How is buying a condo a good investment?

[sikishrory]

Example:

The condo I rent at the moment is worth 1 million baht. This is what others in same building have sold for and they're exactly the same.

I pay 7000 baht a month rent.

Simple maths...

1000000÷7000= 142 

142÷12= 11.8

So it would take 11.8 years to pay it off and start making a measly 7000 a month out of it.

This is not taking into account all the fees you pay as an owner.

People in Bangkok and Pattaya are spoilt for choice when it comes to buying/renting NEW condos.

I have rented 3 in both areas all new and 10k or less.

I imagine resale would be a headache when people can get new ones so cheap.

If you google "top 30 countries to invest in property" Thailand comes in at number 7.

I have always thought it was a terrible idea but this got me thinking maybe I am missing something or not seeing the bigger picture.

Phillipines was number 1 on this list so as someone looking to buy some investment properties but so settled in Thailand already I would love to know more. I suspect Phillipines condo scene would be a similar story but that's purely a guess.

 

[KittenKong]

I suspect that many people who buy condos for rental income here either arent very bright or arent paying the full asking price.

 

Personally I would much rather own shares that pay a 4% dividend with no ownership costs at all, and which also have a fair chance of increasing in value with inflation, or better.

 

I am particularly unwilling to have many assets in a country in which I have no right of abode, and which is quite xenophobic.

[blackcab]

33 minutes ago, sikishrory said:

This is not taking into account all the fees you pay as an owner

 

Don't forget the fees you will also probably pay as a seller.

[Jingthing]

As a condo owner I would advise most people to RENT. 

[Jingthing]

25 minutes ago, KittenKong said:

I suspect that many people who buy condos for rental income here either arent very bright or arent paying the full asking price.

 

Personally I would much rather own shares that pay a 4% dividend with no ownership costs at all, and which also have a fair chance of increasing in value with inflation, or better.

 

I am particularly unwilling to have many assets in a country in which I have no right of abode, and which is quite xenophobic.

You hit the most risky part. Owning an expensive asset with no residence security. It's hard enough to sell a "used" condo here. Try it if you're forced to leave for a number of possible reasons including issues with getting your next extension. People, often older people, can be financially ruined for life in such instances. 

Edited January 11, 2019 by Jingthing

[NCC1701A]

53 minutes ago, sikishrory said:

f you google "top 30 countries to invest in property" Thailand comes in at number 7.

here is the story with Thailand as number 7:

https://www.businessinsider.com/best-countries-to-buy-rental-property-earn-passive-income-2018-5#1-philippines-25

 

this article is thin on real information and full of beautiful photoshop.

 

some people who own condos here say they are happy breaking even after selling and they think of it as living rent free for 10 or 15 years.

 

 

[Jingthing]

9 minutes ago, NCC1701A said:

here is the story with Thailand as number 7:

https://www.businessinsider.com/best-countries-to-buy-rental-property-earn-passive-income-2018-5#1-philippines-25

 

this article is thin on real information and full of beautiful photoshop.

 

some people who own condos here say they are happy breaking even after selling and they think of it as living rent free for 10 or 15 years.

 

 

Yes, that is a big benefit of living in a place long term even without any/much capital gains. But the risks are still there -- often really hard to sell at all even at a loss and residence insecurity carrying the risk of eating the condo investment. So overall I would still advise foreigner to not buy here which would make me the worse salesman in the world if selling my own condo. 

Edited January 11, 2019 by Jingthing

[NCC1701A]

I think some people who invested in a condo in Bangkok in a GOOD area and building say around 2005 have come out way ahead.

 

of course the problem is not getting your view blocked and selecting a building that has a good association with maintenance and rule enforcement.

 

I did read that condo buildings actually have a 30 year lifespan. After that the building becomes really hard to maintain without a total refit.

 

 

[anon7854]

 

I would not invest my money in a condo in Thailand.

 

Reasons are below :

 

1) You will have a hard time selling it. Thais (have my Thai sources ???? ) like to buy new condos unless you really drop the price which I wouldn't - after all I want some profit not to lose money from transaction

2) volatility of the political / economical domain. I won't buy anything in a non-democratic country where i could lose "my rights" in a second or get taxed to death or indirectly "forced" with different political measures to leave country.

