ROI Thais are happy with? (RENT)

[banagan]

I'm trying to get my head around the condo property market in Chiang Mai. 

I've been here over 8 years, and rents have either gone sideways, or over the past year, down another 20%+, there's just an over supply, and a pandemic! 

 

I bought a condo in an old building in 2019 for 750k, renovations, furnishing, total came to roughly 1mil. 

Pre-Covid rent, 7,000pm. 

 

The same condos were selling for 500k back in 2015, and the rents were pretty much the same. 

 

Rents have now dropped to 6000k, but the price of the condos have gone up.

 

I don't really understand, is this just Thaiconomics?

 

(assuming rented for a full year)

2015 ROI - 10%

2019 ROI - 8%

2021 ROI - 5%

 

One recently sold for 1.2mil, fully renovated. There's others in the building looking for 1.3 and 1.4.... for the past few years, so I guess 1.2 is the limit. 

 

What's going on here? Are prices expected to jump once things get back to some sort of normality, which could be 2 years away. 

 

A target ROI in the west for a rental property investment is 10 - 15%.... Is 5 - 6% considered ok here?

 

On one hand its good, my property price has increased, but on the other hand, not so good. I was hoping to pick up another one, but a 5% ROI is pretty crappy.... unless these buyers know something I don't?

 

 

Edited July 29, 2021 by banagan

[FritsSikkink]

Buying/selling is a different market than renting. How many properties are on the market to buy, how many to rent?

[Peterw42]

Where are you getting 10-15% return in the west, I will take 2.

 

Rents down due to the pandemic is an extraordinary circumstance, and should return.

One higher sale probably doesn't reflect an overall rise in the market (someone got lucky) and the rest is just the usual high asking prices that don't mean much.,

Rents and sales will probably return to there 2019 levels when things go back to normal.

[Airalee]

Depends on the condo.  There are ฿2,000,000 condos renting for $6-8,000.   There are also ฿1,250,000 condos listed at the similar prices for rent.  Some people might get lucky and get 5%, some will get 2-3% after common fees and other expenses.   Some will sit empty and get a negative return.  
 

Rents in Chiangmai have gradually trended down from when I first rented there in 2012 even before Covid.  One example would be Mountain View.  Friend picked up the cheapest condo there in 2013 and paid 15k.  2 years ago it could have been rented for 12k.  Now, 9-10k

 

It’s a moving target.  How lucky do you feel?

[inThailand]

When you buy a low end shoe box, you get similar returns, whether you rent or sell. 

[statman78]

My wife and I have 4 properties (3 Houses, 1 condo) which we rent out.  All our renters have been there for several years.  After expenses (taxes, fees and maintenance) we get about a 6% return.  The houses are considered upper middle class and the condo is more at the low end.  We are happy with this consistent return which more than covers our basic living expenses.  Our other money is still invested in the US in an IRA.

[1FinickyOne]

18 hours ago, banagan said:

A target ROI in the west

You cannot apply Western logic here... 

 

Yes, it is a funny market here.. to the point of not resembling a market or market factors... in CM it is a buyers market as far as supply, though there are few benefits for the buyer as people do not compromise the price to meet market factors... *** except when there are farang owners who need to sell, then the reality of market factors kick in... along with large discounts... 

 

and then there are other factors not necessarily at work in other countries... properties here can really decay through age/climate factors.. I looked at a very charming property some years ago in San Kamphaeng area... it was 30 yrs old and it seemed near every door could fall off in your hand when you opened it... surely charming in its day, it was now a knockdown... I asked the realtor, how can they ask 10MM baht for this? The realtor told me it was a battle to get it to 10MM as the owner wanted 15MM... not much of a bargain,,, 

[Robin]

AS someone who has bee into rented property in UK, I can assure readers here that 4% is a more realistic return  after expenses have been paid.  This is fro 12 month occupation.  Ay additional profit comes from increase in property value.  All of this is taxed.  Only advantage is that it is better return than keeping money in the bank, either in UK or Thailand.

[jomtienisgood]

22 hours ago, FritsSikkink said:

Buying/selling is a different market than renting. How many properties are on the market to buy, how many to rent?

LOADS of them... 

[shortstop2]

6 hours ago, statman78 said:

After expenses (taxes, fees and maintenance) we get about a 6% return.

Is the major expense the Common Area Maintenance charge?

[Brick Top]

I have several rental property's both here and in the UK , some I have owned for over 30 years. 

Never have I received a rate of return above 6% , some of my property's are returning 6% and some as low as 3% , to be honest it's better than the 0.8% to 0.50% you would get in the bank. Property's go up in value over a 30 year period the rate they increase in value is around 4% to 5% per year. So with the rents I calculate the full ROR is between 8% to 10%.

I hope people don't come on here saying property goes up 10% a year because long term it certainly doesn't.

[statman78]

1 hour ago, shortstop2 said:

Is the major expense the Common Area Maintenance charge?

You are correct.  For the houses it is the annual fee based on land area.  For the condo there is a quarterly condo fee.  I estimate that those fees make up 80-90% of our expenses.  The property tax is almost nothing now since the government has discounted the amount by 90% due to Covid the last 2 years.

[chrisandsu]

On 7/29/2021 at 2:48 AM, Peterw42 said:

Where are you getting 10-15% return in the west, I will take 2.

 

Rents down due to the pandemic is an extraordinary circumstance, and should return.

One higher sale probably doesn't reflect an overall rise in the market (someone got lucky) and the rest is just the usual high asking prices that don't mean much.,

Rents and sales will probably return to there 2019 levels when things go back to normal.

Agree . A 5% ROI is seen as very good in the west . The good thing in the west is the longer you hold the property the value tends to go up . Not the same in Thailand as the market usually stays stagnant . 

[lkn]

On 7/29/2021 at 10:20 AM, banagan said:

I'm trying to get my head around the condo property market in Chiang Mai. 

In addition to all what has already been said, another thing to keep in mind is that “the market” consists of a lot of individuals who are renting out just a few units for a bit of extra income, but not running a professional business with staff and specific goals about return on capital for the investors etc., and the units being rented out have been acquired individually over a very long time frame (decades), some where the buyers themselves put in a lot of time and labour in finding just one or two ideal units (for their situation), renovating them, and some even play an active role in handing over the key, i.e. this is a lot of semi-amateurs running lifestyle businesses.

 

Trying to understand pricing in this market is akin to trying to understand pricing of tea cups at flea markets in California. I am sure these will also be all over the place, with little correlation to the overall economy or price of new tea cups from the store.