Greetings!
So this question is probably coming about 5 years too late but here goes...
Have come across an opportunity to buy a property in Kennedy Town (about 100 m from The Westwood/Belcher's development). Details:
1/F Unit
1 bed
379 sq ft flat WITH 600 sq ft terrace
30 yr old building (with lift)
Literally next upcoming new MTR exit
HUGE RENOVATION POTENTIAL
Asking price: 3.5 million
So my idea (like everyone else's) is to get into the who buy-renovate-rent to expats market. The place is really, really cool and has real potential for a top-to-bottom renovation job (budgeting max $400-500,000 for renovations).
Do any of the savvy investors on here reckon this sounds like a good deal?
The flat sounds small, but the lay-out is great, and with the right renovation, the place could really be something quite special (internal walls can be knocked down etc).
I would hope to rent it out for at least 15-20K after renovation.
I can't help but reckon that this may be a good investment bearing in mind that the new MTR exit (which is literally next to it) will be opening within the next 2 years.
Apparently all 'noisy' building work on the MTR station has been completed but I need to do a little more research to determine just how bad the coming works may/may not be (i.e. contact MTR).
Need some advice as I've heard mixed reviews on Kennedy Town - some say it's hippie town and nobody there would ever pay above 10K in rent, whilst others have said it's the up and coming expat place to be. My ideal tenant would be an expat bachelor/couple.
Obviously given the choice I'd love to be able to purchase a nice walk-up in Central/Soho but these are incredibly rare these days (hence the being 5 years too late thing at the beginning of this message!).
Also, best to buy outright or get a mortgage? This may seem like a silly question but I'm looking at rental yields, which actually work out better with a mortgage...
Any thoughts/advice would be HUGELY appreciated and many thanks in advance!!!
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Well, you're not buying it cheap but then again I don't think you are paying through the nose. Being next to the MTR will make it easy to rent especially if you have a good lay-out. I would budget more conservatively, say 11-15,000 in rent. Is it a terrace or a roof terrace? A lot of people like terraces but I would be concerned about falling objects if it is not a roof terrace - unless there are just a few storeys. By the way, don't you need to put down 50% if it's an investment property? I can't remember the rules now, they are so complicated. If you are putting in 50%, then a 1.75m mortgage over 20 years at 2% is about 9,000 per month so it should pay for itself (though of course you are giving up a chunk of capital). Also, if you are looking to rent out, remember this is a business. If you make it too fancy, it is unlikely you will recover your refurbishment expenses in rent at the lower end of the market. I have a 400 sq ft flat in Mid-levels. It's clean, freshly-painted and in the original format. Many tenants have asked me why I don't knock down the walls and make it really trendy and get more rent. The answer is simple. It would cost me at least 300,000 to do this and I would probably only get about 3,000 more in rent - that would take around 2-3 years to get my money back (after tax) and I would have greater wear and tear concerns. I also think there will be competition from other small flats in the area - I think there are quite a few when compared to Mid-levels etc. Having said that, if you are financially comfortable, you like the flat and think you can make a go of it then I would suggest you go ahead. I think you will make money but don't expect quick returns. Have been renting out small flats for years, if you want any advice feel free to PM me. By the way, keep the simple decor and try to put in a washing machine and dryer plus somewhere to hang up clothes. Above all, don't fall in love with the property and keep the rent resonable. Don't do short-term rents (at least 13 months) and never rent to business people/people wanting to cut down on servce apartment charges as paying rent will not be priority. Stick to HK residents who will tell you where they work (which you can check independently) and don't be afraid to take your time in choosing a tenant. Try to think of it as an airline seat that needs to be filled and keep the rent reaosnable.
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Wow, thanks a lot for all the info guys - some great points raised here. Am off out to a few banks and to look at some more properties in the Sheung Wan area this afternoon for some comparison - if you don't mind it would be really great to get some more advice on this, though I do need to sit down and do some calculations to see what options would be best for me, factoring in all the points you raised. Apologies if my message was a little vague, but further well-researched details and PMs on the way!!!
Loyd/walkup - have actually been following many of your posts on the property forums and was hoping that I would hear from you both, so thanks very much for the input!!! Have a great day ;)
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Actually, if I had HK$1.75m I wouldn't do this trade. I would buy HSBC. It has a yield of about 4.69%. An annual dividend works out at HK$82,000 - that's about HK$6,800 per month with no tax, refurbishment, tenant troubles and a better chance of capital appreciation. Also more liquid and will get dividend increases that would probably match any rental increase you could put through. Yes there is risk but there is also risk with this trade. Equity market looking very cheap at the moment.
