30-year Lease On A Condo

[5ky]

As we know, a safe way to buy real-estate in Thailand can be done via the 30-year lease option.

It may seem strange to others, but is it possbile to utilise the 30-year lease option to buy a CONDO ??

Some of you may consider this crazy, but at least it avoids the transfer in/out of foreign capital to Thailand.

Anyway, would the owner sell on this basis ?? (i would expect a discount )

All comments considered ....

[trogers]

I am confused. You refer to a 30-year lease and you wonder if the owner will sell. I would think the owner would lease, and at the end of the 30 years, rights to the condo unit will revert back to the owner.

[gotlost]

Do you want to lease or do you want to buy? A farang can buy and own a condo.

[InterestedObserver]

I'm also a little confused by your question. You talk as if you expect to own the condo at the end of the 30 year lease, that would be a hire purchase or rent to own agreement. The standard lease would allow you to live in the condo for 30 years, or whatever period is agreed upon, then it would revert back to the original owner or his/her heirs.

[5ky]

Sorry yes, what i mean is, would the owner lease for 30-years as opposed to an outright freehold sale ?? Hopefully, i would expect a discount. The thinking behind me reasoning is that most condo buildings detrioate after time.

BUT if it reverts back to the owner after 30 years, what happens if he/she dies ??

In summary, is it possible ??

[Langsuan Man]

Yes, it is possible but not very probable

You don't seem to understand that the lease provision means that the owner will want the FULL amount of the lease up front, thereby eliminating your "discount" , this is why 30 year leases are registered with the Land Office

If the owner dies before the end of the lease period then the lease flows to their heirs, if you die before the lease expires then your heirs would inherit the remaining time on the lease

And finally at the end of the 30 year period you are left with nothing; doesn't sound like a great idea now does it ?

It makes more sense to purchase a condo within the 49% foreign quota, since condos are the only thing that foreigners can own in their own name

[trogers]

Sorry yes, what i mean is, would the owner lease for 30-years as opposed to an outright freehold sale ?? Hopefully, i would expect a discount. The thinking behind me reasoning is that most condo buildings detrioate after time.

BUT if it reverts back to the owner after 30 years, what happens if he/she dies ??

In summary, is it possible ??

If the owner dies during the lease period, the title will go to his heirs.

A lease longer than 3 years have to be registered with the Land Dept and recorded into the title deed. His heirs will have to wait out till the end of the lease to retake possession of the condo, and all fixed items in it (eg. air-con, fan, etc).

I think it will be easier for you to buy a unit in projects that are developed on leasehold, that is, the developer leased the land on a 30-year lease and all apartment units in the development are sold tied to the lease of the land. One such development is The Rajdamri.

http://www.therajdamri.com/

[PattayaParent]

Yes, it is possible but not very probable

You don't seem to understand that the lease provision means that the owner will want the FULL amount of the lease up front, thereby eliminating your "discount" , this is why 30 year leases are registered with the Land Office

If the owner dies before the end of the lease period then the lease flows to their heirs, if you die before the lease expires then your heirs would inherit the remaining time on the lease

And finally at the end of the 30 year period you are left with nothing; doesn't sound like a great idea now does it ?

It makes more sense to purchase a condo within the 49% foreign quota, since condos are the only thing that foreigners can own in their own name

Unless in the building he wants to buy into there are no more condos available in the Farang quota, then it would make sense to lease for 30 years.

But I don't think there's too much of a discount is there? I read lease is typically 80% of purchase price (for land anyway) and is usually paid up front in a lump sum. Although there's no reason why a lease could not be written with stage payments but then you probably wouldn't get the 'discount'

[trogers]

Yes, it is possible but not very probable

You don't seem to understand that the lease provision means that the owner will want the FULL amount of the lease up front, thereby eliminating your "discount" , this is why 30 year leases are registered with the Land Office

If the owner dies before the end of the lease period then the lease flows to their heirs, if you die before the lease expires then your heirs would inherit the remaining time on the lease

And finally at the end of the 30 year period you are left with nothing; doesn't sound like a great idea now does it ?

