As A Foreigner Why Is "buying" Better Than Renting?

[huggybear]

Some of you blokes out there clarify for me, why is "buying" any better than renting?

As I understand it foreigners cannot own, we actually have a 30 year lease (yes, I know about the company thing, 49%, blah, blah, blah) and if we do "own" a freehold condo, the land still does not belong to us and the freehold condo is again under a company that has the 51%.

So lets do some math. Lets say I "buy" a house and get the 30 year lease with the "option" of another 30 years (which if property goes way up in value I doubt that "option" will be available) and I buy this house for 7.6 million thb.

7.6 million divide by 30 is 253,333, divide again by 12 for each month in a year and said house is 21,111 per month. I already rent an o.k. house for 12,000, a 21,111 rental gets me a pretty nice place.

Can someone explain what advantage "buying" has over renting? Seems the same to me, "buying" being a 30 year rental. What is the difference?

[Crossy]

Much depends upon your personal circumstances, many of us who choose to buy have Thai family who we can leave the property to when we pass on.

To us renting is just throwing away money, after 30 years of renting you have nothing, after 30 years of buying you have a house.

You can protect your investment from greedy family should your wife die before you by using an usufruct agreement, that is not limited to 30 years.

BTW There is no way you're going to rent a 7.6M baht house for 21k, more like 76k (although it matters a lot where you are located).

Simplistic maths:-

21k rent will net you a house worth about 2.1 million.

Rent - 21k for 30 years = 7.56 million

Buy - 2.1 million divided over 30 years = 5833 per month

Buying is 15166 per month cheaper even if you throw the property away at the end of the lease

QED

Edited April 3, 2008 by Crossy

[donx]

I mostly agree with Crossy although I do believe and have heard of people who get rental rates that are low compared to the purchase price of property.

IMO if you are not married to a Thai then the only way I would buy property in Thailand would be either a condo in my own name or a house purchased via a company. I would only do the company purchase if I actually started a company that was actively involved in a business unrelated to real estate such as exporting of Thai goods.

I personally would never rent a property for 30 years since rental rates are very low.

[tattoodrob]

I mostly agree with Crossy although I do believe and have heard of people who get rental rates that are low compared to the purchase price of property.

IMO if you are not married to a Thai then the only way I would buy property in Thailand would be either a condo in my own name or a house purchased via a company. I would only do the company purchase if I actually started a company that was actively involved in a business unrelated to real estate such as exporting of Thai goods.

I personally would never rent a property for 30 years since rental rates are very low.

i also agree with crossy although i think 21k might get u a better house than 2.1 mill value but again depends what area.

donx.....if rental rates are really low then isnt that a good reason to rent...or am i not understanding...do you mean you wouldnt rent out a property for 30 yrs as return not that good???

[BEENTHEREDONETHAT]

If you look back say 15 years what was rent then? Believe it has gone up a bit since then. You most likely will be paying more in a few years so that should be figured into the problem. If you buy you can relax because you know it won't go up in cost and you can maintain it to a standard you want not one the landlord wants.

[thaiclan]

10% is a bit steep of a return these days for rental income. Try 5% would bring more inline.

Ive never felt the urge to buy property here. Ive always liked the freedom attached to renting which I can then choose to continue or not. Especially when Somchai opens a kareoke bar down the road and Ting opens a motorbike repair shop next door!

[Boo]

Especially when Somchai opens a kareoke bar down the road and Ting opens a motorbike repair shop next door!

lol, thats why I plan on building my little dream house smack bang in the middle of the 50 rai hubby just bought. No chance in hel_l of any neighbours let alone ones who have a great idea for karaoke shop

[JohnC]

A lot of these questions are down to personal circumstances etc, for example I bought my home with the view that now I retired and living on a pension I dont have to worry about rent every month. House prices in my area and rental means that in another 4 years I break even, own my home and no rent to pay, what happens when I die I dont realy care as I will not need a home! Others will disagree and argue about the insecurity etc which is also true but life is full of gambles and I am happy with my decision. If I ever feel that I do not want to live here anymore then I simply sell up and go home, price increases in my village and the lower exchange rate will give me a reasonable return on my initial investment, but as I stated that was not my reason for buying, again with low exchange rates I am not struggling to pay the rent every month.

