Countries and Property Returns

[MandM!]

Everyone on this forum is pretty interested in investments and property, so I was thinking we could all share our experience and returns on buying property in different countries, to help give an idea to others who might be looking to buy a property overseas.

If anyone is interested to add to the below, the return is estimated based upon long-term unfurnished rentals:

Location        |   Return (% pa)  |      Costs/Repairs/Taxes                   |   Ability to manage overseas   |      Appreciation
Hong Kong            2.5 - 3 %             Rates: 0.1% :  15% Tax                        Yes                                         Stable 
USA (suburb)        10+%                  Prop. tax 1.5-2% pa : Tiered taxes        Not really, 10% mgmt fee      +5% annually
USA (city)              6-7%                 As above                                                 As above                                Stable  
Toronto                  3-4%             Prop tax 0.5% : 15% spec tax : Taxes?      Unsure                                    Very strong
China
Thailand
Japan
Philippines
Singapore
Australia
New Zealand
UK

[Kowloon Goon]

Your "table" makes me dizzy... Basic spacing and punctuation are needed.

US market varies widely within many states. City and suburb belie this variation.

[jack55]

I thought at the end of the day just invest in the stock market. Housing is not an investment. So just buy a house to live in, and invest the heck out of the rest of it.
The net return for an investment property per annum is pretty lame and you're just counting on property appreciation at the end of the day.

Anyway I think Cambodia has really high returns on rentals but also expensive to finance. So if you can borrow money overseas to buy in Cambodia it's not a bad deal.
Cambodia 10% mortgage rate, rental return at 10.8%, net return 0.8%
Tokyo is nice. 2% mortgage, 4.78% rental return, net return 2.78%

[Kowloon Goon]

Housing is not an investment? What an unusual thing to say.

[bdw]

I thought at the end of the day just invest in the stock market. Housing is not an investment. So just buy a house to live in, and invest the heck out of the rest of it.
The net return for an investment property per annum is pretty lame and you're just counting on property appreciation at the end of the day.

Anyway I think Cambodia has really high returns on rentals but also expensive to finance. So if you can borrow money overseas to buy in Cambodia it's not a bad deal.
Cambodia 10% mortgage rate, rental return at 10.8%, net return 0.8%
Tokyo is nice. 2% mortgage, 4.78% rental return, net return 2.78%

The thing about housing is that it's easier to leverage. For example, you can just put down a 20% deposit and then borrow 80% from the bank. Then your profit/loss is based on 5 times what you actually put down. So you might only get 3%-4% rental return, but you are getting x 5 leverage which is actually 15% to 20% return!! Of course, you have a mortgage which you are paying interest to the bank so need to minus this from the overall return.

Investing is stocks is harder for most normal people to leverage. ie invest $100k in stocks and your profit/loss is just based on that $100k, not 5 times the boost that property can give you.

Having said that, I did find products like Standard Chartered 'Wealthpro' that allow you to leverage your stocks. For example, buy $100k worth of unit trusts with them, these unit trusts pay dividends and go up/down in value just like shares, but then Standard Chartered apply a ratio to each one and allow you to redraw this ratio to do other investing with. The ratio is normally around 70%. So invest $100k in unit trusts, they will allow you to redraw $70k out again and invest it in other ways.

[MABinPengChau]

The peasant in me likes to own real estate, at the end of the day it is property, not a piece of paper. Even when it loses value, still can rent it out...in the US, it is still relatively reasonable to buy in many areas. I also have just a pure speculative 100 acre parcel on a major road, just waiting for expansion of the nearby city. So I don't make any money on it, just watching it appreciate (300 percent so far, in about 15 years- at one point was 500 percent but then came back down). It makes me feel good...hoping that it will help finance my daughter's retirement, that's how long I am planning to hold it...

My one house rental (suburban MD) is about 10 percent net and my suburban VA flat is about 8 percent net then I have other property (one house, two flats) that relatives live in rent-free so not great returns on those... but they pay the taxes and maintenance fees so no cost to me... I have property managers do the house and the flat that are rented and it's been very smooth. What I really need to do is buy some more because I feel like the US stock market is headed for a a crash and would rather own more real estate. I haven't financed property since 1992 although probably should but, like I said, I am a peasant who just wants land...

[MandM!]

The stock market can go either way, dropping in value causing you to either wait it out or realizing a loss.

If my company ever goes bust, I am going to rely solely on my property investments to cover my living costs moving forward.

With property the money comes in monthly.

[bdw]

The peasant in me likes to own real estate, at the end of the day it is property, not a piece of paper. Even when it loses value, still can rent it out...in the US, it is still relatively reasonable to buy in many areas. I also have just a pure speculative 100 acre parcel on a major road, just waiting for expansion of the nearby city. So I don't make any money on it, just watching it appreciate (300 percent so far, in about 15 years- at one point was 500 percent but then came back down). It makes me feel good...hoping that it will help finance my daughter's retirement, that's how long I am planning to hold it...

My one house rental (suburban MD) is about 10 percent net and my suburban VA flat is about 8 percent net then I have other property (one house, two flats) that relatives live in rent-free so not great returns on those... but they pay the taxes and maintenance fees so no cost to me... I have property managers do the house and the flat that are rented and it's been very smooth. What I really need to do is buy some more because I feel like the US stock market is headed for a a crash and would rather own more real estate. I haven't financed property since 1992 although probably should but, like I said, I am a peasant who just wants land...

I agree with this sentiment. With property, I like the idea that its something you can buy now, it might take 30 years to pay it off, but during those 30 years someone is paying you rent so it doesn't really cost you a lot to hold, then after 30 years you will get the 'reward' of a steady income for the rest of your life and support your retirement. For me, if you have extra cash lying around that would otherwise just be sitting in the bank, its really a no brainer to put some of it towards this purpose. Again, I'm saying you only have to put 20% down yourself, borrow the rest from the bank and sit back and watch your tenant pay back to the bank for you over the next 30 years.

[MandM!]

I agree with this sentiment. With property, I like the idea that its something you can buy now, it might take 30 years to pay it off, but during those 30 years someone is paying you rent so it doesn't really cost you a lot to hold, then after 30 years you will get the 'reward' of a steady income for the rest of your life and support your retirement. For me, if you have extra cash lying around that would otherwise just be sitting in the bank, its really a no brainer to put some of it towards this purpose. Again, I'm saying you only have to put 20% down yourself, borrow the rest from the bank and sit back and watch your tenant pay back to the bank for you over the next 30 years.

The 30 years to pay off a property is a bit overthought. At least for me, I have paid off properties in less than half that time. If you do not overstretch your borrowing power, it's very easy to pay it off early.

Expenses are more stable, with a mortgage, the monthly repayment amount has went down for me, whereas rent for people goes up. Wages, bonuses or income generally goes up over time as well making it easier to pay off debt.

Now of course if you are not moving up in a career then you would experience different results.

[traineeinvestor]

The 30 years to pay off a property is a bit overthought. At least for me, I have paid off properties in less than half that time. If you do not overstretch your borrowing power, it's very easy to pay it off early.

Expenses are more stable, with a mortgage, the monthly repayment amount has went down for me, whereas rent for people goes up. Wages, bonuses or income generally goes up over time as well making it easier to pay off debt.

Now of course if you are not moving up in a career then you would experience different results.

All true but when interest rates are so low, paying off a mortgage early is not always the best strategy (obviously, depending on individual circumstances). For much of the last decade (or so) mortgage interest rates in Hong Kong have been below the rate of inflation.