Building Rooms For Letting In Pattaya

[getithere328]

We are considering building between 10 to 20 rooms to rent out near Pattaya (about 10 mins from city centre).

The land is already sorted, just wondered if anyone has experience of doing a project like this, the approximate cost to build per room (rooms to have toilet, some with aircon some with just fan).

I have a figure of 100,000 baht per room, finished. Does that sound about right?

Hoping to get around 4000 to 5000 baht per room per month.

We would expect the room to be mainly rented to Thai people, however, I had considered maybe building some houses and renting to Thai / expat.

Any advice would be greatfully recieved

[thainet]

If you have 10 to 20 rooms you may need to be 2 or 3 floors (depending on your land size of course).

Extra floors means more money as the foundations and columns need to be very strong.

Also depending on the finish of the rooms you are looking at a lot more than 100k per room.

materials (cement, steel,bricks, and labour) is not cheap these days. I would count on at least

150k per room plus other costs for outside finishing, wiring, septic, water etc that always add up.

Also Thai's are not going to be paying 4-5000 baht a month---usually their range is 2-3000 baht a mth for a good fan room

and there are hundreds of 5000 baht rooms around, but it is an awkward price range that is hard to rent.

Food for thought, but good luck.

[BWPattaya]

I wouldn't touch this idea. There are thousands of rooms available, thousands of empty houses, and many, many more being built.

Thainet is corect, Thais pay less than your target rent, and if the rooms look cheap you won't get the foreigners in.

Are you hoping for full occupancy? What will you do if the rooms are only let during the short high season and empty for 90% of the year?

You say "We are considering". Is that you plus a Thai? Or two foreigners? Who will own the building? What about earnings from the rent? Who is that to be paid to? Check on the legality of making money without a work permit.

[Nio]

Once again another foreigner with an idea not backed up with a credible business plan.

The business plan is the road map for go or no go for any project

Without a bonafide business plan to prove your idea, this project is already doomed

The business plan would show you that there are indeed 1,000's of empty rooms and that your price range is out of scope

Business success is a little more than having an idea

An idea that has not been proven with a sound business plan equals failure.

[monty]

Two observations:

1) your expected return is out of range for Thai renters.

2) You expected cost is way to low. At a tiny 25 sqm/room you are looking at 4000 Baht/sqm including all fixtures, for a building most likely with more then 1 floor. And remember, for every 25 sqm room you'll have at least 5 sqm of general area (walkways, stairwells, office), so you are looking at expecting a contractor to build this thing for around 3000 Baht/sqm! no way!

I concur with a likely minimum building cost of 150,000 Baht/room (25 sqm) but this is without furniture or air conditioning. This would work out to around 5000 Baht/sqm if you include general area's. Even at that price level it'll be hard to find a contractor!

And you'll end up with rooms fetching between 2000 and 3000 Baht/month. The higher number only if you have A/C in them.

I'm slightly less pessimistic on occupancy though, I know many building full up with even a waiting list (darkside, soi CC club, Nern Plub Waan etc). Sharp prices, clean new building, yes, definitely can work, especially if you throw in some freebees.

Example, install a satellite system giving all Thai government channels and beam them to all the rooms. One time installation for you (30,000 to 40,000 Baht), no monthly costs and the renter saves himself 100 Baht for Sophon/BTV...

It can make sense. Spend 250,000 Baht/room (including land cost) and rent for 2,500 Baht. At full occupancy you'll reach a return of 12.5% with costs probaly eating 2.5%...

[plasticpig]

name='Nio' date='2009-12-04 08:50:48' post='3181938']

Once again another foreigner with an idea not backed up with a credible business plan.

The business plan is the road map for go or no go for any project

Thats true for most fools in pattaya.

[Rimmer]

This is doable, everywhere you go you can see low cost rented accommodation units, they are always full, even out where I am close to Phoenix a German guy has a nice little development of units that are always full with people waiting. He has two sections one for Thai people at a slightly lower rent and one for budget ex pats.

