Answers to banter etc...below. I will try to post a sample model when I'm done - a few more days. It's not beautiful to look at, but hopefully it proves useful for others to start their own guess-timates when it comes to managing personal cashflow, figuring out how much one can afford to borrow and the fees surrounding a financing and subsequent exit for HKG property investments.
I've just arrived in Hong Kong but have lived in Asia for 10 years. Thanks for the guidance re: interest rates, I just hadn't bothered to check online yet and picked my estimates out of the sky.
Yeah - the income tax deduction is one that I've now included in the model.
Great to see the living cost estimates - gas, water, electricity....thanks. Wondering if everyone agrees or is similar ?
Maintanence - yeah agreed - I'm generally a conservative estimator at the onset... then later tightening up the assumptions. Maintenance will not factor greatly in my calcs going forward but will include a space for it in the model, in case we go with an older apt. Thankfully the model is not meant to go longer than 5 years at the most - which should keep a lid on major renovations/ repairs.
I looked at the mortgage insurance - good rates to use. The rates give a single payment rate and an annual rate. Can you explain the calc for each rate type - is it either / or ... or is it both, eg. an upfront and an annual ?
Like yourself, I'm big on gearing too. Borrowing at 4% is a great rate right now. I think I'll have a scenario that will gear it right up to 90% and weather the pain of big monthly payments for the short term and then exit upon departure from HKG in 3-4 years.
My model currently rewards the higher leverage - even with no appreciation realised in resale price upon exit. The problem is managing the monthly payments - which can be offset by different loan terms. I will explain more once it's complete.
Home vs. Mortgage
The home vs. mortgage is an easy debate for me... I can't afford to get a place in HKG that satisfies the quality requirement AND make another investment that is manageable, growable and headache free. The combo is a big plus for me right now.
Certainties in Life
Tax, tax...."Do you ever get the feeling that countries feel their citizens belong to them? " Well, for the sake of debate... let's kick it out to another thread. I'll get started on it shortly... but anyone else... feel free to start.
Investment property structures and taxation
Renting to your dad may be a tricky one in many jurisdictions because the rental agreement can often contribute to overall determination of residency ties which, in turn, are driving factors to taxation. For example in Canada, your situation would pose a problem for me because if I were renting to my father at a rate that wasn't at arm's length, the lease agreement would not qualify and I would be open to being deemed a resident of Canada because a property I owned was not occupied at market rates and open for my use. Residency / non-residency tax rules in Canada... another thread. The US system is different - they tax on citizenship - which makes it a very expensive passport to own if you're a US expat. And they've recently taken a hit on claiming limits for benefits too - another thread as well.
Hard to talk about the profits tax in general as rulings are made on case by case specifics. If you lived in the property, had a contract with an indefinite period in HKG - that would have to be pretty strong. But the intent to hold a residence after leaving HKG might be a subsequent intent to resell for profit. I would say you would have to demonstrate intent to return to HKG and the need to have a residence - eg. creation of more ties to HKG. Tough to argue if you rent it out while you're "away". One idea might be for you, as a resident, to structure a sale to your shell investment company to own, hold and manage the property for investment's sake BUT for a very high price, the very top of the market. Then a year or two later, after having collected some rent from tenants, you sell to third party at the low end of the market and compliantly take a tax hit but on a smaller profit spread. Fun to think about in theory - but in isolation, the structure and headache is probably not worth it for a regular apartment. Stamp duty would kick you as well. Needs more time and thought for a successful transfer/solution if trying to mitigate the challenge of intent by the IRD.
Love and War...
Re: shares & divorce...gotta ask - are you married ?