Posted by
syax
13 yrs ago
One sunny day, Tom cashes a winning 3 T, Dick hits the jackpot, and Harry makes a winning trade for Barclays each pocketing 10M big ones. There are 3 castles each on sale for 9.98M, or 26K/month rent.
(a) Tom plonks down 9.98M cash and lives rent free for the next 30 years, banking that he gets 5% appreciation in value a year
(b) Dick rents the sucker, and put the 9M in stocks, funds, bonds, CDs etc pockeing 8% pa, but withdrawing 300K a year in rent.
(c) Harry puts down 3M, gets a 30 yr mortgage averaging 4% with tax savings, and invest the rest as for 8% pa, withdrawing 400K a year for the repayment
Who's better off after 1 year? 10 years? 30 years?
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Who knows? How can the rent be predicted for the next 10 to 30 years?
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syax
13 yrs ago
Lack of response, well probably cos I'm really havent made ip my mind who i think would be better off. Yes, the question was deliberately academic, but hopefully fun. I dunno, to answer my own question, my gut seems to tell my Harry's probably smartest, although I'm not sure.
@walkup I guess I'm more seeing what everyone's reasoning is. There is probably no 'right' answer anyway. And I realize the example 8% is probably less realist. Maybe a 3% after inflation is probably more realistic.
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syax
13 yrs ago
@LGMV, good point about the rent. Hence, thr mult part question on 1 year on, 10 and so on. So I'm kinda thinking Dick would be better of over the first year, but possibly less so, as rents rise to a more realistic ratio. Not saying that the current ratio is not realistic, cos I randomly pulled those asking prices from a flat on offer on gohome the other day, the belchers it was.
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syax
13 yrs ago
Really interesting perspective, especially about the air quality. I've been here so long my lungs have probably adapted to the pollution (shudder). I've noticed the quality has improved in recent years though. Wonder if it cos of the LPG taxis and factories moving north.
Another thing, of the family, friends I've asked about this to, it's roughly 60:40 in favour of C to B, most saying its due to the low interest and house appreciation potential, and a few saying its due to they hate throwing good money into the rental black hole.
Finances aside, as obviously T, D, and H are in no way hard pressed, probably Harry's method would result in fewer gray hairs saving the need for musical chairs, expected of renting
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syax
13 yrs ago
In hindsight, i probably should have said a mortgage rate closer to 2.5%. Person (a) might have better been someone who pays off 7M, then mortgages/lives off the rest. If anyone's interested, i just found a really good thread on here, about the typical interest rates now for mortages: hong-kong-property/threads/118479/mortgage-loan-interest-rate?/ which led me to moneymoneyhome, and the approx 2.5%. For the castle you can replace it with penthouse, villa, trailer (pimped up), or whatever tickles your fancy, and the opening line: One sunny groundhog day, so all rates stays same ad infinitum...
P.S. Ed, these reply boxes are really hard to type into...
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syax
13 yrs ago
Must admit, I didn't think of that. I can see the benefits!
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