Build maybe 5 first, you can not lose, you always have the land and the building cost is very small.

[plasticpig]

This is doable, everywhere you go you can see low cost rented accommodation units, they are always full, even out where I am close to Phoenix a German guy has a nice little development of units that are always full with people waiting. He has two sections one for Thai people at a slightly lower rent and one for budget ex pats.

Build maybe 5 first, you can not lose, you always have the land and the building cost is very small.

Thats not sound advice.

[monty]

Thats not sound advice.

Why not? Apart from the fact he has to be aware of the little rule not to invest more then one is willing to lose!

It sure as heck is a much better plan then opening a beerbar to make your fortune

I, just as Rimmer, know a fair few foreigners (along with their wives/girlfriends) who have this kind of investments, and they can live quite comfortably of them, with virtually zero head aches.

Apart from his unrealistic return on investment of course, so up to him if he can live the more realistic return we have projected...

[rick75]

If they are costing 150k per unit and you are getting 30k- 36k per year return (less expenses) thats pretty good, what sort of money are they allowing for a block of land?

As said, it sure beats sitting around a beer bar all day hoping the local p*ss heads come in and throw some cash around.

[prospero]

How can anyone discuss this when the location has not been specified?

[plasticpig]

name='monty' date='2009-12-04 11:22:17' post='3182233']

Thats not sound advice.

Why not? Apart from the fact he has to be aware of the little rule not to invest more then one is willing to lose!

That was why

It sure as heck is a much better plan then opening a beerbar to make your fortune

Most bars are an expensive hobby for a few years, not a business.

I, just as Rimmer, know a fair few foreigners (along with their wives/girlfriends) who have this kind of investments, and they can live quite comfortably of them, with virtually zero head aches.

Apart from his unrealistic return on investment of course, so up to him if he can live the more realistic return we have projected...

The statement you can not lose, is just <deleted> stupid for pattaya.

Good luck to the Op, hope he get a return on his dosh.

Edited December 4, 2009 by plasticpig

[torrenova]

I agree that the proposed rental is never going to work as it is, as noted, in the wrong range.

As for whether it is a good business plan, then I think you have to look at it in terms of opportunity cost and whether you can actually live on the income produced, if that is the intention. If you do not need to live on the income produced, but treat it as an investment, then different calculations apply.

For me, the inward cost is too great and the return far too small and that is without the land ownership issue.

I've a pretty good understanding of fitting out a completed building to either Thai or western standards but it is an either or situation as the two are not compatible. I don't have much of a handle on multi story building costs though.

I personally doubt whether you can consistently achieve 10% pa but I do see some capital appreciation. The greater profit may be in selling it on after completion.

[monty]

The greater profit may be in selling it on after completion.

That I am not sure of

I've just come across one of such buildings for sale, 7 million, 28 rooms, 85% occupied with no management nor even one single sign (it's a bit in a side soi).

With proper signage occupancy probably can reach 100%.

Building needs a bit of a touch-up (paint only).

SO still looking at 250,000 Baht/room all in...

For me, the inward cost is too great and the return far too small and that is without the land ownership issue.

Very true, but basically that's the difference between a relatively passive business, and one which would need your full time attention to run!

The latter if done properly should return the same or more AFTER it paid you a proper salary for your management/work!

[getithere328]

Once again another foreigner with an idea not backed up with a credible business plan.

The business plan is the road map for go or no go for any project

Without a bonafide business plan to prove your idea, this project is already doomed

The business plan would show you that there are indeed 1,000's of empty rooms and that your price range is out of scope

Business success is a little more than having an idea

An idea that has not been proven with a sound business plan equals failure.

Thanks for the advise, however, all businesses start with an idea, then your research and business plan.

Indeed a business plan is required but based on 16 years experience in business, I have found that the business plan is not always worth the paper it is written on.

