26, Modest Savings, Is A Condo A Wise Move?

[emsfeld]

The younger you are, the more risk you should take as time (value) is on your side. Just paint the worst case scenario - within the next 5 years you lose everything. You'll just be 31 yrs old, very employable with lots of experience under your belt. You can easily start over again.

I am not so familiar with BKK's high end condo market, but considering what has happened in USA, EU, UK I am not sure whether it's the best place to be. Sure, in good times, the turnaround times are quicker and returns higher than in the lower end, however, this segment also gets hit hardest during not so good times. I reckon, that prices came down by up to 30% per sqm at the higher end, but remained fairly stable at the lower end. In terms of rental yields, yes, they will be considerably higher in the upper end, however, I think you have much more idle time after a tenant moves out. I'd be interested to hear from other users how much their actual yield was when averaged over, say, five years rather than stating their best year.

Seems there is contradiction here. First, more risk should be taken for higher expected return due to age.

Then, high end condo may not be the best position to take with its high risk and high returns...

If you put all your funds in a single high-end condo then I would find that hardly a contradiction. I was referring to OP's situation (being in a similar one myself) - not to someone who's investment in a high-end condo makes up 20-30% ( or less) of his total portfolio. I also said you should take more risk, not take a punt by putting all ur money on 37. There are also other issues that go with that such as liquidity. The greater the amount of equity I have to contribute to an asset, the more I value liquidity. Hence, I'd prefer to take riskier investments in other asset classes where I dont have to commit capital for a longer period of time. Plus, you can spread your funds more easily and recoup losses. The condo thing in BKK works for us as the capital tie up is minimal - it doesn't affect my liquidity at all. If worse comes to worst I go out clubbing only 5 days a month rather than 8 and I cover my base (on that condo). Maybe this clarifies my point above.

Edited January 15, 2010 by emsfeld

[pkrv]

OP - Is it a home?

[torrenova]

It really depends upon a great number of factors, many of which you cannot control. You have to decide whether the fact that you cannot control certain factors still leaves the intended purchase within a risk profile that you are happy with.

Out of the things you can control, you need at least 12 months of money as stated. You need health insurance, paid up for at least 12 months or the money equivalent. You need some "get out of jail" money which can be "get out of country" money. Quite simply, having the best part of a million sitting around in a few bank accounts is probably a wise move.

I don't know whether foreigners can purchase condos in their name with money earned in Thailand (and tax paid) rather than just bringing the money into the country from overseas. If you have to bring it in from overseas, you might have issues getting the money out. There are numerous ways, including just taking cash abroad so don't worry but it might have to be done.

Of course the immediate saving is your rent. If you live in a 5k a month place, then you'll not be saving much. If you are paying 20k a month, then you are saving a decent amount, though your purchase price would be higher.

You could buy in another place, such as Pattaya and rent it out. Quite easily done if it is the right product and priced accordingly. Still better to live in the one you buy 95% of the time though.

There comes a time when you have to decide what you are going to do. Fixing your rent at the interest available on your cash deposit is one of the decent things you will ever do but you cannot think of a Bangkok condo as you would a house in London. There will come a point when they will need to tear it down. If at that time your value is zero, then you have to consider that whilst it may appreciate in value initially, over the medium to very long term, it will depreciate to zero.

If I had the cash security net, I'd be looking. There will most likely be an increasing number of westerners shipping out as D-Day cannot be too far off.

[gregb]

It turns out a lot of people in the west now think they should have though of it that way before the crash. BTW, I think NOW is a superb time to buy USA real estate. So cheap, it can hardly go lower.

Sorry, cost of holding and maintaining residential properties in the US is too high. Property taxes, and the cheap lightweight stud walls...

Not to mention the currency risks. I wouldn't invest in any USD denominated asset that wasn't returning a minimum of 15%. US property values may be at their bottom dollar wise, but they have a lot further to fall in terms of stronger currencies.

The Thai property market does have the advantage that the Baht is likely to strengthen against all Western currencies, thus providing some portfolio diversity. But I don't think a condo is going to give someone who is 26 the kind of liquidity he needs. At that age, you need to be nimble and ready to take advantage of opportunities as they appear. He simply can't do that if he's locked into several tons of bricks weighing him down.

I have a few properties scattered around Thailand, all carefully chosen due to some particular geographical feature or mass transit location, but I am married with a family on the way. I would never have chosen these investments at 26. You need to be able to aggressively go after high yielding opportunities at that age, and the coming financial crisis is going to make liquidity even more important.

