Sell or rent?

[liana3legend]

I have a leasehold resort villa, and the leasehold contract expires in 11 years.  The current housing market is not very much to my favor, and my realtor proposed to rent the villa for 3-5 years. The questions are:

 

1. Sell the property short and move on;

2. Rent the place and wait till the market picks up.

 

The issue here is that if I rent my place for a long period of time, and the leasehold contract due is near, I won't have enough money to renew it. In the meantime, potential buyers won't be interested in buying a property that requires to add additional costs.  19 years ago, the leasehold contract was almost 9 million THB, and I wonder how much it will be in 11 years later from now. Please advise. Thanks in advance!

[Henryford]

I doubt anyone would buy it now with a 10-15 million lease bill in 11 years. Start saving for the lease.

[OneMoreFarang]

20 minutes ago, liana3legend said:

19 years ago, the leasehold contract was almost 9 million THB, and I wonder how much it will be in 11 years later from now.

What were your thoughts 19 years ago?

[Peterw42]

Is there ongoing rent to pay every month ?

If the initial 9 million has already paid the rent, why do you need to do anything.

Have you had a realization that your 9 million is gone ?

 

 

Edited January 31, 2023 by Peterw42

[Celsius]

Sell and move on.

 

Even if the market picks up, it will most likely have no effect on your property,

[BE88]

Sell now at a discount, you've already lost enough money.

[lkn]

How much do you think that you can sell it for today?

 

What would you expect it to rent for?

 

What are your expenses on the property?

 

I would look at these numbers to make a decision, although I would not want to be a landlord, but it sounds like what you own is more or less worthless in 11 years, which also means that the current market value of your lease is going toward zero, over the next 11 years.

 

The question is just how to extract the most value out of it, before it expires. I would think this would be by renting it out.

[proton]

Burn it down for the insurance money? ????

[liana3legend]

2 hours ago, Henryford said:

I doubt anyone would buy it now with a 10-15 million lease bill in 11 years. Start saving for the lease.

Thanks! I thought so, too.

[liana3legend]

2 hours ago, OneMoreFarang said:

What were your thoughts 19 years ago?

I didn't buy it. It is an inheritance.

[liana3legend]

2 hours ago, Peterw42 said:

Is there ongoing rent to pay every month ?

If the initial 9 million has already paid the rent, why do you need to do anything.

Have you had a realization that your 9 million is gone ?

 

 

9 million was the price of lease contract at the time of the purchase. I live in my house now, but once I lease the place out, I have to pay for my own rent elsewhere.

[liana3legend]

1 hour ago, Celsius said:

Sell and move on.

 

Even if the market picks up, it will most likely have no effect on your property,

Thank you! I thought about this option, too.

[liana3legend]

1 hour ago, lkn said:

How much do you think that you can sell it for today?

That's a difficult question to answer. My left neighbor sold theirs for 35 M in 2020, and the right neighbor sold theirs for under 25 M in 2022 because the house was pretty run down. My developer told me the other section of the same houses were sold for 19.4 M just a month ago. At first I thought I could sell it for 35 M. Maybe I have been dreaming.

 

1 hour ago, lkn said:

What would you expect it to rent for?

My realtor talked about 200-250K/month.

 

1 hour ago, lkn said:

What are your expenses on the property?

I pay about 40K/month.

 

1 hour ago, lkn said:

I would look at these numbers to make a decision, although I would not want to be a landlord, but it sounds like what you own is more or less worthless in 11 years, which also means that the current market value of your lease is going toward zero, over the next 11 years.

 

The question is just how to extract the most value out of it, before it expires. I would think this would be by renting it out.

Thanks for your realistic input!  I don't know what to do now....

[Salerno]

6 minutes ago, liana3legend said:

I didn't buy it. It is an inheritance.

In that case, I'd be selling up and using the money to set yourself up elsewhere. It's not like you would be taking a personal monetary loss; renting it out and then having to find a place to live is just delaying the inevitable and adding stress to your life IMO.

