Investing in a property involves not only the purchase price of the property itself, but also the associated costs of the purchase.
In this 3 part series, we break the cost of purchasing a property into 3 categories, and have outlined the details in each one.
The categories are;
Purchase Costs – The cost of the property itself
Legal & Administration Costs – Taxes, notary, registration fees etc
Property Costs – Renovation, improvements and furnishing
We have covered Purchase costs and Legal and Administration Costs in the first 2 parts of this series, and this week we look at Property Costs and the overall summary.
Property prices in Macau are in HKD, so for the sake of consistency please assume that all prices here are in HKD.
For the purpose of this article, we are going to look at a property that is purchased for HKD 6,000,000.
However, be warned that these costs do fluctuate, and whilst the figures themselves may change, you will at least know what you are looking for.
Property Costs – $160,000
Property costs are associated with the property itself.
These costs are broken into 3 main areas;
1) Improvement Costs – $80,000
An improvement cost is money invested in improving the property.
For example, if you add a toilet or bathroom to the property, it is classed as an improvement.
Obviously there is an infinite amount of money that can be spent here, so you have to think carefully about what you are trying to achieve.
2) Renovation Costs – $30,000
This cost is associated with such things as painting the property, or re-plastering the walls.
These costs are generally ‘sunk’ costs meaning that you should not expect to get the money back.
3) Furnishing Costs – $50,000
Furnishing a property can be done as cheap or expensive as your taste and wallet dictate.
Some people prefer a huge TV screen and a couch you sail across the ocean on. Others prefer a more simple and less costly approach.
OK, its crunch time. Lets look at what we have spent;
1) Purchase Costs – $1,800,000 (cash required)
2) Legal & Administrative costs – $277,000
3) Property Costs – $160,000
Clearly you don’t need $6,000,000 cash in order to buy a property for that amount.
However, you will need a significant amount of cash, in this case $2,237,000 to be exact. Not a small amount !
Whilst this sum of money and complexity of the process may seem a little daunting, the agency role is to walk you through the process to make it as easy as possible.
Juliet Risdon is a Director of JML Property and a property investor.
Having been established in 1994, JML Property offers investment property & homes. It specializes in managing properties for owners and investors, and providing attractive and comfortable homes for tenants.