Is A "holiday Home" Really An "investment"

[corkman]

Hi All,

Been discussing this with a few semi-ex-pat friends (as in the type that do 6 months Europe / 6 months Thailand). Is a holiday house actually an "investment" in so far as is it likely to appreciate much in value?

I am looking into various investment oppertunities, trying to be a little more inventive / creative by investing money in Isaan in land / farming / building, but a couple of friends reckon that it is all just smoke and mirrors and the only way to make money is simply buy a holiday home in an up and coming area area, wait a few years, and then sell it to the highest bidder. To me, I cannot see how you'd get much of a return on that?

Realistically, if you were to buy a house, say 2.5 to 3.0 million baht, in an area like Cha'am or Hua Hin, at what rate are hosue prices likely to increase in the coming years. Has teh boom gone, or at least slowed down? Is there a fear of the market getting flooded? I remember in Samui 5 or 6 yrs ago you could get a really nice house for a little over a million baht.......but that type of growth can't be sustained for long.

Realistically, is this something worth looking into in detail, or is it a bit of a spruce goose?

Cheers,

Matt

[Riley'sLife]

Condos maybe, if you buy at the right price and in the best location. Every other type of Thai real estate falls into the category of very high risk investment. Personally, I would rather take a trip to the casino with my money... more chance of doubling my stake, and less chance of losing it!!!

Be careful Matt, its not like it is at home here. Dont ever forget the best advice of "never invest more in LOS than you are willing to walk away from." Sorry to sound so negative,but you did ask!

Cheers Rick

[jumnien]

Second the caution about sticking with condos.

[londonthai]

choose the place where you want holidays for yourself - the time you are not there your relatives, friends and holidaymakers would pay back for your investment.

as to selling it after sometimes - I wouldn't expect to get more than you invested (and on condition that the thai and international markets don't crash) as in the tropical climates property deteriorates fast and need a constant attention.

[tornado40]

I bought my house in Samui by the new Big C about 4 years ago for 1.75m

Use it as a holiday home 3 times a year - so at £50 per night (hotel rate) means that it will 'pay for itself' in about 3 years time

Should I wish to sell as I don't - maybe get 4m on a very good day!

Mainly, this is a holiday home till I retire at 60 in 12years time - so should be well and truely in 'profit' by then

I guess only good if you don't go anywhere else - and I don't except for long weekends in Europe on my K1200 LT

I think you can look as an investment in a number of ways

[johnnyk]

Buy to enjoy it yourself.

Rent to friends or friends of friends with the objective of meeting operating expenses and air fare.

If you later sell at a profit, good!

The real estate bubble is looking dicey everywhere right now, the big money has already been made.

Wait a year or two you may be able to scoop a bargain...in the west.

And you're a bit late for a 2.5-3 million baht house in HH.

[suiging]

Sometimes the problem lies with the term " Holiday Home".

For many, this means acceptance of cheap concrete, crap block construction, shoddy wiring etc etc etc, as It's only for holidays in a third world country. If this is what you want, Pattaya has thousands of them either for sale, or empty. Problem is cheap construction in Pattaya takes the term cheap to new levels.

Burn your money ( at least you'll get some warmth out of it ) if you go the cheapo route, unseen off plan or from glossy internet photo's spells disaster in the LOS and Pattaya in particular.

I firmly believe there is solid potential long term ( and I mean long term ) in the Pattaya area. But you have to buy a well situated, well built property. These, just like anywhere else in the world, are not cheap in comparative terms anymore and I am not sure if they suit the generally accepted definition of a " Holiday Home ".

Edited October 3, 2007 by suiging

[fletchsmile]

I bought my house in Samui by the new Big C about 4 years ago for 1.75m

Use it as a holiday home 3 times a year - so at £50 per night (hotel rate) means that it will 'pay for itself' in about 3 years time

Should I wish to sell as I don't - maybe get 4m on a very good day!

Mainly, this is a holiday home till I retire at 60 in 12years time - so should be well and truely in 'profit' by then

I guess only good if you don't go anywhere else - and I don't except for long weekends in Europe on my K1200 LT

I think you can look as an investment in a number of ways

Understand the point you are making. But your numbers look very skewed. Unless you are factoring in capital gains, holiday homes very rarely pay for themselves in 3 years if you're the sole user, and not renting them out.