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"I would buy HSBC. It has a yield of about 4.69%. An annual dividend works out at HK$82,000 - that's about HK$6,800 per month."
I reckon the dividend may be less secure than a rental return, especially if Europe comes apart, and banks find themselves with huge capital shortages. I have move over half my cash from out of HSBC, into a "safer" bank.
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While I agree with Loyd that there is probably better value in the equity markets right now, I would not be putting all of my stash into the shares of one company.
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Yes, I'm not advising you to buy HSBC or a single company. Stick with what you know.
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Thanks for all the input folks.
Sorry, failed to mention that the Kennedy Town property I mentioned is actually in a pretty unlivable condition so renovation is a must (just to get it back to basics!). Revisiting property this evening with my renovation guy (family friend so will be getting accurate quote!) for a better idea of what we will need to budget. Going to backtrack on what I said about 500K for renovating; we're capping it at 300K.
TBH we are using this property as a 'starting point' and are unlikely to go ahead with the buy - just needed something concrete to work from as an example of calculations etc, and it was the first property we've looked at.
Spent whole day yesterday walking round SoHo/NoHo area all the way up to Tai Ping Shan/Square street as some of you suggested. Can't quite believe I've lived here for 20 something years and I've never been round those parts - really liking the area (i.e. I would definitely live there at least!) and have a few viewings for properties in the $3-4 M range later this week. Thanks for the tips!
Admittedly a little intimidated by some of the lingo on this thread - I'm a youngish (30), first-time property investor, and green as can be. Doing shed loads of research and homework to try and get my understanding of all this up to a respectable level (!) so also being extra-cautious about this all as I don't have bucket loads of cash and this would be my first entry into the property market...
Visited Bank of China and HSBC for mortgage information and to get a comparison of what I've heard is the best bank for mortgages and the worst. I've heard that BOC is the place to go for older properties i.e. chinese walk-ups, as HSBC won't go where they can't do a proper valuation on the property. Speaking of which, we also got a valuation on the Kennedy Town flat and they came back with $2.8M - the asking price is $3.5, and even though the bank obviously doesn't factor in the terrace and the new MTR etc., well let's just say we are re-thinking things a little...!
As for mortgages - I have heard about HSBC's notorious mortgage rates but was told yesterday that they might (note the word 'might') be able to get us this 'Deposit-Linked Account' - whereby the interest rate matches their mortgage interest rate of 2.15%. You can deposit up to 50% of the mortgage loan amount which means a 50% saving on the mortgage interest. Mmmmm.... any thoughts? I stress again that there was a lot of 'we might be able to' from the guy we spoke to, so a little unsure. He also mentioned a 1% cash rebate offer for the mortgage loan. Guessing that they have all sorts of these offers at other banks so also going round a few more to get some comparisons.
Anyway, so off out again to view more listings.... would really appreciate any more thoughts/advice on this as like I said I am a first-time buyer and not quite up to scratch on all my investment terminology (I'm much better with layman terminology!!!). The aim of this project is RENTING TO EXPATS (both residents and non-residents, though appreciate there is a difference even there) and we do have a knack for design, hence our interest in buying an older flat and doing it up (btw i say 'we' as i am doing this together with a mate of mine). Realise that many such properties have already been snapped up and are rare on the market but a little unwilling to buy a flat that already has refurbishment as this obviously means you're buying it at a marked-up price already. The only way we would consider such a property is if it has a tenant already, though this obviously means other issues i.e. we're not likely to be able to view the property before a buy, which we are unwilling to do. As we are in no rush and obviously still have LOTS to learn, we are willing to wait a little longer to see if any hidden gems do pop up - also want to see what happens with the market over the next few months, what with the new government and all this talk about an 'inevitable' dip in the market (though that's a whole other thread i know). lots of people are saying that waiting could actually mean us missing out on good deals as things are just going to go up and up, but i don't want to be too bullish on our first investment, and i am a strong believer that at some point something we want will come up (like i said, green...).
anyway, off out for more viewings - once again please excuse all my layman terminology and lack of investment expertise- but I am doing all the homework so hopefully these posts will gradually become a little more coherent ;)
have a great day everyone
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If you can afford it, get a small flat (The 'F" flats are 477 square feet) in Bella Vista, 3 Ying Fai Terrace, Mid-levels. I own there - and don't worry I'm not pitching it for sale. It's really quick to rent and you can demand a high price. The location is superb, it's quiet and the management and quality is good. I have a standard repayment mortgage with HSBC linked to the Prime rate (not Hibor).
