Having To Pay Cash? Is It Better To Be In Debt?

[OmarComing]

Everyone always says "don't pay cash for a home". i guess the idea is that its better to borrow from a bank and invest the money in the markets, paying off the mortgage. OK, but thats not an option in Thailand... So, is it really that bad to pay cash for a condo in Thailand? If you keep and invest, it doesn't seem like you will earn more interest then rent will appreciate.

for example, you have $250K. You get maybe 7% on average from markets, but if you rent a $250 condo you will have to pay about 5% in rent, and the rent will keep getting more expensive every so often.

thoughts?

[lazeeboy]

if its your 1st time buy in thailand ,rent for a while and get to know the property market and laws ,the condo prices dont go up too much in a year so you wont miss the boat when you decice to buy ,

[Khun Jean]

Everyone always says "don't pay cash for a home". i guess the idea is that its better to borrow from a bank and invest the money in the markets, paying off the mortgage. OK, but thats not an option in Thailand... So, is it really that bad to pay cash for a condo in Thailand? If you keep and invest, it doesn't seem like you will earn more interest then rent will appreciate.

for example, you have $250K. You get maybe 7% on average from markets, but if you rent a $250 condo you will have to pay about 5% in rent, and the rent will keep getting more expensive every so often.

thoughts?

I would say Thailand is ideal for that. Rental prices are low compared to buying.

In your example it would give you around 45.000 baht a month. Very nice places available for that.

7.7 M baht would not buy that when in prime areas. Outside those prime areas the rent/buy ratio is even more in your favor.

What type of property and location has your preference? Knowing that more specifics can be answered.

[PadThaiGuy]

Condos - Easy to buy - Hard to sell.

Keep your cash safe.

RENT.

[nidge]

I rented various apartments in bangkok and probably paid 1,400,000 over a 5 year period. I now live in Issan and bought a lovely house with cash for 1,600,000. I have nothing to show for my 5 years in bangkok. Now i have no rent, repair costs are insignificant and i have a house to sell if i am ever desperate. For me it's a "no brainer" not to buy.

[BEENTHEREDONETHAT]

It depends what your reason for buying is. If you are buying as a investment it is probably not a great one, but if you are buying as a place to live and a lifestyle it probably makes sense. If you want to live here and rent your rent will keep going up and your cost of living will be much more flexible than if you own, as a place to live is probably your single largest expenditure. You also have the security of knowing you woun't be ask to leave and you can do what you like to the place.

The biggest reason for not paying cash for a place is typically the tax writeoff you receive for paying interest. You don't have that advantage in Thailand as there is no tax to pay, so nothing to deduct. Unless you can get long term interest of a higher percentage than the interest you have to pay on the loan you should pay cash.

Good luck on whatever you decide.

[Moonfruit]

I live in a 16 million baht house. Well, thats what is up for sale for.

My rent is 70K per month.

Im in Bangkok. You do the math.

Unless you are out of farang populated areas then renting is the way to go.

[Cyberstar]

I live in a 16 million baht house. Well, thats what is up for sale for.

My rent is 70K per month.

Im in Bangkok. You do the math.

Unless you are out of farang populated areas then renting is the way to go.

Okay, I'll do some math. Let's for simplicity say that the relative "value' of involved variables remains about the same the next 20 years - that means that the future equivalent of involved cash would give you the same housing conditions in 20 years from now.

a) Paying a rent of 70k/month means you'd have paid the 16 million in about 19 years and not own a thing.

Let's say you buy the place for 4.8 million in cash and take out a mortgage of 11.2 million (70% of the price). A payoff through 20 years at around 6.5% interest would make pretty close to 70K a month. So - the difference to case a) is that for the initial down payment of 4.8 million you'd be the owner of the 16 million baht house after the 20 years.

Not trying to argue, that one gets the best possible value for that 4.8 million - just trying to say, that it isn't that simple to figure whether rental or ownership is the better option.

[ProThaiExpat]

You might consider the currency from which you will be converting to baht to buy.

I built my house when the baht was 44 to the dollar. I was just lucky. But those currencies that are historically "riding high" against the baht, one should consider that currency devaluating against the baht in the future.

Inflation is a given in the future as well. I seriously doubt inflation in Thailand or the rest of Asia, including China, will remain tame in the future.

[MJo]

I would rent now for a year to see which way the market is going. In my opinion the same bubble exists in Thailand as in UK and USA. And lot of sign's that we will follow the big ones down the drain. You just might end up buying "16 Mil" house next year with your 7.7 Mil...

And if not, you can still get the same condo as today for the same price...

Just my thoughts...

[BigSnake]

Pay cash if you are that well off in the money department, for get the naysayer

[zorro1]

I live in a 16 million baht house. Well, thats what is up for sale for.

My rent is 70K per month.

Im in Bangkok. You do the math.

Unless you are out of farang populated areas then renting is the way to go.

errr how do you know its worth 16 mill if you didn't buy it? 70k/month is big bucks and what do you mean by you do the math? please be more specific when posting. What soi are you in and what is the name of the building thanks

[CaptHaddock]

I live in a 16 million baht house. Well, thats what is up for sale for.

My rent is 70K per month.

Im in Bangkok. You do the math.

Unless you are out of farang populated areas then renting is the way to go.

Okay, I'll do some math. Let's for simplicity say that the relative "value' of involved variables remains about the same the next 20 years - that means that the future equivalent of involved cash would give you the same housing conditions in 20 years from now.

a) Paying a rent of 70k/month means you'd have paid the 16 million in about 19 years and not own a thing.

Let's say you buy the place for 4.8 million in cash and take out a mortgage of 11.2 million (70% of the price). A payoff through 20 years at around 6.5% interest would make pretty close to 70K a month. So - the difference to case a) is that for the initial down payment of 4.8 million you'd be the owner of the 16 million baht house after the 20 years.

Not trying to argue, that one gets the best possible value for that 4.8 million - just trying to say, that it isn't that simple to figure whether rental or ownership is the better option.

Let's look more closely at this financial sleight of hand. The rent of 70k provides the owner with a 5.25% gross return. Not very handsome for the risks he is taking in the BKK property market. A mortgage for 11.2 million at 6.5% means a monthly payment of 83,504. Let's ignore maintenance costs. That means the total payments over 20 years would be 20,000,000. But you neglected the opportunity cost of that 4.8 million down payment. If that were invested at let's say 5% return compounded that would produce 13,000,000 after 20 years. So the total cost is now 33,000,000. The 70k rent for 20 years, if it doesn't change, adds up to 16,800,000. So the property has to double for you to break even in 20 years. That could happen, but it's by no means a slam dunk. The renter in any case takes much less risk.