[liana3legend]

3 minutes ago, Salerno said:

In that case, I'd be selling up and using the money to set yourself up elsewhere. It's not like you would be taking a personal monetary loss; renting it out and then having to find a place to live is just delaying the inevitable and adding stress to your life IMO.

Thanks a million! Perhaps this is a good idea. 

[FriendlyFarang]

Looking at the 200-250k rent per month I would assume that in 11 years your landlord will ask for 40 million for another 30 years.

Are you willing to spend this?

[CanadaSam]

You didn't answer lkn's excellent post which would have given you (and us) a very clear picture of your situation now, and after 11 years.

 

Sorry, just realized most questions were answered by you while I was typing.

 

IMO Salerno's answer is the wisest, if you can get 20 million out of it now, it should be enough for you set up a permanent home elsewhere.

Edited January 31, 2023 by CanadaSam
Update

[Salerno]

3 minutes ago, CanadaSam said:

You didn't answer lkn's excellent post which would have given you (and us) a very clear picture of your situation now, and after 11 years.

I think you missed her reply (4 posts prior to yours).

[BostonJoe]

3 questions  

Do you have the cash for the new lease in 11 years ?

If not would leasing it out for 11 years  give you the funds to purchase  a new lease ?

If I was selling you this property for 12 million would you buy it ?

 

[liana3legend]

46 minutes ago, FriendlyFarang said:

Looking at the 200-250k rent per month I would assume that in 11 years your landlord will ask for 40 million for another 30 years.

Are you willing to spend this?

That's a great point. Thanks a million!

[liana3legend]

43 minutes ago, CanadaSam said:

You didn't answer lkn's excellent post which would have given you (and us) a very clear picture of your situation now, and after 11 years.

 

Sorry, just realized most questions were answered by you while I was typing.

 

IMO Salerno's answer is the wisest, if you can get 20 million out of it now, it should be enough for you set up a permanent home elsewhere.

Thanks a bunch! I tend to sell my property more and more now.

[liana3legend]

39 minutes ago, BostonJoe said:

3 questions  

Do you have the cash for the new lease in 11 years ?

No, I don't.

 

39 minutes ago, BostonJoe said:

If not would leasing it out for 11 years  give you the funds to purchase  a new lease ?

No. I don't think so.  

 

39 minutes ago, BostonJoe said:

If I was selling you this property for 12 million would you buy it ?

 

The developer offered me for 19 M, but I refused him.

[liana3legend]

56 minutes ago, FriendlyFarang said:

Looking at the 200-250k rent per month I would assume that in 11 years your landlord will ask for 40 million for another 30 years.

Are you willing to spend this?

Definitely no. I dreamt about something like that last night. ☹️

[liana3legend]

1 hour ago, BostonJoe said:

 

If I was selling you this property for 12 million would you buy it ?

 

I meant "no" because when the price of a house in a hotel resort is unreasonably low, it could probably be a dodgy deal. 

[1FinickyOne]

2 hours ago, liana3legend said:

That's a difficult question to answer. My left neighbor sold theirs for 35 M in 2020, and the right neighbor sold theirs for under 25 M in 2022 because the house was pretty run down. My developer told me the other section of the same houses were sold for 19.4 M just a month ago. At first I thought I could sell it for 35 M. Maybe I have been dreaming.

 

My realtor talked about 200-250K/month.

 

I pay about 40K/month.

 

Thanks for your realistic input!  I don't know what to do now....

As a long time business man - I never liked any complex business deals... If I inherited it, I would sell and use the money for something that is either mine w/no others involved or invest it somewhere more traditional w/no contingencies... or more likely, a combination of both. 

 

I am a simple guy and have done well w/o complicated deals... in other words, if it needs explaining - I am out. 

[liana3legend]

12 minutes ago, 1FinickyOne said:

As a long time business man - I never liked any complex business deals... If I inherited it, I would sell and use the money for something that is either mine w/no others involved or invest it somewhere more traditional w/no contingencies... or more likely, a combination of both. 

 

I am a simple guy and have done well w/o complicated deals... in other words, if it needs explaining - I am out. 