[rgs2001uk]

the following are rent/selling prices, plucked at random

37,500 THB/month

5,500,000 THB

60,000 THB/month

14,000,000 THB

90,000 THB/month

18.5 ล้าน THB

40,000 THB/month

6,700,000 THB

25,000 THB/month

4,500,000 THB

9,000 THB/month thought for a 3 bedroom 2 bathroom townhouse this was a good deal

2,500,000 THB

it would appear that the old 1/100 rule doesnt seem to apply in these cases.

also worth noting, these were plucked from a website in english, i know if you took a wander round the area you were interested in living in, you will find notices in thai with houses for rent/sale cheaper than you will find online, also getting discounts by paying rent in advance is another benefit.

[donx]

I mostly agree with Crossy although I do believe and have heard of people who get rental rates that are low compared to the purchase price of property.

IMO if you are not married to a Thai then the only way I would buy property in Thailand would be either a condo in my own name or a house purchased via a company. I would only do the company purchase if I actually started a company that was actively involved in a business unrelated to real estate such as exporting of Thai goods.

I personally would never rent a property for 30 years since rental rates are very low.

i also agree with crossy although i think 21k might get u a better house than 2.1 mill value but again depends what area.

donx.....if rental rates are really low then isnt that a good reason to rent...or am i not understanding...do you mean you wouldnt rent out a property for 30 yrs as return not that good???

Yes, I mean I wouldn't rent out a property for 30 years. A 30 year lease is what the OP refers to as "buying" verses yearly rental agreements.

[Smokin Joe]

Your info about owning a condo is incorrect. You CAN own a condo, no company involved. The percentage is for total ownership in the building, but if you own one it can be yours in a foreign name 100%.

[sweetchariot]

Well I am on both sides. After weighing up my options a couple of years ago I decided to buy 2 condo's in my own name, which combined pay the rent on my house. Can't really see the point of buying a house at the moment, especially with all the uncertainty around company law, FBA etc.

If I couldn't have had the condos in my own name then I would have left the money in the bank and rented indefinitely.

[donx]

A lot of these questions are down to personal circumstances etc, for example I bought my home with the view that now I retired and living on a pension I dont have to worry about rent every month. House prices in my area and rental means that in another 4 years I break even, own my home and no rent to pay, what happens when I die I dont realy care as I will not need a home! Others will disagree and argue about the insecurity etc which is also true but life is full of gambles and I am happy with my decision. If I ever feel that I do not want to live here anymore then I simply sell up and go home, price increases in my village and the lower exchange rate will give me a reasonable return on my initial investment, but as I stated that was not my reason for buying, again with low exchange rates I am not struggling to pay the rent every month.

Just so we all know, did you buy this property with a 30 year lease to someone other than a Thai spouse? If so, then don't expect to be able to sell your property. If not, then your situation is not what the OP is asking about.

I too "own" property but like Boo it is in my spouse's name. We plan to build on it when I retire.

You do raise a good point though. For example, where we bought is not very populated. If I wanted to live in that area now by renting a nice house and I wasn't married to a Thai, I would have a hard time finding anything worth renting. The only choice would be to lease land for 30 years or go the Thai company route. If, as the OP says forget about the company route, then the only choice in this area would be a 30 year land lease.

By the way, the area I am referring to is Tha Sala beach front property in NST.

[johnnyk]

Some of you blokes out there clarify for me, why is "buying" any better than renting?

As I understand it foreigners cannot own, we actually have a 30 year lease (yes, I know about the company thing, 49%, blah, blah, blah) and if we do "own" a freehold condo, the land still does not belong to us and the freehold condo is again under a company that has the 51%.

