Buying a townhouse

[Avrock]

Hello TV people,

I hope everyone’s having a lovely long weekend. So I’ve got a few things on my mind that I need to put in perspective. The Mrs wants to buy a townhouse & she’ll be getting a loan from the bank in order to do that. The value of the property is 2M with the average rental value being around 7k.( not planning to rent,just mentioning for the sake of analysis) So the bank is quoting 3% interest rate for the first three years & afterwards 5%. What I’m curious about is that over a period of 30years suppose we pay double the amount of the actual value of the house & from what I’ve come to find out is that these town houses depreciate almost every time,why would someone want to buy property when they’re losing money throughout the entire mortgage period?

The second option is that we increase our budget slightly & buy a detached house. At least then there is a fine window of growth because of the land value.

So I’d very much appreciate it if the people having experience or exposure can shed some light on it.

 

P.S Please avoid with the farangs shouldn’t invest in property because I’m very well aware of that phenomena. Heard all the stories that come along with it.

Best regards

 

 

 

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[cranki]

Location would help..

[CharlieH]

Without wishing to state the obvious, but hasnt the bank or the lady determined the mortgage period ?

It seems these questions should be asked directly of the lender and not "guestimated" with vague info.

[CharlieH]

Inflammatory Troll comment removed.

[Avrock]

Without wishing to state the obvious, but hasnt the bank or the lady determined the mortgage period ?
It seems these questions should be asked directly of the lender and not "guestimated" with vague info.

Well with time everything would be “estimated” because we’re still at the initial stages of the process. That is why I am seeking for opinions of the TV members who’ve been through this process themselves.


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[CharlieH]

2 minutes ago, Avrock said:

Well with time everything would be “estimated” because we’re still at the initial stages of the process. That is why I am seeking for opinions of the TV members who’ve been through this process themselves.


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 "What I’m curious about is that over a period of 30years suppose we pay double the amount of the actual value "

 

How can anyone answer that without knowing the agreed term of the mortgage, the amount borrowed and the amount of deposit ? and repayment value ?

[ThomasThBKK]

We are talking about 2 mio USD not THAI BAHT? It's unclear.

[cranki]

2 minutes ago, ThomasThBKK said:

We are talking about 2 mio USD not THAI BAHT? It's unclear.

Thailand forum so safe to assume BHT....doh

Edited May 19, 2019 by cranki

[ThomasThBKK]

2 minutes ago, cranki said:

Thailand forum so safe to assume BHT....doh

Well, i never saw someone paying off a 2 MIO THB loan over 30 years, seems ridicoulus to me. 

That's like 5500 Baht a month...30 years of debt for 60k usd... urgs.

[sandrabbit]

The best advice I can give you is try different banks, we borrowed money to finish off a resort we were building as I didn't want to be crucified over exchange rates after brexit. The most helpful was the government savings bank (GSB the pink bank) who we did borrow money from and the worst was Siam Commercial Bank (the purple one), in between most of the other banks were indifferent. The total cost of the loan over the period we've borrowed was more than twice as much with Siam and even though they would hold the chanoute which is worth way more than the borrowed amount  they wanted my UK bank details so we fkd them off straight away. Another piece of advice stay out of sight or the banks will want you to be a guarantor.

[Avrock]

Well, i never saw someone paying off a 2 MIO THB loan over 30 years, seems ridicoulus to me. 
That's like 5500 Baht a month...30 years of debt for 60k usd... urgs.

There’s always a first time. When a relatively young person whose been working in this country & relies on the money that he earns, 2M baht starts to look serious money [emoji56].. We’re talking about 12-14k average monthly payments here because even though the value of the house might be 2M, in the end it totals up to around 3.5M over time..


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[ThomasThBKK]

1 minute ago, Avrock said:

There’s always a first time. When a relatively young person whose been working in this country & relies on the money that he earns, 2M baht starts to look serious money .. We’re talking about 12-14k average monthly payments here because even though the value of the house might be 2M, in the end it totals up to around 3.5M over time..


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yeah fair point, would save money first for a downpayment. 

 

Easier to get a better mortgage then and would make sure you can at least pay off before the 30 years are over or take one over 15 or 20 years max...You are essentially paying  double with a 5% mortgage over 30 years as is.

[Avrock]

 "What I’m curious about is that over a period of 30years suppose we pay double the amount of the actual value "
 
How can anyone answer that without knowing the agreed term of the mortgage, the amount borrowed and the amount of deposit ? and repayment value ?