I started my business with £700 and an idea, 16 years later I am the MD of a very successful company.

Is my business success due to a sound business plan? Absolutely not, it is down to having a good idea backed up by a lot of hard work.

The idea of building in LOS will require alot more than 700 quid I know, however, my research into this idea will tell me if it is a viable business, not my business plan .

[getithere328]

Just to clarify a few things.

1. I am looking for a long-term investment.

2. I can already see by the responses that I am way out on building costs and rent return.

3. Fortunately I will not be relying on this for an income.

4. The area is Nong Ket noy (sorry about the spelling) and the land size is about 1 rai.

[Max2000]

Why all developers seems to forget the rental marked 8-12.000 per month?

[torrenova]

Why all developers seems to forget the rental marked 8-12.000 per month?

They don't. For that you have View Talay 1, some more in Jomtien, some condos in town, then for less than that you have the Pattaya Beach Condominium. Down market again you have the Nirun stalags until you get to the Thai stuff at 2-4k.

[torrenova]

The greater profit may be in selling it on after completion.

That I am not sure of

I've just come across one of such buildings for sale, 7 million, 28 rooms, 85% occupied with no management nor even one single sign (it's a bit in a side soi).

With proper signage occupancy probably can reach 100%.

Building needs a bit of a touch-up (paint only).

SO still looking at 250,000 Baht/room all in...

For me, the inward cost is too great and the return far too small and that is without the land ownership issue.

Very true, but basically that's the difference between a relatively passive business, and one which would need your full time attention to run!

The latter if done properly should return the same or more AFTER it paid you a proper salary for your management/work!

7m for 28 rooms = 250k - wow ! but presuming these are Thai rooms, then they will be barren bar a cold water shower and perhaps ceiling fan (perhaps more I understand) but never western standard. Thus, the cost of fitting out the rooms will be very low, meaning that nearly all of your 250k per room is attributable to construction and land costs.

So what do they rent out at ? If 3k then you have 28*3*12*.85= circa 850k before costs which might get near 10% I agree. Less with costs and repairs and a sinking fund though 15% occupancy to play with to offset this somewhat.

What is the likely capital appreciation for this building though and just how much management would be required ?

What we strive for is relatively passive businesses which provide the returns you suggest though without the work ! The key there is building it up, not just building it.

[Basil B]

100K per room at return of 4-5K PCM, money back in 2.5 years...

Not realistic, as others have pointed out you build costs are far to low.

Thailand is split between the "Have's" (minority) and "Have Not's" (majority), the "Have's" who have loads of money own their own houses, the "Have Not's" earn something like 5 - 8K PCM and struggle to afford an apartment at 3K PCM, most of the single females around Pattaya who seem to earn more are sending most of their earnings home.

[rgs2001uk]

I dont know how up to date the following is,

http://www.smilehomes.com/apartment_catalog.htm

However it gives us a guideline of construction costs, not including land price.

Assuming the need to purchase say 200 tw of land at say 7 million, we are now looking at

about 20 million baht total cost for 60 rooms.

You can do the maths yourself, however the constructions cost in theory will be the same,

the determing factor will be the cost of land.

[rayong09]

Why not? Apart from the fact he has to be aware of the little rule not to invest more then one is willing to lose!

*Yawn*

[Thongkorn]

Have you thought about Building affordable rooms for Thais, I have traveled around Thailand a little bit , there always seems to be a big demand for reasonable rooms for Thais, My wifes mother stays in one In Samut Prakan, Bangkok, Its 3000baht a month, they pay the water and Electric. There are no Air con or fans,In some rooms, those that have are extra. Same goes for fridges, The rooms are only about 3x3 mtre, with shower and toilet. She had to pay a deposit . The thing is they are clean and safe, And always in demand never any rooms empty. in the long term may be a good investment,

[monty]

Assuming the need to purchase say 200 tw of land at say 7 million

Ouch, that's rather expensive at 14 million/rai!