It makes more sense to purchase a condo within the 49% foreign quota, since condos are the only thing that foreigners can own in their own name

Unless in the building he wants to buy into there are no more condos available in the Farang quota, then it would make sense to lease for 30 years.

But I don't think there's too much of a discount is there? I read lease is typically 80% of purchase price (for land anyway) and is usually paid up front in a lump sum. Although there's no reason why a lease could not be written with stage payments but then you probably wouldn't get the 'discount'

For newly furnished condos, a reasonable price for a 30-year lease is 60% of purchase price plus a sum to renovate and furnish the space as it is at present day price. The amount for renovation can be placed as a sinking fund so that at the end of 30 years, the principal and accrued interest will cover the inflated cost.

Example - cost to buy the condo unit (100m2) is Bt8m discount to 60% = Bt4.8m. Cost to refurbish and furnish 100m2 = Bt2m

Price of 30-year lease = Bt6.8m paid in full at start of lease.

Edited November 24, 2009 by trogers

[PattayaParent]

Example - cost to buy the condo unit (100m2) is Bt8m discount to 60% = Bt4.8m. Cost to refurbish and furnish 100m2 = Bt2m

Price of 30-year lease = Bt6.8m paid in full at start of lease.

So it's more like 85% of the full price for a condo lease.

[trogers]

Example - cost to buy the condo unit (100m2) is Bt8m discount to 60% = Bt4.8m. Cost to refurbish and furnish 100m2 = Bt2m

Price of 30-year lease = Bt6.8m paid in full at start of lease.

So it's more like 85% of the full price for a condo lease.

What I proposed is not a strict total percentage. Much will depend on the class of the condo unit, as renovation cost varies from Bt10k/m2 to Bt30k/m2 for 3-5 stars.

Example for Class 3, say LPN Lumpini class at Ramkhamhaeng or Rachada

Purchase price for 60m2 @ Bt48k/m2 = Bt2.88m Discount to 60% = Bt1.73m

Refurbishing cost 60m2 @Bt10k/m2 = Bt0.6m

Total lease price = Bt2.33m or 81%

Edited November 25, 2009 by trogers

[trajan]

there a a lot of new 30 yr leasehold condos (actually technically residential apts, since they are not freehold condos) for sale in the Rajadamri area....like:

The ST. REGIS RESIDENCES (in the top portion of the St. Regis Hotel building ) now under furious construction right on Rajdamri Road facing the Royal Sports green,

The RAJADAMRI

The HANSAR (with Hansar Hotel)

BAAN RAJPRASONG (with Anantara Hotel)

The MANEEYA RESIDENCES (with Renaissance Hotel by Marriott)

The ultimate owner of the land and structures is the Royal Privy Purse and the developer is the master leaseholder....so you would technically be a 30 yr sub-leaseholder...

if you want to avoid having to remit into Thailand foreign currency (which would generally be needed when buying a freehold condo) you could buy a leasehold residence.....but of course, the leasehold rights expire after 30 years.....

from the prices quoted for leasehold residences, there doesnt appear to be much of a discount (compared with freehold condos like Q LANGSUAN in the same area) but there is a small discount....

Edited November 27, 2009 by trajan

[trajan]

also, in popular freehold condo projects like The SUKHOTHAI RESIDENCES, the 49% foreign quota has long been sold out, so some foreigners buy leasehold rights from the developer company in the remaining Thai quota.....(in those circurcumstances, the foreign buyer of the leasehold would not need to remit into Thailand foreign currency, but could use its local funds if desired).....

Edited November 27, 2009 by trajan

[johnnyk]

Not much difference in price between leasing and buying a condo. BUT at the end of the lease you have nothing whereas you could sell the condo after 30 years and get something back.

