s a great point
HANNA MUSIDI:
Exactly I mean like okay in the US they have licensed broker or licensed real estate agency but here in Indonesia, I don’t think it’s normal to have a license in a real estate agency something like that so if somebody says hey I’m a real estate agency and it’s like oh you have a license and then Indonesian will say what do you mean license we don’t need a license to do this.
JAY KNIGHT:
Yeah, I think that I think that’s a really good point because if you come from a place where real estate agents and real estate brokers don’t exist having to have licensed it’s not a regulated area you may not ever really think about asking uh somebody that comes to pitch you something whether or not they have a license because you’re not familiar with it needing to have a license and I think Derren point is really really a very poignant point is that yeah they come to these areas where people aren’t familiar with you needing a license and that’s just how business is done in some areas so they think that’s nothing that’s no big deal that’s how it works right they don’t realize that there are people that do have licenses and that is the standard so yeah great point.
HANNA MUSIDI:
Okay. Great. Thank you so much Jay and Derren and then we’ll see you in the next episode.
VOICE-OVER:
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