Buying condos to rent can offer path to riches

By Somluck Srimalee
The Nation

 

Perspective of Reserve Sathorn by Pruksa Real Estate Plc. Sathorn is one of popular location for condominium for rental, Plus Property said.--Photo by Pruksa Real Estate Plc

 

While the interest rate on savings remains stuck below 1.5 per cent, investing in property – and particularly in condominiums for rent –will be top choice for some investors who want to manage their money given that the return on investment for residential still generates a yearly return average of 5-10 per cent.

 

Wipa, 48, bought her first condominium to rent out in the year 2004 at Ratchada road at a cost of Bt990,000 for 30 square metres of unit size. 

 

She opened for rent at the price of Bt10,000 per month for the first two years after the condominium completion, while continuing to pay Bt6,500 monthly instalments to the bank. That left her with Bt3,500 per month in extra income that she put against the mortgage. Now the condominium unit already belongs to her, and provides her with Bt7,000 per month in income.

 

She then expanded her investment to buy two new condominium units. The first at Phetchaburi-Thong Lor road was a one-bedroom unit of 32 square metres and cost Bt2.5 million. The room is renting for Bt15,000 monthly, higher than her Bt11,000 monthly mortgage payment to the bank.

 

The second unit is located at Soi Lasan on Sukhumvit Road and cost Bt1.3 million. It is already renting at Bt6,500 monthly, equal to her monthly Bt6,500 payment to the bank.

 

“I decided to invest in condominiums when I saw the business opportunity to generate recurring income for the long term in a period of rising residential prices, especially in those locations close to the mass transit system,” Wipa said.

 

She added that when investing in a condominium, she selects the location by focusing on its proximity to office buildings and education institutes that will create a strong demand for condominium housing.

 

Vasin Mahaphon, 37, received an offer of Bt12.5 million for a 26-square-wah townhouse he had bought in Ekkamai Soi 28 for Bt5 million in 2012 – a surge of over 100 per cent in six years. The property was renovated at a cost of Bt1 million. 

 

“I moved to Ekkamai Soi 12 from Nonthaburi province six years ago after purchasing a 35-square-wah townhouse for Bt5.2 million plus a renovation cost of Bt400,000,” said Vasin in an interview with The Nation.

 

The strong demand for homes in the area later led to the idea of buying and renovating existing properties for sale, he said, adding that he had worked in Thong Lor for 15 years before moving to the location. 

 

Vasin began with the purchase of a 35-square-wah twin house for Bt8.2 million, followed by a Bt400,000 renovation. A year after, the house was sold for Bt12.5 million – a 45-per-cent price increase in 12 months.

 

As the rise in residential prices continued, Vasin turned to renting out his properties. Two units have now been taken up by tenants for monthly rentals of Bt60,000 and Bt70,000. 

 

“Rents rise in line with market prices. Besides, the sale price of my units will also be much higher,” he added. 

 

“The Thong Lor-Ekkamai area offers a range of facilities that sit well with my lifestyle. It offers many commercial premises, a vibrant night scene and easy access to the central business district. The area is usually quiet on weekends when I jog with my dog in the mornings,” Vasin said. 

 

Property agency firm Nexus Property Marketing Co Ltd (NEXUS) points out that the return on investments by those who buy condominiums to rent them out, records an average of 4-7 per cent a year depending on the location and the number of condominium units for rent around the area.

 

The company’s managing director Nalinrat Chareonsuphong said the three main factors for projects to make a high yield at 5-6 per cent are the right location, service and maintenance.

 

The first consideration of tenants is location. The project should be easily accessed, near public transport, linked to main roads and surrounded by convenience stores and restaurants.

 

Available services also have a strong impact on the purchasing decision. If projects can provide extra services such as a shuttle or private taxi, coordination with a room-keeping service, car wash or repair service agents, those projects are likely to gain more attention from tenants.

 

Maintenance helps sustain a good image for condominiums. If a project has been operating for a while with good maintenance, tenants feel confident and stay longer. At this point, investors will see higher returns from long-staying tenants than they would from newly-launched projects which that must be bought a higher average price.

 

Finding a condominium to invest in for a high yield goes beyond being located near the BTS or MRT. Success also depends on those other factors mentioned, Nalinrat said.

 

According to a survey conducted by the property agency arm of Sansiri Plc, Plus Property Co Ltd, the top three locations for investment in condominiums for rent are Silom-Sathon, Phaholyothin-Lat Phrao, and Phra Khanong-On Nuj. 