[PattayaParent]

Not much difference in price between leasing and buying a condo. BUT at the end of the lease you have nothing whereas you could sell the condo after 30 years and get something back.

Then it would only be of interest to someone who doesn't expect to be around in 30 years time and has no family to leave it to.

[trajan]

actually the repurcussions of buying a leasehold versus buying a freehold are more immediate than at the end of 30 years...

in a freehold (assuming very good location and maintenance), resale values are generally much better, say 10 years later (after all, not many people stay in one location forever right? and look to trade up etc.)

by contrast, in a leasehold (even assuming the very same good location and maintenance), resale values appear to plunge on a steeper curve in the same 10 year period (because potential buyers just see 20 or 19 years left on the lease, which is not so attractive)....

[pkrv]

Hi 5ky - You have attracted some heavy duty responses, and I entirely agree with their thought processes. You said -

"Some of you may consider this crazy, but at least it avoids the transfer in/out of foreign capital to Thailand. "

Yes, you are crazy! The costs of shifting the currency out and back in again would probably amount to little more than a few thousand Baht.

Do you have an account offshore that you could do this with, is that the problem? If you don't have such an account, it would be tough going but not undoable and worth it in the long run.

I suppose there is another question at the back of my mind, were you considering a cash purchase? That would account for other matters.

Edit - I have just realised you don't have a forign exchange transfer form do you.

Edited November 27, 2009 by pkrv

[trogers]

Hi 5ky - You have attracted some heavy duty responses, and I entirely agree with their thought processes. You said -

"Some of you may consider this crazy, but at least it avoids the transfer in/out of foreign capital to Thailand. "

Yes, you are crazy! The costs of shifting the currency out and back in again would probably amount to little more than a few thousand Baht.

Do you have an account offshore that you could do this with, is that the problem? If you don't have such an account, it would be tough going but not undoable and worth it in the long run.

I suppose there is another question at the back of my mind, were you considering a cash purchase? That would account for other matters.

Edit - I have just realised you don't have a forign exchange transfer form do you.

If he has the cash in Thailand, but not the transfer documents, he should consider renting, 1st on a year's lease, and when he is happy with the place, renew the rental contract for another 2-3 years. This would be better than spending a large sum on a 30-year lease and then have to bear the common fees and maintenance cost of the premises.

He can then choose to rent a new place every few years.

[johnnyk]

Not much difference in price between leasing and buying a condo. BUT at the end of the lease you have nothing whereas you could sell the condo after 30 years and get something back.

Then it would only be of interest to someone who doesn't expect to be around in 30 years time and has no family to leave it to.

Then why not rent on a yearly lease? No money upfront, you can leave if things go poorly and there are plenty of good buildings to rent in. No heirs? Then leave it to charity instead of lining someone's pockets. Just my 2 satang.

[hhgz]

"there a a lot of new 30 yr leasehold condos (actually technically residential apts, since they are not freehold condos) for sale in the Rajadamri area....like: The RAJADAMRI"

The Rajadamri is a FREEHOLD condo, the only one that I know of in this area.

[PattayaParent]

Not much difference in price between leasing and buying a condo. BUT at the end of the lease you have nothing whereas you could sell the condo after 30 years and get something back.

Then it would only be of interest to someone who doesn't expect to be around in 30 years time and has no family to leave it to.

Then why not rent on a yearly lease? No money upfront, you can leave if things go poorly and there are plenty of good buildings to rent in. No heirs? Then leave it to charity instead of lining someone's pockets. Just my 2 satang.

Exact argument I made to a mate last week who's looking to retire.

But he wants 'a place of his own' as he's lived in rented places the last 30 odd years.

Is this a mainly Brit train of thought as in Europe it is more common to rent (as nobody can afford to buy) whereas in UK there is a good percentae of home owners.

Edited November 28, 2009 by PattayaParent

[johnnyk]

Not much difference in price between leasing and buying a condo. BUT at the end of the lease you have nothing whereas you could sell the condo after 30 years and get something back.