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I've also found HSBC to be expensive. We have used DBS, BOCHK and SCB - generally whichever offers the best terms when we are looking for a mortgage.
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Here for 20 years and discovered Hippie Town and property investment... I guess this property caper has a lot further to go as the Clearway Bay and Sai Kung crowd jump in feet first!
I assume this place or similar was priced at $500k or less just 10 years ago. Just a reality check. It was too risky then I presume?!
Everyone's a designer too. At $1000 an hour the 100-200 hours of your time will not be priced in.
LGMV has it right, I think. A PE of 10 on HK shares beats a PE of 20-30 on direct invest property (don't forget HK property tax, stamp duty, agent's fee, empty flat costs, calls from tenants at midnight, people tossing fridges/TV/lite ciggies out of top floors - do people still toss TVs?).
Better yet, LINK REIT has a PE of 7.4 and div yield of 4.1% (PE of 7.4 means 13.5 yield!). Then with all that spare few hundred hours you visit each shopping centre and car park they own and check on your investments. You are then really invested in HK property with a nice annual income of HK$164k, no tax return either. Just what I would do. But most people will not be deterred by the facts.
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I would still buy property now if I were renting. I would buy if it meant trading up a level for personal use - ie moving from a 800 square foot flat to soemthing larger in Mid-levels. However, if I had my own place and I had that cash I would go with blue-chip equities.
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LGMV - thanks for the tip - checked out bella vista, nice development, though a little out of our budget. having said that, centadata showed a recent transaction on an F flat (462sq ft) for 3.48M which sounded good, but most F flats were going for 6-7M? reckon we're going to stick to our budget of 3M-3.5M for an older walk-up (or rather we don't have much choice!). now looking at the tai ping shan/square street area.
ovolo/traineeinvester - yes we have heard the same about local banks offering better mortgages so going to dedicate another day next week for further bank-hopping ;)
walkup - have noted what you said about HSBC giving lower valuations than other banks- reckon if we're going to be sticking to older buildings/walk ups we probably won't get an approval from HSBC anyway. we've based our calculation on a 3.5M property with a 50% mortgage investment, so we'd be putting down about 1.75M and are budgeting MAX 300K on refurbishment though we're not using a designer so possibly 150-200K might suffice (renovation guy is a family friend who will do it at a cut price). we are going to budget for both high and low property valuations however - will know more once we've visited more banks...
hkxxxpat - have noted what you said about property investment vs. shares but unfortunately i think i have lots more homework to do before i can get my head round those figures!!! as i posted earlier i am a first-time investor, and have lots more learning to do. property has always interested me (i know that's what everyone says) but as a hk resident i am also tired of throwing money away on rent and have been looking for ways to buy a property anyway. this way i figure that if a worst case scenario popped up and we couldn't rent out the property as planned at least we'd have somewhere to live too (with a mortgage equal to what we're paying now in rent), so that's why i'm thinking property over shares right now. figures have never quite been my strong point (though i'm obviously getting to grips with this in light of my plans to start investing!!!) so stocks and shares have always been slightly daunting.... :(
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SteffiInTheCity. You can always try low-balling - you may be lucky and get a panicked seller. I got our current flat at a steep discount doing this though I think in Bella Vista most owners are cashed up so you may want to try elsewhere.
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Mortgage = your current rent! So the question is why don't you just buy a home out where you live now?
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Hi Everyone -
Thanks for the input.
OK, so I'm going to lay it all out here in the hope that some of you may very kindly point me in the right direction (if there is such a thing).
I'm a 30 year old wanna-be first time property investor. Have been wanting to get into the whole buy-to-let-to-expats market for some time, and though I'm arguably about 5-7 years late into the game, I'm optimistic that there's still room for new investors (as some of you have pointed out here already).
Hoping to build a respectable property portfolio over the next 10 years. Why property and not another, arguably less-tiring investment vehicle? Simply because it interests me, and I'm hoping to take a hands-on approach with the renovation (i.e. no designers involved) and with the property management (no, phone calls in the middle of the night from arsey tenants doesn't put me off). Let's just say that if property moguls were the new celebrities, I'd have a poster of Dare Koslow on my wall.