I still recommend avoiding the real estate market entirely right now. It is not the pancea it was a decade ago. It has been over inflated and is now frought with risk. Stick with gold and high yielding equities. You can always rent cheaper than you can buy in Thailand, and pride of ownership is overrated.

Edited January 16, 2010 by gregb

[Pakboong]

IMHO, this coming year will be one of the best ever to buy real estate in Thailand. You will likely have to be very patient to sell at a profit however. But, at your age, that shouldn't be a huge problem.

[mccw]

Hello.

As an investment I wouldn't expect to make much money out of a bottom end condo, but if you want to be paying of the place your going to want to live in for a long time then fair enough.

Investment wise, to give you income and security incase of accident or what have you, i'd recomend buying a property in england to give for rent to students (higher return and don't have to fix it up each year as lower standard expected), with a deposit of say 40 grand on a house at 180, 4 beds you'd be making an income in the region of 3-600 pounds per month plus paying off the morgage so in 25 years will have a nice egg waiting for utilisation. Also now is a relatively low point in the market so a good time to get in.

After another 5 years of continued saving then maybe think about getting a place just for purposes of living in Thailand, but in my opinion building up a rental base paying itself off plus earning an income is the best; one now, another in 5 years, 2 more after another 5 years, by the time your 40 or 45 could retire and just live off the rental income.

I'm under 30 also, but have a missus 2 kids, so a bit different, i spent mostly everything on a house for us to live in here in chiang mai a couple years ago, which worked out alriaght as bht strengthening added about 30% to value but going to keep for a long time so makes no real difference, (a 3 bed house here is about the same as a 45sqm condo in town so no questions for me personally, also rent return would be alot better on the house), but next step thinking about investment for the future is to go the route i've just described in the previous paragraph, ie property in uk. Much more stable than the markets, no worries about politics unstable in thai and bht movements etc. I've researched and thought about it alot and think i'm right in my conclusion, but for sure everyones got their own opion for what suits them best.

Have a long think and don't rush in to anything.

If you do decide to get a condo, in my opinion its better to get one in an older building which you can see is well managed and well maintained rather than something new off plan or only a year or so old, as other posters said there can be problems with management and people no paying the fees, mafia etc etc . You could add value by renovating or knocking 2 together.

Best of luck and happy days to ya

Edited January 17, 2010 by mccw

[Jingthing]

I think that's good advice if you are going to buy. Don't buy a new one. Buy an older one that are managed correctly.

[mccw]

I still recommend avoiding the real estate market entirely right now. It is not the pancea it was a decade ago. It has been over inflated and is now frought with risk. Stick with gold and high yielding equities. You can always rent cheaper than you can buy in Thailand, and pride of ownership is overrated.

If everything falls appart this year then yeah gold could double, but if it doesn't it will fall back to around 500$ or so. Not worth the speculation i reckon. property is alway rentable if it goes down and could turn a nice profit depending where and what you buy. I'd look at UK or EU in desirable areas or in Thailand land on one of the islands (but well researched and negotiated of course); an area waiting for infustracture if got plenty time to wait will see a larger return.

[Benjie]

Hello.

As an investment I wouldn't expect to make much money out of a bottom end condo, but if you want to be paying of the place your going to want to live in for a long time then fair enough.

Investment wise, to give you income and security incase of accident or what have you, i'd recomend buying a property in england to give for rent to students (higher return and don't have to fix it up each year as lower standard expected), with a deposit of say 40 grand on a house at 180, 4 beds you'd be making an income in the region of 3-600 pounds per month plus paying off the morgage so in 25 years will have a nice egg waiting for utilisation. Also now is a relatively low point in the market so a good time to get in.

After another 5 years of continued saving then maybe think about getting a place just for purposes of living in Thailand, but in my opinion building up a rental base paying itself off plus earning an income is the best; one now, another in 5 years, 2 more after another 5 years, by the time your 40 or 45 could retire and just live off the rental income.

How much money would he lose every single month it's not rented out, 140,000 pounds worth of mortgage + Council Tax + Water Rates + maintenance etc...

[mccw]

Hello.

As an investment I wouldn't expect to make much money out of a bottom end condo, but if you want to be paying of the place your going to want to live in for a long time then fair enough.