Then it would only be of interest to someone who doesn't expect to be around in 30 years time and has no family to leave it to.

Then why not rent on a yearly lease? No money upfront, you can leave if things go poorly and there are plenty of good buildings to rent in. No heirs? Then leave it to charity instead of lining someone's pockets. Just my 2 satang.

Exact argument I made to a mate last week who's looking to retire.

But he wants 'a place of his own' as he's lived in rented places the last 30 odd years.

Is this a mainly Brit train of thought as in Europe it is more common to rent (as nobody can afford to buy) whereas in UK there is a good percentae of home owners.

He sounds muddled and sentimental.

1-year lease or 30 years, he's still a tenant owning nothing. Condo and 30-yr lease don't make sense IMO if you can legally own a condo. Whether he buys outright or buys a 30-year lease there won't be a big price difference.

[johnnyk]

deleted - double post

Edited November 28, 2009 by johnnyk

[PattayaParent]

He sounds muddled and sentimental.

1-year lease or 30 years, he's still a tenant owning nothing. Condo and 30-yr lease don't make sense IMO if you can legally own a condo. Whether he buys outright or buys a 30-year lease there won't be a big price difference.

Ah, but he's looking for a house (and land) which of course is not an option here (unless you lease) and he's not married to a Thai.

[johnnyk]

He sounds muddled and sentimental.

1-year lease or 30 years, he's still a tenant owning nothing. Condo and 30-yr lease don't make sense IMO if you can legally own a condo. Whether he buys outright or buys a 30-year lease there won't be a big price difference.

Ah, but he's looking for a house (and land) which of course is not an option here (unless you lease) and he's not married to a Thai.

OK, I get it. I thought your mate was the one looking for a 30-yr lease on a condo. He can "own" through a company, just structure it so no one else can make important decisions and make sure it actually carries on business, i.e. file returns and pay some tax if need be. Or he can look into lifetime usufruct.

[trogers]

He sounds muddled and sentimental.

1-year lease or 30 years, he's still a tenant owning nothing. Condo and 30-yr lease don't make sense IMO if you can legally own a condo. Whether he buys outright or buys a 30-year lease there won't be a big price difference.

Ah, but he's looking for a house (and land) which of course is not an option here (unless you lease) and he's not married to a Thai.

OK, I get it. I thought your mate was the one looking for a 30-yr lease on a condo. He can "own" through a company, just structure it so no one else can make important decisions and make sure it actually carries on business, i.e. file returns and pay some tax if need be. Or he can look into lifetime usufruct.

Why go through such a complication that carries a high annual running cost?

Take up a 30-year lease from a genuine land owner, engage a designer and build a house to his satisfaction. This will be his retirement home. Just make sure that he has some remaining funds near the end for a stay in a nursing home.

A 30-year lease on a condo is a different matter as it is a unit in an already constructed building and in a communal living environment. And most important, foreigners can own a freehold unit instead of taking up a 30-year lease, especially when the price difference between these two forms of interest over the property is small.

[trajan]

"there a a lot of new 30 yr leasehold condos (actually technically residential apts, since they are not freehold condos) for sale in the Rajadamri area....like: The RAJADAMRI"

The Rajadamri is a FREEHOLD condo, the only one that I know of in this area.

wrong...the Rajadamri is LEASEHOLD

The Rajdamri, Bangkok

[hhgz]

Duh, brain fart on my end. I was thinking on an entirely different building...one that has yet to be built.

[pkrv]

Hi 5KY - are you going to get back to us?

BTW great Avatar! Where is it from?

[torrenova]

The numbers can sometimes stack up but usually only where the allowable depreciation is much lower than the cost of the lease, offset for tax purposes and even then, I cannot see why anyone would pay up front as there are no tax benefits in doing so. Renting as you go would be far more beneficial.

It is very hard to make a viable argument for taking out a 30 year lease at anywhere near the terms likely to be offered.