Business Idea

[Thaiquila]

I have a novel idea that I want to put out there.

If it is legally possible, perhaps someone with the right background would be interested in pursuing it (not me).

In the US, there is a regulated industry which provides reverse mortgages for elderly house and condo owners who have either paid off or largly paid off their housing debt.

Given that almost all of the farang owned condos in Thailand are bought for cash (so are holding untapped and untappable equity) and a large percentage are owned by older retired persons, it seems to me there is a possible business opportunity.

This idea is pretty simple. The condo owner signs over the ownership of the condo AFTER DEATH in exchange for an annual payment which is determined by the life expectancy of the owner and the value of the condo at the time of the contract.

I think lots of owners would be very interested in this additional cash flow.

There would be a big issue of trustworthiness and credibility with a company attempting to offer this product. For example, if they appeared dodgy, potential customers might be concerned that they would be setting themselves up for a balcony flight instigated by a company operative.

Anyway, I don't know if this would even be legal in Thailand, but there it is.

[~G~]

I have a novel idea that I want to put out there.

If it is legally possible, perhaps someone with the right background would be interested in pursuing it (not me).

In the US, there is a regulated industry which provides reverse mortgages for elderly house and condo owners who have either paid off or largly paid off their housing debt.

Given that almost all of the farang owned condos in Thailand are bought for cash (so are holding untapped and untappable equity) and a large percentage are owned by older retired persons, it seems to me there is a possible business opportunity.

This idea is pretty simple. The condo owner signs over the ownership of the condo AFTER DEATH in exchange for an annual payment which is determined by the life expectancy of the owner and the value of the condo at the time of the contract.

I think lots of owners would be very interested in this additional cash flow.

There would be a big issue of trustworthiness and credibility with a company attempting to offer this product. For example, if they appeared dodgy, potential customers might be concerned that they would be setting themselves up for a balcony flight instigated by a company operative.

Anyway, I don't know if this would even be legal in Thailand, but there it is.

<{POST_SNAPBACK}>

If you owned a condo and were an "older retired person", would you go for it? putting yourself in a situation that someone you don't know is greedily waiting for your death? And what happens if you over-live your "expectancy"?

[Thaiquila]

Such a company would have to do a lot to establish trust and credibility.

Perhaps have a connection with a reputable European insurance company.

Also in the US, there are such things as viatical contracts that pay people with fatal diseases cash for their insurance policies while they are still alive; similar kind of business arrangement.

These kinds of legal arrangements are also available in Europe from what I have read, it just seems there is a market for it in Thailand.

It is like an insurance risk for such companies. If there are enough clients and they have accurate life expectancy calculations (standard stuff for insurance companies) they win some and lose some (in other words, some folks live longer, some live shorter).

There also has to be a way for the person to buy out the contract if they so choose (if they want to sell the condo and move away for example) for a penalty fee of course.

I never said it was an easy business or a small business.

I just see a need in Thailand that is now being filled in some Western countries.

An untapped gold mine of equity, as it were.

If you doubt the appeal of this for owners, note that reverse mortgages have become quite popular in the US.

[sajal]

seems like a nice idea for old farangs living here....but i wouldnt ever put myself in such a position where another company would pray for my death....

[Thaiquila]

seems like a nice idea for old farangs living here....but i wouldnt ever put myself in such a position where another company would pray for my death....

<{POST_SNAPBACK}>

True, it is psychologically unpleasant.

But people do it because they need additional cash flow and they want to stay in their homes. However, if there was even a hint of danger that the company was murderous, that would be a very, very hard sell.

Governments that have income programs for the elderly would not be happy if suddenly none of the oldies were dying, so you can say governments are hoping for people to die in a predictable, orderly manner as well.

[~G~]

seems like a nice idea for old farangs living here....but i wouldnt ever put myself in such a position where another company would pray for my death....

<{POST_SNAPBACK}>

True, it is psychologically unpleasant.

But people do it because they need additional cash flow and they want to stay in their homes. However, if there was even a hint of danger that the company was murderous, that would be a very, very hard sell.

Governments that have income programs for the elderly would not be happy if suddenly none of the oldies were dying, so you can say governments are hoping for people to die in a predictable, orderly manner as well.

<{POST_SNAPBACK}>

Companies do not have the same responsibility as governments. They are not elected by the public. All they need to do is to generate profits for the shareholders (and if doing something illegal, not to get caught )

Edited March 14, 2005 by ~G~

[sajal]

oldies income program and this is totally diferent.

in case the oldies were to die, the only benifit the government would get is reducing the cashflow.

in this case its one oldie dying and the *company* gets the property plus not having to pay monthly.

i agree this is a gr8 idea for thailand, where farangs buy property upfront and dont have much inward cashflow and probably dont have anyone else behind to give the property to after death...

im not sure if thais would go in for such offers....farangs would...but again maybe the government makes it dificult for a farang to apply ;-)

[sajal]

Companies do not have the same responsibility as governments. They are not elected by the public. All they need to do is to generate profits for the shareholders (and if doing something illegal, not to get caught  )

<{POST_SNAPBACK}>

its not illegal to murder...

its getting caught that is illegal....