3) renting condos (air b&b style) is illegal

4) If you are looking for profit , why bother with a market like Thailand where the supply is much higher than demand? It's stupid.

Graph Credit: Knight Frank Bangkok Condominium Market Report Q3 2018

[baansgr]

11.8 years is very quick.  UK takes 25

[BritManToo]

9 hours ago, sikishrory said:

I pay 7000 baht a month rent.

Simple maths...

1000000÷7000= 142 

142÷12= 11.8

So it would take 11.8 years to pay it off and start making a measly 7000 a month out of it.

This is not taking into account all the fees you pay as an owner.

What about the 6% compound interest on the loan?

That makes it about 24 years to pay off.

Edited January 12, 2019 by BritManToo

[GinBoy2]

This is one of those almost impossible questions to answer.

 

Everything depends on location in real estate.

 

I would never never ever recommend farangs to buy anything outside of the central area of Suk.

 

The Thai condo property market is so overbuilt in general, you really need to be awfully cautious.

 

I owned 4 units in Noble Remix Bangkok, mainly because I researched it was a prefered destination for Japanese expats, and indeed all of my tenants over the years were Japanese. They pay the rent on time, and not that needy, and I could always get new tenants when one moved out.

 

That scenario I don't think applies to Pattaya, Phuket or Nakorn Wherever, and equity loss is probably more likely

 

Now on equity, I broke even after finally selling and taxes and fees etc.

 

My rental income made it all positive, but honestly I'm glad I'm out

[SheungWan]

Some places have turned out to be sound purchases for their owners.

[GinBoy2]

1 hour ago, SheungWan said:

Some places have turned out to be sound purchases for their owners.

That's an interesting point.

 

A lot of real estate investment comes down to, is it an investment or somewhere to live.

 

If, you're buying somewhere to live, then all bets are off, it's your home, not a financial instrument.

 

So if it's an investment, it's no different on gambling in the stock market, and do your research

[KittenKong]

2 hours ago, SheungWan said:

Some places have turned out to be sound purchases for their owners.

The only people I personally know in Thailand who ever showed a profit on a condo either bought at well below the advertised price or bought decades ago or sold to a pigeon who didnt know the real value of what he was buying. The sales taxes and agency costs alone make it very hard to show a profit, as both are very high here compared to some other countries.

 

I estimate that my own condo would probably show a 20+% loss if I sold it, and that takes account of the cost of improvements I have made. Thankfully my own condo was bought for me to live in and not as a rental "investment". The value of knowing that no one can force me to move out, or increase my rent unreasonably, or stop me from decorating/modifying it as I wish, easily compensates for the cost of ownership as far as I'm concerned. That said, if there were many other condos similar to mine available for rental then I probably wouldn't care so much, but in all the hundreds of condos I have seen in Pattaya/Jomtien there has only been a tiny handful that I would want to live in, and I do live in one of them.

 

 

Edited January 12, 2019 by KittenKong

[lkn]

12 hours ago, sikishrory said:

So it would take 11.8 years to pay it off and start making a measly 7000 a month out of it.

We don’t know about common fee, agent fee, wear and tear, and downtime, but from your numbers alone, it actually looks like a successful investment.

 

You say a measly 7,000 baht/month, but it’s 8.4% and the investment itself was not that big, I would think that many has this amount in their bank account drawing interests closer to 0%, and your landlord probably bought for less than a million (years ago).

 

On a general note though, I would not buy a condo in Thailand as an investment, too high risk and it’s a physical asset that requires maintenance. But it’s very individual how you look at this, and your general question cannot be answered, just like you cannot answer whether buying Thai stocks is a good investment.

 

It depends both on the asset being invested in, and the profile of the person who does it.

 

Edited January 12, 2019 by lkn

[KittenKong]

3 minutes ago, lkn said:

We don’t know about common fee, agent fee, wear and tear, and downtime, .......

Let's not forget tax. I'm sure the owner does pay all the tax due on the rental income.

[SheungWan]

2 hours ago, SheungWan said:

Some places have turned out to be sound purchases for their owners.

I should point out that I am only really talking about purchasing for own personal use plus there should be some gain in currency movement on sale, assuming sale proceeds are going to be remitted. Having said all that, I have always rented here. Would I be better off if I had purchased 10 years ago? Well yes, probably, except I invested in property elsewhere. So as always it is about individual choices and circumstances. 