 

At Silom-Sathon records show rental prices average between Bt700 and Bt1,000 per square metre per month, an average return on investment of about 5 per cent a year.

 

Phaholyothin-Lat Phrao records show rental prices average between Bt520 and Bt542 per square metre per month, an average return on investment about 5 per cent yearly.

 

Phra Khanong-On Nuj offers a return on investment of 5-7 per cent a year by offering an average price between Bt500 and Bt600 per square metre monthly.

 

Although the investment in property sometimes generates a return on investment lower than investing in the capital market, the investment in property generates a sustainable return on investment when you succeed in selecting the right locations, the property agency found.

 

-- © Copyright The Nation Thailand  2019-07-23

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When the MSM is running articles telling me that buying (insert asset clsss here) will put me on the path to riches...that is my signal to sell (or go short) whatever the asset de jour happens to be.

Ridiculous - there are so many mid to low end empty condos at the moment if you buy one with the idea of renting it out quickly and for a profit you are mistaken. There are not enough prospective tenants to go round unless you are in the very high end market.

42 minutes ago, Maverell said:

Ridiculous - there are so many mid to low end empty condos at the moment if you buy one with the idea of renting it out quickly and for a profit you are mistaken. There are not enough prospective tenants to go round unless you are in the very high end market.

If you look at the high end market, you’ll notice that the PE ratios are consistently worse than the mid to low end market.  Many units asking 300-400 times monthly rent and that’s before factoring in the holding costs that come with ownership.  I have found that even in the US, in cities that I have lived (Seattle, L.A.) the higher end condos generally have much worse investment returns (either via rent or appreciation) than the lower end units.

 

You are correct regarding the glut of mid range condos.  My building is at 20% vacancy (per the management office), and I doubt that includes the owner occupied units that are listed for sale.

oh good. not much longer to wait.

It's official - the bubble is about to burst.

So many dummies claiming that keeping cash locked up in the west is the path to riches 

bahaha idiots losing exchange rate by the minute against the mighty baht

 

The only winners were those that sold up everything and "burned bridges" to catch onto the mighty mighty baht. The rest are losers there is no disputing that fact

3 hours ago, snoop1130 said:

average return on investment about 5 per cent yearly.

They don't mention that is gross,a tenant trashes your condo,

the deposit would not even cover it,for 5 % gross return its

just not worth the headaches and hassle.

regards worgeordie

So which real estate agent wrote this piece? Or rather provided "research material" for the journalist.

I thought it was ilegal for foreigners to rent out apartments.  

Just love those infomercials. What's next? Time shares?

10 hours ago, madmen said:

So many dummies claiming that keeping cash locked up in the west is the path to riches 

bahaha idiots losing exchange rate by the minute against the mighty baht

 

The only winners were those that sold up everything and "burned bridges" to catch onto the mighty mighty baht. The rest are losers there is no disputing that fact

Wow, instead showing where to succeed, you instead took the low road.  There was a moment where I thought we were about to pick out drapes and take long walks on the beach together.

 

It is a good idea to diversify and invest in parts of Asia. 

And meanwhile, you are running backwards and forwards to immigration with TM30,s and the whole exercise starts getting tedious ????

That's all fine and well as long as you have them rented out, if they arent that's when you have problems same anywhere else in the world

With a grossly overpriced Baht?  Or, did they mean buying a condo in Vietnam?

12 hours ago, madmen said:

So many dummies claiming that keeping cash locked up in the west is the path to riches 

bahaha idiots losing exchange rate by the minute against the mighty baht

 

The only winners were those that sold up everything and "burned bridges" to catch onto the mighty mighty baht. The rest are losers there is no disputing that fact

Are you OK? 

The article made me feel like I was reading the "You too can become a real-estate millionaire" promotions that were flooding the US... just before the bubble burst.

There are a multitude of factors that are not accounted for in this article~if you have connections~no problem

On 7/24/2019 at 11:17 AM, lahgon29 said:

Are you OK? 

why ? are you? and farang  laugh at Thais needing a calculator ????

3 hours ago, madmen said:

why ? are you? and farang  laugh at Thais needing a calculator ????

Ok.  Let me break out the calculator for the first example.  I’m not even going to need to go into details as it’s so obvious.

 

Purchased in 2004 for @฿1,000,000

 

Rented at ฿10k  ฿6,500 homedebtors payment + extra ฿3,500 applied to mortgage.  That’s good.  It’s always good to pay off debt faster....but...where are the monthly commons fees (homeowners dues, whatever) accounted for?  Income tax on rent?  Agency fees? (unless the owner rented it out themselves)  

 

Were there any special assessments for maintenance or capital improvements during that time? 

