House for sale & for rent

[Rc2702]

If a house is for sale and it also being offered for rent. 

 

Does this give an indication of the true price?

 

For example 

 

House rented for 20 years straight yields 10000 baht per month = 2.4m

 

That of course is providing it is rented throughout the 20 years.

 

Price of house is 2.9m 

 

Rent is 10k a month.

 

Any input appreciated.

 

 

[CharlieH]

One would assume that rental figure wouldn't be "fixed", rents will increase every few years the figure after 10yrs will be a lot higher.(dependent on condition and other variables etc). I dont think the rental is any "indication" it just demonstrates the owner wants to do something, either rental income or sale.

[AlexRich]

I've seen valuations calculated from the yield on the rent.

 

So a house with a 5% rental yield, with the rent at 10,000 per month, or 120,000 per year, is:

 

120,000

-------------

0.05

 

= 2,400,000 Baht

 

I'm not sure what the standard rental yield is in the area of Thailand that your house is? But if it is around 5%, then 2.4 million looks about right.

 

Edit: Just noticed you are quoting 2.9 m. That yield would be 4.13% approximately.

 

 

Edited September 2, 2018 by AlexRich

[Airalee]

1 hour ago, CharlieH said:

One would assume that rental figure wouldn't be "fixed", rents will increase every few years the figure after 10yrs will be a lot higher.(dependent on condition and other variables etc). I dont think the rental is any "indication" it just demonstrates the owner wants to do something, either rental income or sale.

I rented a brand new 1br condo with a sweeping unobstructed view of Doi Suthep in Chiang Mai from 2012-2014 for ฿14,000/mo.  The same condo is now listed for rent at ฿13,500.  The neighboring (smaller)1 br condo was ฿12,000 in 2012.  Now, a similar one is listed for ฿10,000.  Looking at other condos that were new around the same time, I’m seeing similar reductions.  These are desirable condos in good locations.  I don’t look at the dumps.

 

I’m now renting a condo for ฿19,000 in Bangkok.  Rents over the last year have dipped slightly.

 

Rents don’t always go up...they can also go down.

 

WRT the P/E ratios for condos, you can’t just take the purchase price and divide by the rental price.  One must also consider the monthly homeowners fees and perhaps any special assessments.  Plus, over time, furniture and other things need to be replaced (at the owners cost).  And don’t forget commissions for the rental agent.

[ukrules]

1 hour ago, Airalee said:

Rents don’t always go up...they can also go down.

 

Try that without moving.

 

My next door neighbour is attempting to sell their house for a price which would bring a 2.25% yield based on the rent I'm paying right now.

 

These people are deluded.

[Airalee]

6 minutes ago, ukrules said:

 

Try that without moving.

 

My next door neighbour is attempting to sell their house for a price which would bring a 2.25% yield based on the rent I'm paying right now.

 

These people are deluded.

I’m certain that had I never moved that my rent would never have gone up. ?. Better for the owner than the ฿0 she is getting while it sits empty.

 

2.25% is definitely crazy.  I’ve seen some ridiculous P/E ratios on the super high end units here in BKK.  Most notably was the Ritz Carlton.  Originally, they started at ฿65,000,000.  Now, you can scoop one up in the low 40s.  And rent a mid floor 2br for ฿108,000.  https://www.hipflat.com/listings/bangkok-condo-axlwawhp where a comparable condo for sale is ฿50,000,000. https://www.hipflat.com/listings/bangkok-condo-tafqvsiv

 

It it would make for an interesting (and eye opening) thread where we try to find the worst P/E ratios out there.

[ukrules]

8 minutes ago, Airalee said:

It it would make for an interesting (and eye opening) thread where we try to find the worst P/E ratios out there.

 

It certainly would. With the very expensive 'high end' places you expect the ratio to be kind of out of proportion, this is happening in lots of major cities.

 

I'm in a 3 floor town house, 4 bedrooms, pretty normal, the rent is 15k a month. Next door want to sell their identical house for 8 million Baht.

 

I once rented a one bedroom apartment just down the road, about 6 years back - price - 22k / month. Now they want 45k / month. I doubt anyone is renting for that price as it's not a great location (outskirts of Hua Hin) but the supposed rental price is set to match a 5% yearly ratio.

 

It's all a big scam !

Edited September 2, 2018 by ukrules

[Airalee]

I think I’ve found a winner...2.15% ( before homeowners fees and commission)

 

https://www.hipflat.com/listings/bangkok-condo-ilkcipaj

 

?

[ukrules]

Lets not forget the depreciation, that's right, investment properties often list a depreciation percentage, literally w.tf.

[baansgr]

17 hours ago, Airalee said:

I think I’ve found a winner...2.15% ( before homeowners fees and commission)

 

https://www.hipflat.com/listings/bangkok-condo-ilkcipaj

 

?

