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Where would you invest a windfall?

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  1. #31

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    Have you studied carefully the history of the Property Cycle in Hong Kong and elsewhere?
    Once you do, you may be more confident in making investment moves.
    And you can hedge, by purchasing a cheaper property, or properties elsewhere.

    Let's take a HK$8.5mn Hong Kong property as an example.
    If you sell it, you can take about 1/3 of the proceeds, and buy 2-4 similar size (and quality) properties in other locations. The income you can earn from those other properties, can more or less cover the cost of renting in HK, if you choose to stay here.

    If you are ready to do such a swap ... the Question becomes:
    + Will the rental income associated with those other properties keep pace with the rental cost in HK?

    I think it will. And can provide specific examples - here in summary:

    + 2 BR flat in Manila : 600sf : cost HKD $1,200k : HKD$ 9,000 rent
    + 1 BR flat in Manila : 300sf : cost HKD $0,500k : HKD$ 4,500 rent
    + studio flat/ Manila : 230sf : cost HKD $0,400k : HKD$ 3,500 rent
    + 3 BR house / USA: 1300sf : cost HKD $0,600k : HKD$ 5,000 rent
    ===TOTAL/4 props : 2,430sf: cost HKD $2,700k : HKD$22,000 /mo.
    Last edited by DrBubb2; 11-09-2015 at 10:43 PM.

  2. #32

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    Quote Originally Posted by DrBubb2:

    I think it will. And can provide specific examples - here in summary:

    + 2 BR flat in Manila : 600sf : cost HKD $1,200k : HKD$ 9,000 rent
    + 1 BR flat in Manila : 300sf : cost HKD $0,500k : HKD$ 4,500 rent
    + studio flat/ Manila : 230sf : cost HKD $0,400k : HKD$ 3,500 rent
    + 3 BR house / USA: 1300sf : cost HKD $0,600k : HKD$ 5,000 rent
    ===TOTAL/4 props : 2,430sf: cost HKD $2,700k : HKD$22,000 /mo.
    Looks good in theory but when you think about it, 4 separate properties in different locations means:

    4 separate sets of management fees / ownership costs
    4 separate sets of appliances / equipment that needs to be maintained / replaced at regular intervals

    Are you going to travel out to each whenever there is an issue or a new tenant moving in? Probably not! That means you have to hire agents to handle things, that means potentially 4 agents to make commission payments to. A significant amount of that 22K profit is going to be bled away just by managing these places.

    Starting to sound like a hassle right? In this scenario I'd rather have 1 property close by, worth maybe 6-7 million HK which would generate similar income but with less hassle and with much less wasted time and money.

  3. #33

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    Your post makes sense.
    But here's why I am not so worried.

    The far away US property is rented for three years, and my 11% return is AFTER all taxes, mgmt, and maintenance costs (but before my personal income tax.) I have seen the property, and talked to the next door neighbor about its history. But there will be no need for me to see it again, or to seek a tenant, or worry about maintenance, since the price I paid includes all those services. If I do not want to extend the contract beyond three years, there's a buyback guarantee at 3-years at my initial price - so I can walkaway with an 11% pretax return. It sounds too good to be true, but I have 'kicked the tires" extensively, and am convinced that the deal is what it says it is.

    This leaves me with three properties in Manila. They are within easy walking distance of each other, and there is a reasonable possibility that I will move there, and live in one of the properties. That would leave me with two to manage myself. (I have owned as many as 10 properties at once in HK, and so owning three is not a big deal for me. The two rented properties should fund my living expenses, so I will not need to remit money into the country for living.)

    The other consideration is that the properties are not finished. The first will complete later this year. The second completes in 2017, and the third in 2018. If the first property proves to be too great a burden, I can sell it, and I still have 2-3 years to figure out what to do with the others.

    Last edited by DrBubb2; 12-09-2015 at 08:24 AM.

  4. #34

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    I get your point, jrkob: "This is not a hedge to the HK property market..."

    There's a basis risk on the Currency (PHP, rather than HKD), which is part of the reason that I can get a much higher yield. (Frankly, I expect that RENTS in PH will rise faster than in HK, so I may "win" on the basis risk that I willingly take - PH has higher growth, and more favorable demographics - and it starts much, much cheaper.)

    Part of the reason I have a US property in the mix, is to limit the exposure to the risk of a very weak PH Peso. I do not expect it to weaken against the USD long term, but it is possible.

    But the bigger issue is:
    I AM HEDGING MY OWN HOUSING COST Risk... not necessarily HK housing costs, since I can choose to move there, if HK costs continue to move higher.

    Last edited by DrBubb2; 12-09-2015 at 11:26 AM.

  5. #35

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    A random thought - look at car park leases / licenses. Not sure how it all works, but a few folks who have formed an investment group are doing well with this.

    http://www.landsd.gov.hk/en/stt/forecast.htm

    Last edited by shri; 12-09-2015 at 11:58 AM.

  6. #36

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    Are the triads now called investment groups, shri?


  7. #37

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    Cookie09 have always wondered. But these are quite respectable westerners with their own success stories.

    Too many risk factors and not sure how they mitigate them.


  8. #38

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    Indeed the risk factors would be my biggest worry on this one


  9. #39

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    Original Post Deleted
    btw, another who has taken "the plunge" into the philippines is Hullexile:
    https://geoexpat.com/forum/52/thread327381.html

    - and here, you can take a detailed look at some of the major metrics:
    http://www.greenenergyinvestors.com/...howtopic=18811
    Last edited by DrBubb2; 12-09-2015 at 09:40 PM.

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