A friend’s 500 sq ft (approximate), 3-room apartment in a Hong Kong tower in a desirable neighborhood is worth $4 million CAD, but rents for “just” $4,000 a month.
About .8% pa.
Real estate investing in HK brings poor cash returns, which means CDN real estate looks mighty tempting with cap rates of 3.5% to 6% or more.
You could buy (for $4 million), seven or eight 1,500 to 2,000 sq ft homes in Ottawa, a G7 capital, that are 15-minutes from the Parliamentary Precinct (ie, downtown).
You can add an in-law suite to create a legal duplex or a backyard coach house, and, presto, you are generating around a 6% per annum cap rate (net operating income divided by purchase price + renovations costs).
Now let’s compare these two options:
note: operating costs are guesstimated at 34% of GOI (ie, money spent on repairs, maintenance, property taxes, condo fees, insurance, vacancy allowance, property management (everything except mortgage costs))
If you invest your $4 million in an HK apartment, you’ll make about $32k a year after paying off your mortgage.
In Ottawa, you’ll receive around $240,000 a year in NOI (net operating income), seven and a half times more than what you can make in Hong Kong.
It’s no wonder Chinese investors are looking outward and overseas these days.
Bruce M Firestone, B Eng (civil), M Eng-Sci, PhD
Real Estate Investment and Business coach
Century 21 Explorer Realty Inc broker
Ottawa Senators founder
MAKING IMPOSSIBLE POSSIBLE
FREEDOM VIA REAL ESTATE INVESTMENT AND PB4L, PERSONAL BUSINESS FOR LIFE
FEHAJ, FOR EVERY HOME A JOB
Image courtesy of: Sakaori (talk) – Own work, CC BY 3.0, https://commons.wikimedia.org/w/index.php?curid=43023528
Tags: hong kong real estate
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