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We'll
Further assumptions: we'll assume a rental return of 7.5% per annum--starting 18 months after the date of purchase. also assume an annual 10% capital appreciation (in theory, the rental return should increase each year at the same rate--but we will under-estimate returns by ignoring that possibility).
Given all those assumptions, we can work out a possible return on investment.
1.
Cost: $US65,150. At $HK7.83/$US1, we borrow $HK510,125. On an interest-only basis, we pay the interest each month and at the end of seven years must repay the capital in full.
2. Interest. At 18% per annum, the interest is $91,822.50, or $7,651.88 per month. Over seven years, we pay a total of $HK642,757.50 in interest.
3.
Rental income. From month 19, we'll receive an annual rent of $US4,125 (7.5% on the initial purchase price)--$HK32,175 per year at $HK7.80/$US1. That's a monthly return of $2,681.25. Over seven years we receive $HK176,962.50 in rental revenue.
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4 Net monthly outflow. For the first 18 months, we
we must pay the total interest of $HK7,651.88. From month 19, rental income reduces our net monthly cash outflow to $HK4,970.63.
5. Capital appreciation. At 10% per year, by year seven, the property has appreciated to $US107,180. At $HK7.80/$US1, that's $HK836,004. However, if we realise this value by selling the property, we'll have to pay 5% to the real estate agent, reducing our total return to $US101,752.60 ($HK794,203.80).
Given these assumptions, we can project a net cost:
COSTS:
Initial borrowing
Total interest
TOTAL COSTS:
$HK510,125.00
642,757.50 $HK1,152,882.50
LESS:
Rental income Sale of property
$HK176,962.50 794,203.80
TOTAL
971,166.30
SHK
181,716.20
NET COST:
At $HK7.80/$US1, that net cost is $US23,297, or (over seven years) $US277.35 ($HK2,163.30) per month. Unfortunately, I don't know anyone willing to finance the transaction on that basis.
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