Building one bang in the middle of Pattaya wouldn't make much sense.

Other side of Sukumvit you'd probably find land at about a third (or less) of that price!

So what do they rent out at ? If 3k then you have 28*3*12*.85= circa 850k before costs which might get near 10% I agree. Less with costs and repairs and a sinking fund though 15% occupancy to play with to offset this somewhat.

You wouldn't rent them out at 3000 Baht, more likely 2500 Baht.

Maintenance is next to nothing on a building like that, and usually gets paid for by the profit they make on utilities. They sell their electrics at 7 or 8 Baht/unit and water at either 30 or more/unit, or a fixed fee of 80 Baht/month. Doesnt make you rich, but an extra 100 Baht/month/room easily pays for the electric consumption of the public area's. That is already one cost less!

Admitted, to reach 10% net return you really need 100% occupancy, but as said, give a proper product and you'll get it. I have a few staff living in this kind of room, and they had to look at several places before they found one, and not even in their preferred location!

[LennyW]

Assuming the need to purchase say 200 tw of land at say 7 million

Ouch, that's rather expensive at 14 million/rai!

Building one bang in the middle of Pattaya wouldn't make much sense.

Other side of Sukumvit you'd probably find land at about a third (or less) of that price!

So what do they rent out at ? If 3k then you have 28*3*12*.85= circa 850k before costs which might get near 10% I agree. Less with costs and repairs and a sinking fund though 15% occupancy to play with to offset this somewhat.

You wouldn't rent them out at 3000 Baht, more likely 2500 Baht.

Maintenance is next to nothing on a building like that, and usually gets paid for by the profit they make on utilities. They sell their electrics at 7 or 8 Baht/unit and water at either 30 or more/unit, or a fixed fee of 80 Baht/month. Doesnt make you rich, but an extra 100 Baht/month/room easily pays for the electric consumption of the public area's. That is already one cost less!

Admitted, to reach 10% net return you really need 100% occupancy, but as said, give a proper product and you'll get it. I have a few staff living in this kind of room, and they had to look at several places before they found one, and not even in their preferred location!

Sorry Monty, but 1500 - 1800 is much more the norm, we are only a couple of hundred meters off Sukhumvit near Satit School and there are hundreds of these apartments around here, 1800 baht a month is considerd "luxury" by the locals, saying that, as soon as one tennant leaves - someone else is in the room the following day!!!

The key to being successful in this sort of enterprise is owning the land already, for a foreigner to consider buying a piece of land and constructing the apartments puts them into a situation whereby....

a) they try to charge too much to recoup their investment and consequently get no business, or,

end up looking at a 40 year period before seeing a retun on their investment.

As a foreigner, best avoid this type of investment unless you can buy or lease an existing and established apartment block that may benefit from a bit of TLC, but do the math first, and dont be surprised if the figures dont exactly match your expectations!!

[torrenova]

You wouldn't rent them out at 3000 Baht, more likely 2500 Baht.

Maintenance is next to nothing on a building like that, and usually gets paid for by the profit they make on utilities. They sell their electrics at 7 or 8 Baht/unit and water at either 30 or more/unit, or a fixed fee of 80 Baht/month. Doesnt make you rich, but an extra 100 Baht/month/room easily pays for the electric consumption of the public area's. That is already one cost less!

Admitted, to reach 10% net return you really need 100% occupancy, but as said, give a proper product and you'll get it. I have a few staff living in this kind of room, and they had to look at several places before they found one, and not even in their preferred location!

I think your numbers and ideas are right when I think about my looking for staff accommodation. I know some girls who still keep their good rooms (sublet), years after they moved in with some western guys. They can drop in, stay over (friends living there) and they can get it back if they want.