Will be approaching this project together with my partner (who's local chinese), so looking for a joint investment mortgage. Another investor will be putting up the initial capital for us. I'm expat but have the benefit of being able to speak fluent cantonese, so I'm guessing this helps somewhat in the process.
Stats:
Maximum mortgage we can afford: 10K per month (Jointly)
Available start-up capital (including renovations): 2M
Obviously these are pretty miniscule numbers but alas, this is all we can afford. Right now we are torn between 2 properties so would love some advice - one is a walk-up in SoHo and the other a walk-up in Kennedy Town. The Soho walkup is about $800,000 more and both require renovation.
Obviously the SoHo property can get us more rent, however, I cannot ignore the capital growth potential of the Kennedy Town walk-up (it's literally 30 seconds from the new station).
Obviously as we only have the capital for 1 flat, we are looking for somewhere that's going to give us a higher return on the capital, in the hope that we can release the flat in 3-4 years and move on to our next - hopefully - bigger one.
It's clearly a question of calculations but I guess I'm asking if any of you would fork out for a Kennedy Town walk-up as your first investment?
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For investment to work you need to buy cheap so unless you low-ball and strike lucky, it probably won't work. If you buy now it will probably take at least 10 years to be in the money. Also, you are 30 and you may be getting married soon and need some cash quickly. How will this work with your partners? Also will your partners last the course?
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Also to trade up to a bigger property, unless you are very rich, you almost need to pay the first one off given the restrictions imposed by HKMA - ie 50-60pc down.Trading property is not easy any more because there is much less liquidity. It's a buy and hold market.
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but with an inestment mortgage we are already having to put down 50% of the payment, so it wouldn't take 10 years to get there?
my partner on this project is my life partner, and we have no plans for starting a family, so we're covered on that. the other investor (putting up the capital) is also family, so no partner issues whatsoever - buying it one off could be an option but we figured a mortgage would make more sense as we wouldn't need to put down so much capital?
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If you want to live in the property, fine. As an investment i wouldn't do it. You don't have deep pockets and the vast majority of your competitors got in at 50pc less.
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I see many different sides to the discussion above and think for mind clarity is needed for exactly what it is your intentions are.
Are you a real estate buyer or a property buyer as I think that the two are evry different. Real estate is your own pride and joy your slice of paradise so a lot different factors need to be thought out and considered in comparison to a property purchase which is just that - property. No emotional value the clear cut dollars and sense. Use leverage to the best of your ability never gear up too high 50-60% should be enough otherwise you will be severyly negative and never enjoy any sort of a yield play.
I have recently purchased my 6th property this time in London. I went for an option a lot have had bad experience with in Asia being Hotel room investment. I got a great deal from a company here called Pinnacle in a great up and coming area of London. It was well below market value and it came complete with lending already in place!!!!! did not have to sweet tlk my HSBC manager this time around thank godness. Plus it costs me nothing in management fees and I have no tenants to worry about and it will return a net net net cash on cash return of over 10%!! sometimes it pays to look outside the box a bit!
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BirdHK. Sounds too good to be true so it I'm sure it is. You're not trying to push dodgy property are you?
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@ Loyd - there was enough in the post to rule out even doing basic DD.
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BirdHK:
"Use leverage to the best of your ability never gear up too high 50-60% should be enough otherwise you will be severyly negative and never enjoy any sort of a yield play.
I have recently purchased my 6th property this time in London...
I got a great deal from a company here called Pinnacle
UNQUOTE
You have my sympathies. I cannot imagine a worse time to be buying in London.
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The truth? Here goes. You can't afford it. Buy a small flat to live in, like LMGV says, if you must. At least you get the benefit of your designer skills.
You are giving up the one thing that most of us don't have - financial freedom.
If the relative is really good, they would lend you the money for 10 years to buy a home (interest free) and you work like crazy to pay it off.
People who made money and frequent this forum typically just made it in a rising market. It didn't take a gift for seeing a great investment, it took guts to buy cheap when everyone else was doing the opposite. That's the lesson of the past few years. You are doing the opposite, buying high - which usually suggests you will sell low. That's fine because in 5-10 years I just might be interested in a beaten up rental property in Kennedy Town.
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thanks for the input, am taking it all in.
want to know also how it is that some people have gotten into the buy-to-let game (specifically buying up old walk ups, refurbishing them to western standards, and then letting them out at sky-high rents) and managed to acquire 20 properties in like 5-10 years? i refuse to believe that all these people started off with millions and millions of dollars because in that case why didn't they buy in the luxury sector which often gives far better returns without all the hassle?