So lets do some math. Lets say I "buy" a house and get the 30 year lease with the "option" of another 30 years (which if property goes way up in value I doubt that "option" will be available) and I buy this house for 7.6 million thb.

7.6 million divide by 30 is 253,333, divide again by 12 for each month in a year and said house is 21,111 per month. I already rent an o.k. house for 12,000, a 21,111 rental gets me a pretty nice place.Can someone explain what advantage "buying" has over renting? Seems the same to me, "buying" being a 30 year rental. What is the difference?

If you "buy" the house on a 30yr lease you will pay the 7.6 million up front, not monthly and after 30 yrs you have zip.

But you need to factor in "opportunity cost": That sum of money @5% for 30 yrs would yield more than double if compounded. So you could pay rent out of the invested money which sounds better then "renting"(leasing) for 30 yrs.

But owning has intangible benefits, among them the feeling of it being your place, you aren't vulnerable to a landlord, you can do it up the way you like and you can sell it or pass it to family as you have essentially paid rent to yourself.

Edited April 3, 2008 by johnnyk

[GuestHouse]

We've bought because a) it was dirt cheap to buy at the hight of the Thai financial crisis and like Crossy suggests, buying provides and extra level of security for my wife and family.

But I do think the question is valid, and while we can argue over exact numbers it is still nevertheless true that buying does remove flexibility and it also ties up capital.

If a foreigner has sufficient capital to buy a house in Thailand and live of his/her remaining capital then the benefits of buy stated above may be worth it to the individual.

If however buying in Thailand is going to eat up a substantial amount of a foreigner's capital then it would clearly be a good idea if they took a long hard look at the numbers, and particularly the rule about not bringing money to Thailand you can't afford to loose.

Very many posts here on TV and elsewhere from foreigners thinking of buying property or having bought property make reference to 'investment growth'. I feel this is a failure to get out of the mindset they had back home where they enjoyed protections under the law and a solid property market. In Thailand things are obviously different, an undeniable issue being security of 'ownership'.

Stories of guys loosing their new Thai house are common place - the stories we read here being the tip of the iceberg. It follows then that when considering buying property in Thailand and calculating possible gains, it is also necessary to calculate in the risks.

If the numbers don't look right, if you can't afford the risk or if buying is going to eat up most of your capital then I think I agree with the jist of the OP's question - buying would not be the sensible decision under these circumstances.

[DisainaM]

when you rent, you are only a paying slave for the owner,

but if you are the house owner, you can connect with the house spirit on a higher level,

(something like this ...)

[johnnyk]

I bought a house in LoS to live in and enjoy. Over all I think there are far better places to invest for profit. If I make some money on it down the road that's nice but not paramount.

In the meantime cold Chang by the pool is fine with me.

[PadThaiGuy]

To us renting is just throwing away money, after 30 years of renting you have nothing, after 30 years of buying you have a house.

QED

Renting is throwing away money?

Ever hear of don't invest more than you care to walk away from in Thailand. TIT they say... and for good reason.

What, are you going to hire a Thai Lawyer to open up an illegal company for you?

Buy a condo in a Farang getto that falls apart in 30 years?

I keep my millions in the bank and use the interest for paying rent.

Easy to move if some new building blocks my view ....or some noisy business/neighbors move in nearby ....or the building managrers are inept/corrupt....or the place turns into a dump.

I'd rather have a pile of liquid cash than a rundown old place to live.

PS, I made alot of money in real estate but not in Thailand.

[Naam]

I'd rather have a pile of liquid cash than a rundown old place to live.

as it was mentioned several times it all depends on the individual priorities. personally i prefer a pile of liquid cash AND a brand new house in a top location which was built according to my plans and in which i feel very comfortable.

[Naam]

renters / owners = never the twain shall meet

[PadThaiGuy]

I'd rather have a pile of liquid cash than a rundown old place to live.

as it was mentioned several times it all depends on the individual priorities. personally i prefer a pile of liquid cash AND a brand new house in a top location which was built according to my plans and in which i feel very comfortable.