Using hotel rates you quote of GBP 50 = THB 3,500/day. THB 1,750,000 would be 500 days. If you say it pay's for itself in 3years => 167 days a year.

A few other points to bear in mind, tho there are a lot more, including intangibles:

- There's a cost to tying up your capital. On THB 1.75mio Let's say you could earn 10% elsehwere = THB 175k per year. Put another way you could have 50 days a year holiday on the income you earned. Most people don't use 50 days holiday a year, so they'd be saving the difference.

- Then there are various ongoing cots, eg maintenance fees, insurance, and various utility bills.

- You'll be buying things like TV, cable, furniture, etc which are free in a hotel

- In a hotel you get all your cleaning, laundry etc etc done for you. That's either going to eat into your own time, or you pay for it. Personally would rather pay.

As long as you're happy with it is the main thing. But can't really see it paying for itself in 3 years on a purely rental basis for you alone.

BTW What sort of job let's you take 167 days holiday a year. Do you need any help?

[jstumbo]

I bought my house in Samui by the new Big C about 4 years ago for 1.75m

Understand the point you are making. But your numbers look very skewed. Unless you are factoring in capital gains, holiday homes very rarely pay for themselves in 3 years if you're the sole user, and not renting them out.

I think he is saying that it will pay for itself in 7 years. He has had the home for 4 years, and in 3 years it will pay for itself, for a total of 7 years.

[pkrv]

Holiday Home - sort of implies that the property will be vacant for a lot of the time (despite best efforts to rent out etc). Perhaps some other things to consider are:

When it comes to a house security is an issue (anywhere in the world), I remember a comedy sketch on Not the 9 o'clock news 'come home to a real fire, buy a property in Wales'. A condo sort of looks after itself, security is maintained whether you are there or not, not infallible admittedly but IMO infinitely better.

With a house the grounds need to be maintained, this is the tropics things grow bloody quickly. With a condo you get all the pretty green stuff but it is maintained (by some-one else sorry I don't have green fingers)

All in all a Condo is much less hassle, life quite frankly is too short and this is not a trial run! I personally am buying a Condo and am seeing indicative figures of a 50% increase in value in just less than 3 years, but that is not the issue (and is unusual I seem to have made a good decision). The property was bought primarily for our personal use, return on investment did not particularly enter into the equation, though is a nice feel good factor. After all who wants to buy into a spiralling loss – things get very ugly very quickly, IMO Thailand is advancing and growing, over the long term Conds will appreciate in value but not really a financial investment more a combination of personal investment (life style choice) and some financial security.

Edited October 3, 2007 by pkrv

[tornado40]

Jstumbo - you are correct - I do mean 7 years

My job is a 'good one' in so much that I am allowed to holiday in Samui for 3 months of the year. It was my boss who introduced me to Thailand in 1997 - so I just say that it is 'his fault' lol. He is even buying me a new mobile phone so that he can contact me when I visit next week

I have a contractor clean the house every week, and the garden every month and painted every four years

I gain a lot of confidence in my job, knowing that if I get the sack, then well I'll just move straight in and forget the UK. This confidence has allowed me to work better in the UK - so not a problem at the moment

It is good to have a finger on the exit button on the keyboard of life!

I do have to say that I was looking a couple of years ago of buying another more expensive house - and due to 'everything' going on - I'm glad that I didn't

I considered that in the greater scheme of things £25k is not a lot to have a gamble with - better than shares as I can actually use the place

[pkrv]

Jstumbo - you are correct - I do mean 7 years

My job is a 'good one' in so much that I am allowed to holiday in Samui for 3 months of the year. It was my boss who introduced me to Thailand in 1997 - so I just say that it is 'his fault' lol. He is even buying me a new mobile phone so that he can contact me when I visit next week

I have a contractor clean the house every week, and the garden every month and painted every four years

I gain a lot of confidence in my job, knowing that if I get the sack, then well I'll just move straight in and forget the UK. This confidence has allowed me to work better in the UK - so not a problem at the moment

It is good to have a finger on the exit button on the keyboard of life!

