[quote]My wife and I bought an investment property in China because we not only wanted our money out of dollars and into RMB, we also wanted some leverage which we got to the tune of 5X through a 20% down mortgage from a Chinese bank.[/quote]
I hope you have plans an exit plan. You think RE is bad, just wait until the cards fall apart over there. The primary reason for appreciation has been foreign speculation which has driven prices up that no local can afford. Coupled with recent changes in lending standards in the Chinese RE to curb foreign speculation + policy changes that can happy overnight, it’s a big risk. Plus, I hope you have looked into RE laws. I doubt you have a legal claim to the property. You’re wife might as if she is still a citizen of PRC. If not, you’re probably using a proxy company and/or relative in the relative’s name. I hope you have done you’re due dilengence in RE laws there.
RE in china is interesting. Because there are so many “tiers”. Most foreign investors and/or most people without connections buy retail, which is alreday inflated. Then there’s the unofficial “friends and family” track, which gives you preferential access to RE at much lower price, typically given to friends and family of “priveleged people” (government officials, bank officials,employees,etc). In short, these folks get a first cut out of prospect RE from the builder and in recent times flip this directly to your traditional buyers at already inflated prices. It’s really complicated, a lot of red tape, and really requires a lot of connections if you want to minimize the risk.
Plus how do you plan on moving money back into USD if you need to? It thought the chinese government curbs maximum amounts of exchange from RMB back to USD. There are ways around this, like setting up a shell company and treating it as “necessary” currency conversion to perform a business transaction…It’s been a big problem with us despite having a linked account between BofA and China Construction Bank (partner in China).