Again like I said that it’s to early to give an accurate evaluation because the process involves the people from the bank coming to the property physically then assessing the value of the property & then giving the exact figures.All I have right now is a general understanding that was based on 2M loan with 5%MLR over a period of 30years. That is the general layout given to a buyer by the townhouse managements & in our case the bank directly.


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[cranki]

22 minutes ago, ThomasThBKK said:

Well, i never saw someone paying off a 2 MIO THB loan over 30 years, seems ridicoulus to me. 

That's like 5500 Baht a month...30 years of debt for 60k usd... urgs.

Yeah...really....well I bought two condos 8 years ago....for 3 mil baht each...terms were for 30 years based on minimum repayments....of course I didn't pay the minimum figures...both owned outright now.

[Bangkokhatter]

Again like I said that it’s to early to give an accurate evaluation because the process involves the people from the bank coming to the property physically then assessing the value of the property & then giving the exact figures.All I have right now is a general understanding that was based on 2M loan with 5%MLR over a period of 30years. That is the general layout given to a buyer by the townhouse managements & in our case the bank directly.

 

 

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If you are going to be the guarantee of the mortgage then you won't get a 100% mortgage, difficult even for Thais these days so you will need some down payment.

The rates you have given are pretty standard but you should really be considering a much shorter loan period.

 

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Forgot to add the agents that sit in the moohban office will all say we will give you loan no problem....they aren't the people who sign off on the loan

[Avrock]

If you are going to be the guarantee of the mortgage then you won't get a 100% mortgage, difficult even for Thais these days so you will need some down payment.
The rates you have given are pretty standard but you should really be considering a much shorter loan period.

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A shorter loan period would be a priority. Loan won’t be a problem that has been cleared out.
How I look at this situation is when people indulge in real estate they’re looking for the value to go up with the passage of time. Detached houses retain their value. The actual value is not of the house rather it’s the land value increasing due to the development overtime.
Let’s assume
2M townhouse 7k rental value 30 years time
If I rent that property I would pay 2.5M with no ownership over 30 years.
In case of buying
I would pay around 3.5M including interest while the value of that townhouse has depreciated from 2M to 1.5 where I am losing 2M.
I hope what I’m saying here makes sense. But this is how I see it.


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[Bangkokhatter]

A shorter loan period would be a priority. Loan won’t be a problem that has been cleared out.
How I look at this situation is when people indulge in real estate they’re looking for the value to go up with the passage of time. Detached houses retain their value. The actual value is not of the house rather it’s the land value increasing due to the development overtime.
Let’s assume
2M townhouse 7k rental value 30 years time
If I rent that property I would pay 2.5M with no ownership over 30 years.
In case of buying
I would pay around 3.5M including interest while the value of that townhouse has depreciated from 2M to 1.5 where I am losing 2M.
I hope what I’m saying here makes sense. But this is how I see it.


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Not sure about town houses losing value to that extent but like any property it's about location and price.
Times are changing with many younger Thais preferring there own place rather than renting or sharing the family home, most can't afford a nice detached place hence the amount of low priced town house moohbans being built.
I bought a place to live in with my family and don't give a thought to any value in 20 or 30 years time.

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[NanLaew]

1 hour ago, ThomasThBKK said:

Well, i never saw someone paying off a 2 MIO THB loan over 30 years, seems ridicoulus to me. 

That's like 5500 Baht a month...30 years of debt for 60k usd... urgs.

Yeah, but if the OP's wife ends up renting it out at 7k baht/month...?

 

Try not to conflate real estate prices and practices in the outside world with what is the norm in LOS.

[NanLaew]

41 minutes ago, Avrock said:

A shorter loan period would be a priority. Loan won’t be a problem that has been cleared out.
How I look at this situation is when people indulge in real estate they’re looking for the value to go up with the passage of time. Detached houses retain their value. The actual value is not of the house rather it’s the land value increasing due to the development overtime.
Let’s assume
2M townhouse 7k rental value 30 years time
If I rent that property I would pay 2.5M with no ownership over 30 years.
In case of buying
I would pay around 3.5M including interest while the value of that townhouse has depreciated from 2M to 1.5 where I am losing 2M.
I hope what I’m saying here makes sense. But this is how I see it.


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In the long term, be it townhouse, shop house or villa, it is cheaper to rent than buy.

[Avrock]

In the long term, be it townhouse, shop house or villa, it is cheaper to rent than buy.

It certainly seems like it..


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[ThomasThBKK]

43 minutes ago, NanLaew said:

Yeah, but if the OP's wife ends up renting it out at 7k baht/month...?