Investment wise, to give you income and security incase of accident or what have you, i'd recomend buying a property in england to give for rent to students (higher return and don't have to fix it up each year as lower standard expected), with a deposit of say 40 grand on a house at 180, 4 beds you'd be making an income in the region of 3-600 pounds per month plus paying off the morgage so in 25 years will have a nice egg waiting for utilisation. Also now is a relatively low point in the market so a good time to get in.

After another 5 years of continued saving then maybe think about getting a place just for purposes of living in Thailand, but in my opinion building up a rental base paying itself off plus earning an income is the best; one now, another in 5 years, 2 more after another 5 years, by the time your 40 or 45 could retire and just live off the rental income.

How much money would he lose every single month it's not rented out, 140,000 pounds worth of mortgage + Council Tax + Water Rates + maintenance etc...

Obviously one should have enough reserves to cover safely up to 6months morgage payments, but your not loosing money, its contributing to equity you can take out later when you want to sell. Mostly though properties are rented 2-6weeks after going on the market. Maintenance shouldn't be much as damage is covered by the deposit, a new boiler or what have you should be budgeted for but profits will out wiegh such costs. Electric +water would be payed for by the tennents and not used if no one in the house obviously. Council tax would have to be payed yearly anyway.

Be good to get something at auction close to a uni and do up to a medium standard, any damage covered by deposit and coz you've done it up you know there will be minimal maintenance for several years. If your strict with yourself and in no hurry then the auctions one can make a good profit with the point to sell, this is what i do for a living, but to give for rent is good for the long term like what the op is talking about. Right now i'm wanting to turn over a few more properties as more money to be made, but would like to build a rental portfolio for future and retirement. The OP lives and works here so might not be able to take time out to do something up, but could easily find something on the open market suitable for student rentals and if he timed it between accademic years have it rented out in a matter of weeks and let an agent manage everything. Also living oversees the income would be tax free.

[RAZZELL]

I might have missed it, but what did the OP say he was willing to "invest"?

RAZZ

[mccw]

I might have missed it, but what did the OP say he was willing to "invest"?

RAZZ

equal to a modest condo in bkk so i'm guessing over 30grand but under 100,000gbp ball park figure?

[OxfordWill]

That's right.

As for is it a home- it would be that 'security' in the event of a problem. I think perhaps I need to look into what options if any I have with the uk market. I suppose that means finally getting my tax status sorted out (groan). Also I don't like the idea of hooking myself to a mortgage, I just dont, however commonplace it is. Once again thanks to all for your advice.

Given the situation in Thailand right now I suppose acting too soon might be unwise.

I am not keen on stocks- partly because I am so ignorant and not enough time this year to improve myself on that score- and partly because when I think of investing in business/business industry I think of other people's money, not my own. Economies are basically business, I guess. I dont know. Completely stupid about financial stuff, so its just a non starter, couldnt invest in something I know myself to be so stupid about.

Edited January 18, 2010 by OxfordWill

[pkrv]

That's right.

As for is it a home- it would be that 'security' in the event of a problem. I think perhaps I need to look into what options if any I have with the uk market. I suppose that means finally getting my tax status sorted out (groan). Also I don't like the idea of hooking myself to a mortgage, I just dont, however commonplace it is. Once again thanks to all for your advice.

Given the situation in Thailand right now I suppose acting too soon might be unwise.

I am not keen on stocks- partly because I am so ignorant and not enough time this year to improve myself on that score- and partly because when I think of investing in business/business industry I think of other people's money, not my own. Economies are basically business, I guess. I dont know. Completely stupid about financial stuff, so its just a non starter, couldnt invest in something I know myself to be so stupid about.

Actually that was a very candid and open reply - So I will try to reply, but I don't think this is going to help.

Given you are not certain about the concept of a home - That would place a huge tax on you - a short term ball and chain, and immense resentment - so possibly not a good idea.

So rent - this will place a ball and chain on you until the day you die. I don't know but at 90 years old you will still be paying more than the 'mortage' each month, and have to find the income to fund the 'mortgage'.

IMO forget the situation in Thailand things change everywhere. With a home it does not matter.

Interesting decision isn't it. Short term pain long term gain, or long term pain no gain?