As long as your prepared to walk away I see no problem.

Sounds like a cliche but there is a good reason that is the mantra in Thailand.

TIT etc..

[Heng]

From the point of view of average local folks (and you'd be surprised how many people are just a few strokes of bad luck away from "average"), the people who are renting today are the people whose parents, grandparents, great grandparents, etc. chose to rent instead of buy. They can likely expect more of the same for the next generation.

[Naam]

I'd rather have a pile of liquid cash than a rundown old place to live.

as it was mentioned several times it all depends on the individual priorities. personally i prefer a pile of liquid cash AND a brand new house in a top location which was built according to my plans and in which i feel very comfortable.

As long as your prepared to walk away I see no problem. Sounds like a cliche but there is a good reason that is the mantra in Thailand.

"walk away" = yaaawwwwwn...

[PadThaiGuy]

I'd rather have a pile of liquid cash than a rundown old place to live.

as it was mentioned several times it all depends on the individual priorities. personally i prefer a pile of liquid cash AND a brand new house in a top location which was built according to my plans and in which i feel very comfortable.

As long as your prepared to walk away I see no problem. Sounds like a cliche but there is a good reason that is the mantra in Thailand.

"walk away" = yaaawwwwwn...

I guess the best reason to not buy a house is: NOT LEGAL.

If you must own property, but it in a stable country.

[ray08]

From the point of view of average local folks (and you'd be surprised how many people are just a few strokes of bad luck away from "average"), the people who are renting today are the people whose parents, grandparents, great grandparents, etc. chose to rent instead of buy. They can likely expect more of the same for the next generation.

I would agree to that if i was a Thai and this really was my country ,The case of being of a foreigner is that you really are restricted to what you can call your own place , I am not sure even in the Condo where foreigner may buy under their allocation if they actually own a small part of the land it is built on??

But otherwise with such restrictions ,buying a family home is not IMO the best option for say a foreigner living in Thailand , I rent in Thailand but invest in property overseas , at least when i buy in Europe and Australia, i can own the land and buy on equal terms to other buyers ,

[PattayaParent]

I bought a house in LoS to live in and enjoy. Over all I think there are far better places to invest for profit. If I make some money on it down the road that's nice but not paramount.

In the meantime cold Chang by the pool is fine with me.

My thoughts exactly, although in my case a condo not a house.

[YoungFarang13]

Heng,

I'm a bit confused about your post. If it were the case where you could borrow money cheaply in Thailand on a fixed rate mortgage like you could do in other countries, and you had the choice of paying a monthly rent of 40,000 baht or a monthly mortgage of 46,000 then I think it would be clear to buy. But in Thailand, you must pay in cash.

You can rent homes in Thailand for 1/200 of the price to buy. So... 20 million baht to own and 100,000 month to rent, 1.2 million a year in rent AND now you place your 20 million baht in the stock market and as long as you beat 6%/year you will show a profit without any of the risk associated with owning a home in Thailand.

You are also not stuck in one place and you do not have to worry about finding a seller later on down the road.

Also, if real estate becomes more expensive it probably means the economy is expanding and doing well, that means that its unlikely that the Thai housing market will out pace the world's global economies.

I have seen people on here make the comment "I have made X baht the last 3 years"... If they looked at what a handful Index funds in emerging markets returned during this global bull market, they'd see that they only made a fraction of what they could've.

Edited April 4, 2008 by YoungFarang13

[jdinasia]

and I have not bought in Thailand yet because I like the flexibility of leasing for a year and then moving to somewhere else so far it has been HuaHin, bkk, phuket, bkk and next is Chang Mai

[YoungFarang13]

The main advantage of owning a home is the psychological factor of 'having a home' but in Thailand, lol, you still have to leave every 3 months so what is the point?

[johnnyk]

Any place can get to be a bit of a rut after a while so I like the idea of a small sojourn now and then to any one of the many super destinations nearby.