[torrenova]

Sorry Monty, but 1500 - 1800 is much more the norm, we are only a couple of hundred meters off Sukhumvit near Satit School and there are hundreds of these apartments around here, 1800 baht a month is considerd "luxury" by the locals, saying that, as soon as one tennant leaves - someone else is in the room the following day!!!

The key to being successful in this sort of enterprise is owning the land already, for a foreigner to consider buying a piece of land and constructing the apartments puts them into a situation whereby....

a) they try to charge too much to recoup their investment and consequently get no business, or,

end up looking at a 40 year period before seeing a retun on their investment.

As a foreigner, best avoid this type of investment unless you can buy or lease an existing and established apartment block that may benefit from a bit of TLC, but do the math first, and dont be surprised if the figures dont exactly match your expectations!!

I'd say your numbers are on the low side but there must be many levels between 1500 and 3000.

Your point on the land is a good one. Whether your partner will let you put her land in your company I don't know and you'd have to be daft to build somewhere and leave it all in her name.

You don't need 40 years to recoup your investment but very simply, if you needed an income to live and we put that at 1.5m a year and a 7.5m build can provide 10% pa, then you need 2 of those or 15m invested just to cover your living costs and lets throw another one up for some spare cash. Thus, you have maybe 25m invested or around $650,000 and your free cash is only around $20,000 a year.

This brings us back to the issue of any capital appreciation and because of the time in years, we also have to deal with depreciation of the buildings. At 5% a year, you'd lose more on depreciation $33k than your net free cash of $20k and would therefore just need $13k a year capital appreciation just to get an effective 20 year annuity. Whichever way you stack it up it does not really make much sense unless you don't need the income to live on or have a lot of properties and can accept a low net % income.

[steven100]

The greater profit may be in selling it on after completion.

That I am not sure of

I've just come across one of such buildings for sale, 7 million, 28 rooms, 85% occupied with no management nor even one single sign (it's a bit in a side soi).

With proper signage occupancy probably can reach 100%.

Building needs a bit of a touch-up (paint only).

SO still looking at 250,000 Baht/room all in...

For me, the inward cost is too great and the return far too small and that is without the land ownership issue.

Very true, but basically that's the difference between a relatively passive business, and one which would need your full time attention to run!

The latter if done properly should return the same or more AFTER it paid you a proper salary for your management/work!

Agree Monty, I believe this is a better investment , if you do the maths .... 7mill , 28 rooms .... you have the building already there ... location will be more suited to thais in town ... say you spend another 500k to do the place up... then the next step is promote !!

remember ... location , location , location...

just my opinion .. but your return will be better !!

cheers

[Guderian]

Agree Monty, I believe this is a better investment , if you do the maths .... 7mill , 28 rooms .... you have the building already there ... location will be more suited to thais in town ... say you spend another 500k to do the place up... then the next step is promote !!

remember ... location , location , location...

just my opinion .. but your return will be better !!

cheers

I wonder about the best location? As always, there's a balance between price, and proximity and convenience to the areas where the tenants may work. Would you suggest specifically targeting those Thais who work in the tourist areas (so land nearby would be pricey), or would you go for a wider audience (in which case a place east of Suk may be OK)? There are large areas of land yet to be developed on the south side of Thepprasit, which would seem like a good location (from what little I know, anyway), but I have no idea if land prices are still relatively reasonable there. Some of the sois off Jomtien Beach Road have empty and dilapidated buildings that might be suitable for conversion, but given the location near the beach I suppose they would be far too expensive?

[tommybkk]

The property have to be very well located to rent out at 5000 baht to thais.

There are so many rooms available at small prices.

How many square meters are you talking about?

Better idea is to build a small residence with facilities.

10 to 20 rooms with a 50 sqm swimmingpool & gymnasium area is a good rental plan.

Foreigners will be interested in renting rooms as small as 22 to 30 sqm including these facilities at 4000/5500 baht a month

Ofcourse it depends on the location of the property.

Edited December 11, 2009 by tommybkk