 

15 years later, the condo...mortgage free...provides her with only ฿7,000 per month income.  To me, that sounds like rents have fallen over the last 15 years.

 

How much would the condo sell for now?

 

 

On 7/23/2019 at 11:24 PM, Thechook said:

I thought it was ilegal for foreigners to rent out apartments.  

You thought wrong

Selling condos to people stupid enough to believe that "buying condos to rent can offer the path to riches" is the path to riches.

 

23 minutes ago, Airalee said:

Ok.  Let me break out the calculator for the first example.  I’m not even going to need to go into details as it’s so obvious.

 

Purchased in 2004 for @฿1,000,000

 

Rented at ฿10k  ฿6,500 homedebtors payment + extra ฿3,500 applied to mortgage.  That’s good.  It’s always good to pay off debt faster....but...where are the monthly commons fees (homeowners dues, whatever) accounted for?  Income tax on rent?  Agency fees? (unless the owner rented it out themselves)  

 

Were there any special assessments for maintenance or capital improvements during that time? 

 

15 years later, the condo...mortgage free...provides her with only ฿7,000 per month income.  To me, that sounds like rents have fallen over the last 15 years.

 

How much would the condo sell for now?

 

 

I have no mortgage and no tax. Sub 5 million lower Sukhumvit 80sqm  and rent it out on Airbnb 4 months a year at high season 45k per month or in the past rent it 35k per month full time and thats mighty mighty baht money I use when in OZ and travel through Europe

 

Now compare that to some dummy with safe money in the west !! that's rhetorical

 

next question?

On 7/23/2019 at 4:22 PM, madmen said:

So many dummies claiming that keeping cash locked up in the west is the path to riches 

bahaha idiots losing exchange rate by the minute against the mighty baht

 

The only winners were those that sold up everything and "burned bridges" to catch onto the mighty mighty baht. The rest are losers there is no disputing that fact

Money invested in property in the west is not 'tied up'. It more fluid than money tied up in the Thai property market. Even as property ages it remain its value in the UK and goes up in value and the renting market is busy. The idiot who burnt their bridges  invested in Thailand and now cant rent out or sell are the unwise investors. 

3 minutes ago, sunnyboy2018 said:

Money invested in property in the west is not 'tied up'. It more fluid than money tied up in the Thai property market. Even as property ages it remain its value in the UK and goes up in value and the renting market is busy. The idiot who burnt their bridges  invested in Thailand and now cant rent out or sell are the unwise investors. 

haha i can sell for what i paid and kill it on exchange rates. plus I have a great portfolio on the set with the baht screaming forward to new heights..the chinese and japs sweeping up everything in sight and Your income is equivalent to death by a thousand lashes and dropping fast with no end in sight..buy a calculator for god's sakes or use an online one!

 

Half the property sector in the whole world got smashed in the sub prime crisis and Thailand untouched so please keep your fantasy stories for those that are clueless

On 7/23/2019 at 10:22 PM, madmen said:

So many dummies claiming that keeping cash locked up in the west is the path to riches  

bahaha idiots losing exchange rate by the minute against the mighty baht

A few years ago you might be right. Right now you'd have to be a mad man to invest in the baht or condo market. Worst time possible as we're probably at the peak of both for the upcoming years.

6 minutes ago, madmen said:

and dropping fast with no end in sight

The end is already here. Declining tourism and exports, negative current account balance for the first time in 5 years. If you think this won't take a toll on the baht and condo market you're the one in fantasy land. I know you are happy with your investment and hope it'll continue to lay golden eggs, but all indicators point the other way around.

 

Less foreigners + crap exchange rates = less demand for condos + too much construction = market flooded with empty units. Now all that's left is the initial spark to ignite.

To me there is no surer sign of business genius than that of the man who has the time to come to the thaivisa forum to brag about his wealth.

On 7/23/2019 at 10:22 PM, madmen said:

So many dummies claiming that keeping cash locked up in the west is the path to riches 

bahaha idiots losing exchange rate by the minute against the mighty baht

 

The only winners were those that sold up everything and "burned bridges" to catch onto the mighty mighty baht. The rest are losers there is no disputing that fact

 

Seems like the Singha singlet wearing simpletons screaming ‘Sell’ are the majority here.  Usually smart money goes against the herd, and is often right.  Rich get richer and poor stay poor……