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@ SteffInTheCity
I suspect that the number of people with 20+ properties is very small (and certainly does not include me).
It's a simple formula - save deposit - borrow the balance - refurbish - rent out - rinse and repeat. Personally I laike to keep each property cash flow positive which has always meant a large deposit (required in HK anyway). I tend to prefer basic fit out (=less upkeep) and am not interested in getting the top dollar in rent (= more stable and longer term tenants). I am not interested in flipping. YMMV
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Yes, I agree that such people are probably few and far between and most likely managed to acquire their first batch of properties in the 2008 era for what would likely only get you one property today. However, I al still optimistic that this game is not over yet, and there are still a few gems about that are at a decent price - though obviously not at 2008 prices. And sorry when you say 'rinse
does that mean sell?
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Steffinthecity. Refurbishing to 'western standards' is highly risky. You have to a) put in the refurbishment costs up-front and b) manage to find someone who will pay top dollar for a fancy flat in a run-down building. The best thing is to a) by the location b) buy the optimum size and c) repaint in white - or other basic colour and make it very clean. Put in some basic equipment like washing machine and microwave d) don't charge too much and aim for good, stable tenants
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@ Loyd - that's what I was trying to say (very badly). The expensive fit outs and fancy decoration generally means longer vacancies and higher upkeep costs.
@ SeffInTheCity - "rinse and repeat" is an idiom for doing the same thing repeatedly. Buy a property, fix it up, rent it out and then save for the next one.
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haha I doubt the 'rinse' means sell.. he just means that the previous 4 actions are repeatable.
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It seems I am the only one here with real doubts about this, except maybe LMGV. 30yo, no real capital, no experience and limited local knowledge, only $10k a month contribution, and hoping to build a property portfolio in 10 years.
I am sorry but $10k x 120 months (10 years) = $1.2m
But if for your own use, totally different. Then you might have $20k a month to contribute which is $2.4m in 10 years.
Paul Getty (dead rich guy) said: "Buy when everyone else is selling and hold until everyone else is buying. That's not just a catchy slogan. It's the very essence of successful investing."
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@off the peak....Everyone is entitled to their opinion so Ill grant you that. What is the size of your property portfolio look like I wonder? 2 HK properties and a world of knowledge? I take calculated risks and have enjoyed superb results and this time will be know different. I buy new build as old builds = trouble and expense. London has historically been the best property market since at least 1952 and WILL double its equity value without fail every 10 years so I wonder where your thought process is coming from? I own property in NZ, Aus, US, HK (live in) and also London and find the latter to be currently winning in performance.
@Lloyd & @trainee I have guys on the ground in London so do extensive DD I also am from NZ and have contacts in all other areas I invest in. I have a taste for up and coming areas and the part of London that excites me is the east particularly around the two arenas and the cable car. i went on the cable car last week....magnificent!! now strategically that makes my latest purchase a winner when you look at the tourism drivers in the area 25,000 people through the doors on day one?!?!? how can that be bad? I also have a pet peeve with management companies charging me extortionate fees for doing average jobs so it s a big tick when I have a tenant for twenty years and pay no fees!!
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BirdHK. LOL. Your pitch is really spivvy.
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BirdHK: Are you "flipping us one"?
Your:
"I buy new build,as old builds = trouble and expense. London has historically been the best property market since at least 1952 and WILL double its equity value without fail every 10 years so..." (19 hours ago)
Your comment is beyond Idiotic, and is moving into the area of "sublimely ridiculous". If you want to Buy-the-Top in London, I suppose that is your business. But don't expect others to follow you in such wealth-destructive behavior. (And buying new properties is an excellent way of over-paying at the top of a pricey market.)
Please put me down as calling the Top in London property prices, here and now - this summer. From where it is, I could see it falling 15-20%, and perhaps more than that, especially for overpriced new properties. What could drive it far lower, is if London somehow loses its status as a Safe Haven - Or if the UK has to shrink back the size of its banking sector, due to tighter regulation. I thnk this is likely, and needed.
London is and remains one of the Great Walkable Cities on the planet. If you have a good job, and loads of wealth, it can be a great place to live. I lived there for almost 20 years, before coming to HK. But at today's prices, property is just Too Expensive, and a Correction is due.
Bragging about hold many properties now is ridiculous. You should be boosting about how many you have sold. I once owned (over half a dozen), and I am down to one now. You seem just like the sort of fool who gets caught out by market moves. And I suggest you be careful, not cocky in a market like this.
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