I do have to say that I was looking a couple of years ago of buying another more expensive house - and due to 'everything' going on - I'm glad that I didn't

I considered that in the greater scheme of things £25k is not a lot to have a gamble with - better than shares as I can actually use the place

A very healthy attitude. Property is as cheap as chips, exit button primed. At the risk of going off track it is important to note (purely from a stress level point of view) the 49% foreign ownership quota (the only way you can buy and own freehold) on Condominiums, however this is discussed endlessly elsewhere on this forum. I only mention this as I note the original poster is new, the Condo and House property markets are fundamentally different in almost every respect.

Edited October 3, 2007 by pkrv

[chownah]

Why look to Thailand for investment at all? The only money I spend in Thailand on land or buildilngs is for my own lifestyle (and my wife's) and all my investments are kept back where I came from.

[fletchsmile]

Jstumbo - you are correct - I do mean 7 years

My job is a 'good one' in so much that I am allowed to holiday in Samui for 3 months of the year. It was my boss who introduced me to Thailand in 1997 - so I just say that it is 'his fault' lol. He is even buying me a new mobile phone so that he can contact me when I visit next week

I have a contractor clean the house every week, and the garden every month and painted every four years

I gain a lot of confidence in my job, knowing that if I get the sack, then well I'll just move straight in and forget the UK. This confidence has allowed me to work better in the UK - so not a problem at the moment

It is good to have a finger on the exit button on the keyboard of life!

I do have to say that I was looking a couple of years ago of buying another more expensive house - and due to 'everything' going on - I'm glad that I didn't

I considered that in the greater scheme of things £25k is not a lot to have a gamble with - better than shares as I can actually use the place

Makes sense now. Thanks for clarifying. Think you're still a bit under with 7 years payback, with all the hidden costs such as cost of capital, unless you count the capital gains. That said I doubt it would have affected the overall picture/decision much for 25k as you say. You also seem to have things nicely sussed out.

Spare a thought for us "poor souls" based here if we tried in reverse:

- I wouldn't like to imagine the type of hotel I'd get in the UK for 50 quid a night; and

- If we wanted a "holiday home" in the UK, or a finger on the exit button from Thailand... it's going to cost us a little bit more than GBP 25k...

[think_too_mut]

I firmly believe there is solid potential long term ( and I mean long term ) in the Pattaya area.

In the Pattaya area, in 10-15 or so years most of the farang owners will be dead, by natural causes if nothing else.

What's going to happen to their properties?

I'm not waiting on that but if somebody said "long term thinking" I could not resist to post what I did.

[pkrv]

I firmly believe there is solid potential long term ( and I mean long term ) in the Pattaya area.

In the Pattaya area, in 10-15 or so years most of the farang owners will be dead, by natural causes if nothing else.

What's going to happen to their properties?

I'm not waiting on that but if somebody said "long term thinking" I could not resist to post what I did.

One of the most important lessons I learnt in life is quite frankly people do not think in the same way (and fall into the trap that others think as they do), there are major differences and this I think is a good thing. There is a bulge soon about to take place as those who grow old (unlike me I am immortal my name is Peter Pan). It will be interesting to see if there are enough empty Houses/Condos to accommodate all these refugees, how about that for a different answer on the long term holiday home ownership issue ?

Edited October 3, 2007 by pkrv

[Phrakhanong]

I somehow doubt Pattaya will become a ghost town in 10-15 years. I'm noticing younger generations venturing there for the nightlife and I'm sure this will mean another generation of retirees to come, to replace the current generation.

[suiging]

I think you will find Pattaya a totally different place in 10 to 15. As we are all ( in the main ) Eruo/auss/us expats on here, we often forget the coming of the Asian tide. Chinese investors pour millions of pounds an hour ( yep an hour ) into Macao as we speak. Thais , Malay, etc etc all like a gamble. Think of the coming flood if ever a casino was to open in our own backyard ? Even if that did not happen. Real Estate types with a bit of nouse, are hiring Russian and Chinese interpreters as we speak. The grey haired Brit may be on his way out, although I very much doubt it. However, there are many of shades of man waiting to take his place.

[Trollster]

Which condos do you consider to be "solid"? I live in the Jomtien Condotel and frankly have not been aboe to find a better value proposition in Pattaya condos. I would be interested to know which you consider worthwhile pursuing.

[quiksilva]

Of course holiday homes are investments, the trick however is picking one which will turn out to be a good investment and that requires plenty of homework (assuming of course that is your Thai wife who is buying the 'home')