"not facing a cemetry" what's that all about

[Airalee]

39 minutes ago, baansgr said:

"not facing a cemetry" what's that all about

Haha!  I didn’t notice that.  Looks like there is a cemetery just to the north...and we all know how Thai people feel about ghosts ?

 

[jackdd]

I would consider somewhere in the 5% range as normal, but it does of course depend on how long the rental contract is, if you have to pay any maintenance by yourself or the landlord does everything, if it comes furnished, which facilites the place offers and thus how much the landlord has to pay for common fees and so on

[Rc2702]

I guess what I'm trying to say is do you think in such a situation it is fair and reasonable to make an offer based on the following. 

 

No rental income for near 5 months on property to date.

 

Offer 2.3m cash on the property. Would that seem reasonable given their asking for 2.9?

 

I think it's a good offer.

[Airalee]

49 minutes ago, Rc2702 said:

I guess what I'm trying to say is do you think in such a situation it is fair and reasonable to make an offer based on the following. 

 

No rental income for near 5 months on property to date.

 

Offer 2.3m cash on the property. Would that seem reasonable given their asking for 2.9?

 

I think it's a good offer.

Historically, real property investors (pay no attention to what a real estate agent will say) follow the 1% rule and make their offers accordingly because they know about all the hidden costs (such as no rental income for extended periods, etc etc etc) However, with interest rates so low for risk free investments (US treasuries for example) there is definitely some adjustment to be made.

 

https://www.investopedia.com/terms/o/one-percent-rule.asp

 

There is also another saying...to paraphrase...

 

“Dumb money buys overpriced assets with cheap financing.  Smart money pays cash when financing is expensive”

 

Being that you are most likely going to pay cash (as a foreigner), do you really want to compete with “dumb” money that can borrow more than they should be allowed to? 

 

 

[Rc2702]

Just now, Airalee said:

Historically, real property investors (pay no attention to what a real estate agent will say) follow the 1% rule and make their offers accordingly because they know about all the hidden costs (such as no rental income for extended periods, etc etc etc) However, with interest rates so low for risk free investments (US treasuries for example) there is definitely some adjustment to be made.

 

https://www.investopedia.com/terms/o/one-percent-rule.asp

 

There is also another saying...to paraphrase...

 

“Dumb money buys overpriced assets with cheap financing.  Smart money pays cash when financing is expensive”

 

Being that you are most likely going to pay cash (as a foreigner), do you really want to compete with “dumb” money that can borrow more than they should be allowed to? 

 

 

I just don't see it as that competitive here though.

 

Seriously I've been watching the market so long now I feel sorry for the Mrs.

 

We search every night.

 

We have records of loads of properties written down and the likely hood of property selling seems so low. 

 

A property you think has sold as it's no longer listed, suddenly reappears with a fresh listed date.

 

I looked at one recently with an asking price of just over 3m.

 

I mailed the farang advising him id need 18 months to come up with his asking price and all I had was X amount. 35% less his price. The guy was on it, giving me directions etc etc even after my admission. 

 

I have to get a good deal on this it has got to be a beauty of a deal if anything just to teach the Mrs about being patient.

 

The way I'm looking at this is if you have X amount.

 

Look for properties priced 30% more than you have.

 

I'm on all of them for 3 hours a week.

 

Kaidee 

Thaihometown

DD

Hipflat

Bank repossessions website

Mister location

 

 

[Airalee]

30 minutes ago, Rc2702 said:

I just don't see it as that competitive here though.

 

Seriously I've been watching the market so long now I feel sorry for the Mrs.

 

We search every night.

 

We have records of loads of properties written down and the likely hood of property selling seems so low. 

 

A property you think has sold as it's no longer listed, suddenly reappears with a fresh listed date.

 

I looked at one recently with an asking price of just over 3m.

 

I mailed the farang advising him id need 18 months to come up with his asking price and all I had was X amount. 35% less his price. The guy was on it, giving me directions etc etc even after my admission. 

 

I have to get a good deal on this it has got to be a beauty of a deal if anything just to teach the Mrs about being patient.

 

The way I'm looking at this is if you have X amount.

 

Look for properties priced 30% more than you have.

 

I'm on all of them for 3 hours a week.

 

Kaidee 

Thaihometown

DD

Hipflat

Bank repossessions website

Mister location

 

 

Yeah...I understand where you’re coming from.  I too spend a lot of time on a few property websites...more than I’d care to admit ?.   Looking for REO (bank foreclosures) is a waste of time.  I have noticed that not only do the banks only seem to list the “dogs”, but when I find condos and compare them to Hipflat listings, their pricing isn’t competitive at all.  Houses are harder to compare unless they are bog standard moobahn homes where every third house is a carbon copy.

 

Personally, I wouldn’t pay more than 180x monthly rent and I would make sure that I have accurately assessed the rental value.

 

Best of luck to you!