[samuibeachcomber]

So you are not sure how secure your work is,how sure are you of finding other employment here if your work falls through? Lets say you buy a condo,live in it(save on rent)but what happens if you do not have any employment in bangkok and find another job away somewhere,and cant rent the condo out?you need money to finance your move to new employment but have none as it all went on the condo purchase.Buying a cheap condo will only save you rent money,but you will have management fees and upkeep outgoings too,its doubtful you will make any capital gain at this end of the market.

I would not do it.Rent is relatively cheap here compared to the west,and will leave you flexible if you have to move location.Plenty of time to buy property but not now,now is the time to save,and if you cant save on your earnings in thailand at age 26,imo you would be better off making your fortune back in the western world.

[aussiebebe]

There is certainly lots of good advice here, mostly people are saying that having cash and making most risky investments is necessary for younger people. Gregb wrote 'Stick with gold and high yielding equities.' Look, I'm an idiot - mind explaining how to do this? Do you open an account, or buy bonds or gold-bonds or what? How easy or practical is this for people to do? are there fees/minimum investments/taxes etc? If it's not too much trouble, could you give an example? Thanks.

[ExpatJ]

I would say, go ahead and buy!

Even if you have to leave thailand at some point in the future , you can always rent it out. The advantage of owing and renting out is that you get a solid return on your money every month- cash. No other investment can provide monthly cash payments at the same level as a rented condo on your principal investment.

I have a 15 yr buying plan (or more accurately 'wish') so that when im 55 i aim to have 5-7 condos in Jakarta, Bkk and possibly KL...all for renting out with no view to sell them. If all goes well that should bring in about 10,000 US$ per month...but given empty rental units, cost of flying around asia taking care of them etc...the actual profit maybe be alot less than that.

Edited February 8, 2010 by ExpatJ

[pkrv]

...but given empty rental units, cost of flying around asia taking care of them etc...the actual profit maybe be alot less than that.

However I think you would have great fun doing so

[ChiangMaiFun]

Hi - several things:

I assume you will be renting out? I own several and get roughly 9%/10% gross and 7%/8% net (without Prejudice )

There are several ‘hidden’ advantages – firstly you get neither exchange rate charges nor any bank charges on your income (no ATMs). Secondly you also do not have to worry about fluctuation in the rates – because you are in the ‘local’ economy and thirdly your income is somewhat ‘shielded’ from your home base and prying taxmans eyes (dam_n them all).

Do be aware that prices do not go up much – so it’s more a simple question of do you want capital advance or revenue?

Capital it’s a ‘no’, Revenue it’s a ‘yes’.

The old adage: location, location, location is the key. Be aware of common area fees. If I had say ‘100,000’ GBP (150,000 US). I’d spread my risks and consider buying outside of BKK (get 2 for 1) – I pay about 25,000/30,000 here (Chiang Mai) per sq. meter – if you need any help let me know (gratis).

[cyfanaz]

I am the owner of HomeSpace Realty.

I would say that in your situation that buying a condo is NOT a good choice right now. You should have at least 6 months reserves in the bank and be funding a retirement account.

Once you have that saved then you could look at a condo. Make sure that staying in Thailand is something you will do for a long while. There are many condos on the market now

and its a buyers market but that also means that if you loose your job and need to sell it that you may have to wait several months. When you do decide to purchase I would look

for a good value and make sure its close to the BTS as those units always rent first.

Good luck and when your ready I would be happy to help. Rob

[cyfanaz]

Many posts suggest that you can rent out your condo and earn 7 to 10 percent. This is true if its in a good location and if you find

a tenant. We get around 20 new listings a day and only about 5 new customers a day. There is an over supply of condos right now.

So that being said if you do decide to buy make sure that its in a great location. Those units always always always go first. Near the

Bts and newer is the best choice.

email removed per forum rules

[ExpatJ]

Hi Rob

7-10% is very high- i have been looking at new units close to BTS and am seeing 6-6.5% returns. If you have any 7-10% reutrn units, please let me know i am seriously looking to buy. And if you have any 7-10% return already with tenant then i could give you the cash next month (depending on the outcome of the red shirt/Thaksin issue). Thx

[ChiangMaiFun]

Hi Rob

7-10% is very high- i have been looking at new units close to BTS and am seeing 6-6.5% returns. If you have any 7-10% reutrn units, please let me know i am seriously looking to buy. And if you have any 7-10% return already with tenant then i could give you the cash next month (depending on the outcome of the red shirt/Thaksin issue). Thx

I have a 12.110.6 gross/net ratio condo on a 3 year contract in CNX

[CaptHaddock]

That's right.