[Abandon]

True, it is psychologically unpleasant.

It's not the psychology I owuld worry about. You can be bumped off for a couple of 1000 baht in Thailand

[Thaiquila]

Governments aren't exactly a panacea either.

In any case, I am pretty confident there is a market for this, and I am pretty sure there is a profit in it for the right company, but it would have to be a company with a reputable western country track record to gain the confidence of foreigners in Thailand.

In other words, it is probably unlikely to happen in the near future ... but who know who is reading this forum ...

Of course, such a vehicle might not be legal under Thai law, in which case it may never happen.

Seems a shame though.

More cash to farangs, happier farangs that can stay in Thailand longer and spend money in Thailand.

Edited March 14, 2005 by Thaiquila

[frequentatore]

In the US, there is a regulated industry which provides reverse mortgages for elderly house and condo owners who have either paid off or largly paid off their housing debt.

Jeanne Calment was a 90 years old French woman, he was half her age. He was a notary public who made a deal under a similar agreement. It was a good deal, the monthly payment for her house was low... and at 90 years old...

His friends started to make fun of him... she feted her 100th birthday... and going and going... the monthly payments too...

He died at the age of 77, Jeanne died a year later at the age of 122. The oldest person in the world at that time with a birth certificate and recognized by the Guiness Book of Records.

She used to say: I have only one wrinkle... and I'm sitting on it!

[ProThaiExpat]

Thaiquilla: Your instincts and idea regarding reverse mortgages are great.

You have put your finge on a key issue in the reverse mortgage field and that is the equity in the property. Since few farang, if any, buy their property in Thailand with a mortgage, the equity is waiting to be tapped.

Another issue relevent to Thailand is the unwillingness of Thai banks to loan money to falang as they are a credit flight risk. This would not apply to a reverse mortgage, as the security for the loan is in the property and the lender isn't looking to borrower for any payments. We are really talking about a loan paid out over a projected remaining lifetime collaterized by the proceeds of the home upon sale upon death.

Those who have suggested that there is an incentive to do away with the borrower to collect the property sooner upon death are ill informed about reverse mortgages.

The way most of these forms of "mortgages", in effect loans, collaterized by paid for property, work is the lender loans rarely more than half of the appraised value of the property paid out over the balance of the life expectancy.

Thus if one lives too long, there is a big cushion for error. Also, most property appreciates to some degree during the pendency of the loan so there is that protection for the lender as well.

Usually the borrower is required to live in the property during the pendency of the loan and to maintain the property in the condition present at the time of the loan.

The lender does not "own" the property upon the death of the "reverse mortgagor"

merely has a right to sell the property to recover the outstanding amount of the loan. Any proceeds after sale of the property reverts to the heirs of the borrower.

Granted there is not much motivation for the lender at the time of sale to maximize the sale proceeds, merely an effort to recover the amount loaned plus interest. Heis are usually given the right of first refusal to purchase the property at the sale price proposed by the lender.

You can do the math, but assuming a 3 million baht condo borrowed on by a 70 year old with a life expectency of 15 years, with appraised value cut in half by the lender as the max loan available, the loan would be for 1.5 Million Baht pro-rated over 15 years and when you deduct interest on the loan, I question if you would get much more than 5k Baht a month by doing it.

If a person retired in Thailand is reduced to such circumstances that 5k a month would make a big difference in his life, then prhaps there is an appeal to such a program. Of course, if you have 10 million value property, then you are talking.

The real appeal of reverse mortgages is the increase in funds available for living expenses without the need to sell ones home to get to the equity, but usually these work best in a country where the real estate values have skyrocketed and retired people are sitting on literal gold mines, not the case in Thailand in my view.

I wonder what the appraised value of a three year old condo is regardless of what you payed for it when its resale potential is so problematical, even more so for a single family dwelling. The lender certainly will hire the most conservative appraiser available.

I wonder what a Thai bank would think of this idea if approached on the basis of a loan, collaterized by the paid for condo or single family dwelling, with a baloon payment at the end of ten years with the sale of the house as the source of the baloon payment. I doubt they would want to sell the house but then the owner could to generate the funds for the baloon payment?

[Paul MBMG]

meanwhile back in the real world........you wouldn't have a prayer of getting the neccessary BOT approval to offer such a scheme, Thai banks wouldn't be interested in offering such a niche (the numbers would be relatively small and harder to market to than finding easier Thai nationals to market to and to cap it all the viatical industry has such an appalling reputation and the equity release industry such a mixed one that anything of this nature is increasingky being seen as the last resort of the truly desperate and gets priced accordingly

[frequentatore]

Those who have suggested that there is an incentive to do away with the borrower to collect the property sooner upon death are ill informed about reverse mortgages.

Your post is about the law in your own country (USA?) but it doesn't mean that things work this way in other countries!