[Jingthing]

Personally I bought a condo to live in without any expectation of future profits. It seems if I do ever sell, those expectations will be met. Aside from the so called "free rent" which is of course not free because the money could have been invested elsewhere, there are the great non-monetary advantages of not having a landlord. I had owned in the U.S. before and had bad memories of petty landlords before I had bought. There is another big plus that I've found. Address reporting. I hear horror stories of people with landlords not cooperating with Thai immigration causing the tenants problems, also proof of address issues during extensions. Owning a condo, I informed them long ago, just show a phone bill at extensions, and reporting is always done in five minutes max. So of course as is so obvious, a personal decision with pros and cons, but at this point I wish I hadn't had bought here because it would be much, much easier to leave Thailand if I hadn't. It's hard to predict how you're going to feel about your current decisions several years later. I recall reading a study asserting that humans in general are very bad at that. 

Edited January 12, 2019 by Jingthing

[hydraides]

It is a great investment for Thais actually If you think about.

 

Many thais live/sleep in the same house with their families/parents till a much older age.

 

So if a 20 y.o invests in Condo ...............By the time they are 30 ish they will have a place to live completely free for the rest of their life

 

 

 

[BritManToo]

2 minutes ago, hydraides said:

So if a 20 y.o invests in Condo ...............By the time they are 30 ish they will have a place to live completely free for the rest of their life

Most home loans last 20-30 years, how do you calculate they will have a place to live for free after 10 years?

(OP mentioned 11 years, but only because he didn't include interest in the repayments, at 6% that would have taken 24 years)

[hydraides]

BritManToo , Because maybe They will also be earning through this period and so could easily pay off that interest?

 

 

 

 

[ThomasThBKK]

BritManToo , Because maybe They will also be earning through this period and so could easily pay off that interest?
 
 
 
 

That's not how you calculate it...
If you factor in the interest rate the total amount of money gets way more... If you would out that money into an index fund that gives arouns 5-7 percent yearly on average instead you are better off.


Then you have to factor in all the maintenance and costs for juristic officr that are also to still pay and it's even nore of a loss.

Most condos here take 20 till 30 years to brake even and then they are nearly falling apart.
Ops condo is one of the better ones but not standard at all.

Most people here just buy to flip them later for a profit but that's essentially just gambling and the best times to do that are long over.

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[luk AJ]

The OP is talking about a 1 milj Thb condo, if he likes the location and it is for own use I wouldn’t doubt and buy. I wonder though where these condos of 1milj are located..?
As investment, I would not even consider buying not worth the hassle. For own use I will always buy, this is not based on sound calculation but purely on feeling. Owning my own place where I can change, improve whatever I want is very important to me.



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[Destiny1990]

Ur calculations are incorrect..

take one year rent = 12x7000=84000.

84000:10000000x 100= 8,4% only.

then deduct fees ,taxes,agent commissions, maintenance and also 1-3 months that it sits empty in a year then it makes about 3-5% if ur views stay unobstructed otherwise even less then 3%...

[LomSak27]

5 hours ago, GinBoy2 said:

The Thai condo property market is so overbuilt in general, you really need to be awfully cautious.

Bing Bing Bing

 

We have a winner   

[scubascuba3]

Don't forget the threat of compulsory health insurance coming in the future. Being forced to do something doesn't make me keen to buy. Renting gives you more freedom for potential changes ahead

[phantomfiddler]

If you intend to stay here for a long time buying is a good idea, as long as the condo maintenance fees are not too high. Alternatively buy a cheap bungalow which comes with zero fees ????

[murraynz]

15 hours ago, Jingthing said:

As a condo owner I would advise most people to RENT. 

i agree. im also a condo owner, paid  5.5m, good building amazing view...im happy with the condo.but i dont ever consider it as an 'investment'. 

i have other funds, so wont ever be under pressure if i want to sell---they take sooo long to sell.

 

 

[Caine]

8 hours ago, baansgr said:

11.8 years is very quick.  UK takes 25

Yes but in U.K. property worth big money after 25yrs Thailand not worth a carrot and falling apart after 10yrs. That’s the difference.