As for is it a home- it would be that 'security' in the event of a problem. I think perhaps I need to look into what options if any I have with the uk market. I suppose that means finally getting my tax status sorted out (groan). Also I don't like the idea of hooking myself to a mortgage, I just dont, however commonplace it is. Once again thanks to all for your advice.

Here's the flaw in your thinking. Homeownership does not provide security. It is a liability. Especially in Thailand where you do not have the right to reside. There are any number of problems (lose your job, want to move for a new job, political instability turns violent, you tire of Thailand, etc.) that could arise that would cause you to want to sell off the apartment quickly, but you might not be able to do so. Then you could be squeezed. That wouldn't be very secure, would it? America is full of such stories right now and will be for many years to come.

As an investment, owning an apartment might pay off, although that's by no means certain. But investments pay off because you took a risk and it worked out for you. Taking a risk does not provide security. Risk is the opposite of security.

What provides security? Savings. Save a high percentage of your income in the best safe instruments you can find until you have so much that you are not looking for security anymore because you are looking for return. Then make an investment. Between now and then read every book you can find about investing.

[trogers]

What provides security? Savings. Save a high percentage of your income in the best safe instruments you can find until you have so much that you are not looking for security anymore because you are looking for return. Then make an investment. Between now and then read every book you can find about investing.

Savings to an amount to cover unforeseen events is a necessary evil, but is no means a security for the future. Interest on savings are much lower than inflation and the falling value of money will eat up on savings, especially when governments are printing much of it out of thin air.

[ChiangMaiFun]

That's right.

As for is it a home- it would be that 'security' in the event of a problem. I think perhaps I need to look into what options if any I have with the uk market. I suppose that means finally getting my tax status sorted out (groan). Also I don't like the idea of hooking myself to a mortgage, I just dont, however commonplace it is. Once again thanks to all for your advice.

Here's the flaw in your thinking. Homeownership does not provide security. It is a liability. Especially in Thailand where you do not have the right to reside. There are any number of problems (lose your job, want to move for a new job, political instability turns violent, you tire of Thailand, etc.) that could arise that would cause you to want to sell off the apartment quickly, but you might not be able to do so. Then you could be squeezed. That wouldn't be very secure, would it? America is full of such stories right now and will be for many years to come.

As an investment, owning an apartment might pay off, although that's by no means certain. But investments pay off because you took a risk and it worked out for you. Taking a risk does not provide security. Risk is the opposite of security.

What provides security? Savings. Save a high percentage of your income in the best safe instruments you can find until you have so much that you are not looking for security anymore because you are looking for return. Then make an investment. Between now and then read every book you can find about investing.

Not convinced you have got this right - if you are getting 8% net and the property gives you a stable, high return - every year you reduce your initial investment - I know people who have been here 10/20 years and are living 'free'.

I get 10% + gross and 8%+ net (year in year out) and own the chanots - if you split your risks it's a very good deal for the reasons I have outlined (local currency etc.) if you add that in I would be getting 12% gross 10% net. You thinks the stock market is secure? banks? sorry I don't think so...

[Tinkelbell]

It turns out a lot of people in the west now think they should have though of it that way before the crash. BTW, I think NOW is a superb time to buy USA real estate. So cheap, it can hardly go lower.

Sorry, cost of holding and maintaining residential properties in the US is too high. Property taxes, and the cheap lightweight stud walls...

So true.

Next week this high rise high ended condo in Tampa Bay is putting on an auction block. Having seen this beautiful condo with a cousin who flew from Michigan to shop around for a place to live their retirement in a warm climate. It was priced at $995K,

was a bit expensive. So they went home empty handed.

.

Well, what do you know, the auction will start at 2/3 lower than original asking price......around $335K.

Reading announcement about the place, the date to be auctioned, I was quite tempted to make a bid, but the better sense of me warning of high property taxes, CDD, home owner insurances... etc will eat you up alive.

At present home where I live. Paid cash for it, so I'm not dealing with mortgate interest, but every year I still have to shell out over $10K for property taxes and CDD alone.

I'm happy to do that knowing that my taxes is being put to a good works. My area got new roads, new overpass, or extensions.

My point is even you bought a condo at a deep discount, do not forget it's going to cost you quite a fortune to keep and maintain your property. It puts quite a big dent in your retirement fund.