 

Try not to conflate real estate prices and practices in the outside world with what is the norm in LOS.

 

Then he still loses 7k a month as the mortgage is 14k, and has to pay his own rent anyway.

You might as well rent for 7k and save 7k and buy something when it's done.

 

Most foreigners buying here are paying with savings and don't pay interest rate, i suppose.

[scorecard]

2 hours ago, CharlieH said:

 "What I’m curious about is that over a period of 30years suppose we pay double the amount of the actual value "

 

How can anyone answer that without knowing the agreed term of the mortgage, the amount borrowed and the amount of deposit ? and repayment value ?

And any 'out' or 'early repayment' clauses in the loan contract.

[sandrabbit]

2 hours ago, NanLaew said:

In the long term, be it townhouse, shop house or villa, it is cheaper to rent than buy.

This is good advice, we own 3 properties and only 1 of them is worth more than it cost to build or buy. 

[Peterw42]

8 hours ago, Avrock said:

The second option is that we increase our budget slightly & buy a detached house. At least then there is a fine window of growth because of the land value.

A town house is usually on its own plot of land, not common property.

[seancbk]

9 hours ago, ThomasThBKK said:

We are talking about 2 mio USD not THAI BAHT? It's unclear.

 

We are in Thailand, why would he be talking in USD?    

And show me a Townhouse in Thailand that costs 64 million baht.  

 

[GreenerGrass]

You are quite right the house will depreciate and that goes pretty much for any house you unless it is in a prime location in Bangkok. If you can Not buy the house cash than you are much better of renting it. A townhouse worth 2 million after 30 years will need to be torn down,  they throw them up with very cheap materials. 10k a month mortgage 1000 community maintenance another 1000 minimum home maintenance. Do the math not too difficult 

[Pravda]

6 minutes ago, GreenerGrass said:

You are quite right the house will depreciate and that goes pretty much for any house you unless it is in a prime location in Bangkok. 

 

I'd never buy in Thailand, but my wife bought an older townhouse in 2010 for 800k and today it's worth 1.6mil and no these are not just asking prices. The one next to her sold for that amount recently.

 

 

[vukovar77]

9 hours ago, Avrock said:

A shorter loan period would be a priority. Loan won’t be a problem that has been cleared out.
How I look at this situation is when people indulge in real estate they’re looking for the value to go up with the passage of time. Detached houses retain their value. The actual value is not of the house rather it’s the land value increasing due to the development overtime.
Let’s assume
2M townhouse 7k rental value 30 years time
If I rent that property I would pay 2.5M with no ownership over 30 years.
In case of buying
I would pay around 3.5M including interest while the value of that townhouse has depreciated from 2M to 1.5 where I am losing 2M.
I hope what I’m saying here makes sense. But this is how I see it.


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True.Simple numbers!

[vukovar77]

28 minutes ago, Pravda said:

 

I'd never buy in Thailand, but my wife bought an older townhouse in 2010 for 800k and today it's worth 1.6mil and no these are not just asking prices. The one next to her sold for that amount recently.

 

 

Well,and how much You invested in this "old town house".I think at least 500-800K .How much tax and other charges did You pay from 2010,etc?It is not so rosy,right?

From my point of view ,more than 90% "farang" lose on real-estates in Thailand.

Much better for us is to rent here.

Edited May 20, 2019 by vukovar77
make more clear

[LukKrueng]

9 hours ago, Avrock said:

A shorter loan period would be a priority. Loan won’t be a problem that has been cleared out.
How I look at this situation is when people indulge in real estate they’re looking for the value to go up with the passage of time. Detached houses retain their value. The actual value is not of the house rather it’s the land value increasing due to the development overtime.
Let’s assume
2M townhouse 7k rental value 30 years time
If I rent that property I would pay 2.5M with no ownership over 30 years.
In case of buying
I would pay around 3.5M including interest while the value of that townhouse has depreciated from 2M to 1.5 where I am losing 2M.
I hope what I’m saying here makes sense. But this is how I see it.


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I am not a financial nor real estate expert, but as far as I know, if you take a loan for more than 50-60% of the property's value, it is better to keep renting. According to your numbers (value of the property and rental value), the return on investment (from renting it out) is about 4.2% PA and you pay to the bank 5% meaning you overpay 0.8% by buying it. As for future selling - you already calculated a depreciation of 500,000 THB over 30 years. The question is if you will actually be able to sell it (market demand/supply) and you didn't account for maintenance over the 30 years period