Thanks a million! Yes, indeed. I was naive at first because the rental income sounded very attractive until I read the leasehold agreement with the outrageous figure. Your suggestion is absolutely feasible, and that's exactly what I am going to do. Even if I get less money from selling the property now, I should go for it. The value of the house has nothing to do with how it represents. This leasehold agreement is the killer.

Edited January 31, 2023 by liana3legend

[1FinickyOne]

1 hour ago, liana3legend said:

Thanks a million! Yes, indeed. I was naive at first because the rental income sounded very attractive until I read the leasehold agreement with the outrageous figure. Your suggestion is absolutely feasible, and that's exactly what I am going to do. Even if I get less money from selling the property now, I should go for it. The value of the house has nothing to do with how it represents. This leasehold agreement is the killer.

In running your numbers, don't forget to calculate what you will earn on your own... I just never like entanglements. There is no reason why business agreements can't be simple and should be straightforward. 

Edited January 31, 2023 by 1FinickyOne

[liana3legend]

42 minutes ago, 1FinickyOne said:

In running your numbers, don't forget to calculate what you will earn on your own... I just never like entanglements. There is no reason why business agreements can't be simple and should be straightforward. 

Yes, of course. Do you know how to calculate the withholding tax? It seems quite difficult. 

[4MyEgo]

3 hours ago, liana3legend said:

The developer offered me for 19 M, but I refused him.

 

4 hours ago, liana3legend said:

I didn't buy it. It is an inheritance.

So you would have been up 19 M so to speak.

 

Not a figure to scoff at if the neighbouring places achieved 22 M in 2020 & 20 M in 2022, i.e. about a 10% drop in 2 years which is about right.

 

If these are figures you can get confirmations on, it would sound like the developer gave you a good offer, that is, unless those 2 properties sold for more, much much more and he is looking to make a quick couple of M by possibly having a buyer lined up, example: If he buys yours for 19 M.

 

In my opinion no one offers close to what other properties sold for in a downward market, unless they can see that they are going to make a good profit, e.g. 19 M outlay, plus stamp duties/taxes/holding costs/agents fees, he would want to get at least 5% net after the above expenses, because one could get half that return from the banks without the risk of how long it would take to sell to find a buyer in this market for a little extra.

 

If he buys it for 19 M he could be doing you a favour, think twice, e.g. confirm what the other 2 properties sold for and not what you have heard verbally, then you can make a clearer decision whether to go back to him with a counter offer, or get an agent involved, but don't sign up with them for too long or you could find yourself stuck with a non performing agent and contract hard to get out of because of the sign up period.

 

At the end of the day, don't listen to verbal offers/stories, once you have confirmation on the above, then you can make an informed decision, but please be wary of developers, because you might except the offer, but then he doesn't perform, then offers you something lower.

 

Best of luck.

[lkn]

6 hours ago, liana3legend said:

My realtor talked about 200-250K/month.

Based on the most recent market price of your condo being 19M, this sounds too high.

 

I don’t know where in Thailand your villa is located, but compare with prices of staying at high end hotels in your area. I mean, if you do a one year rental for 250K/month, that’s 3 million baht for a year, and if the renter is only here 6 months/year, that gives them a hotel budget of 16,000 baht/night.

 

Based on the estimated price (19M), I would expect your place to rent for around 120,000-150,000 baht/month.

 

Now subtract your fixed cost of 40,000 baht/month, the agent fee (one month for each year rented out), and possibly maintenance and repairs (of which there might be more, when renting it out), and I think trying to sell this place is the best option.

 

And of course, if your realtor lists your place at unrealistic high prices, it will be vacant most of the time, generating no revenue.

 

As for the cost of selling, you normally pay a 3% agent fee and a 2% transfer fee for the title deed, but since this is leasehold, I don’t know how that works. There is also 0.5% stamp duty. The withholding tax, again, not sure if this is the same with leasehold, but for freehold, it’s based on years owned and the appraised value. The easiest is to get an estimate from your Land Office, they can do this.

Edited January 31, 2023 by lkn