Arguments Against Buying A Condo?

[el jefe]

I own several condos in CM and here are the reasons why if anyone is interested in my experience:

Plus's

• I live in one - central, well renovated (by me) and secure - good services
• I own the title (Chanod)
• I receive about 8% return on the condos I rent out (net) 9/10% gross (deducting common area fees etc.)
• None are empty - fingers crossed!
• I receive income in 'local' currency - no exchange rate fees/no ATMs - this saving in addition to the returns quoted

Minus's

• condo management can be 'ify'
• condo politics
• maybe a risk of no renters (not so far!)
• have to spend time marketing
• have to pay agents commissions
• no or very little capital growth - expect to break-even - I do it for revenue not capital but do make profit on my own renovations
• selling takes a lot of time and patience

My view is save the rent and buy - prices are keen - why pay 25,000 (300,000) a year when you outlay 3m? it's 10% down the drain - room pays for itself in 10 years - each year you reduce your capital expenditure by 10% so first year 2.7 etc. etc. after 10 years it's cost you NOTHING - sound like a good plan?

I have made some mistakes and bought 2 or 3 when I first came here - overpaid - dont trust agents evaluations. I offloaded one at a 200,000 loss but this was my stupidity - won't happen again. Now I understand more and happy to own my 'home' - it also 'feels' nicer than renting and I can put my own pictures up etc. you can't own a house, of course, unless you get married - no intention of that!

Go slow, be wise... take your time and buy - that's what I did (missed out some of the 'wise' and 'slow' part when I first got here) - but now it's fine with my local income, good farang tenants - and happy lifestyle.

There are two problems with your economics:

1. You say that with a 10% return "after 10 years it's cost you NOTHING". That implies that all alternative investments have a return of ZERO, with an equal amount of risk. Any return you earn on the 3 mil baht you could have invested increases your hypothetical 10 year deal.

2. I've rarely seen a property where you can get a 10% return as a landlord. Based on comparable sales, the house I'm renting is worth 20 times my annual rent.

So I say rather than lay out millions of baht up front, find a better rental deal.

[ChiangMaiFun]

you use the word logic and then break the first fallacy of logic.

This fallacy involves the attempt to justify a wrong action by pointing to another wrong action. Sure many people are breaking the law so its okay. That is one of the first lessons your parents teach you not to fall into. Very basic.

Your logic boils down to it's necessary to break the law to undertake investment opportunities. Your calling that valid logic?

The question becomes are their investments that return equal rates of return without the risk of breaking the legal rules? Yes of course.

If they did crack down at some point then would one expect them to nail foreigners without citizenship rights or Thai citizens? I am guessing non citizens. What if you make an enemy and some bureaucrat decides to put the screws to you? It's a potential liability no doubt that could compromise your ROE, equity and even legal right to be in Thailand.

Sure it's the corrupt way of Thailand but it's worth taking in that it's against the law and some people do pay their legal share of the taxes.

oh goodie - a flamer just what I needed - I post some useful info to help someone and BANG off you go - I wonder why I bother - havn't you got something to add? something positive to help people? you don't think my post was constructive and useful? you think flaming a poster who is trying to help a positive contribution? get a life

Well I got good value out of your post... there is always a few that will find something negative to state if they think you are ahead of the game. Yes why bother when some Farangs will try tear your post down and flame your efforts... Yer right all Thais pay taxes on their rentals- Come on- dream on. Anyway even if claiming deduct all airfares and anything related to rented out the Condo. 99% would not be paying tax on renting out their Condos- IMO.

Keep any gains you are making low profile I have learnt as the No 1 rule in investing in Thailand- as there are always some Farangs and Thais that will be jealous and tear you down to make themselves feel better... Some not all. In our homeland we do all we can to avoid paying tax, nothing is different here. Why give away money for nothing.

You deserve 8% for all your risk and effort- Good work. Hope you make over 10% in the future. In a lot safer than betting on the worldwide stock market at the moment. Bricks and mortar investments make you feel more secure. Good part of anyones portfolio. I have a Condo in Aussie and I negative gear the expenses, claim all I can to pay basically no tax- what is the difference- none. This is not a Thai Law Taxation thread. It is a Investing in Condos in CMai thread. Is it worth the effort? In many cases the answer is YES. Outperforms many other investments and makes the owner feel better.

I for one look forward to Posts from investors- as should others. Some do not seem to accept that a few make a good living in Thailand. As they cannot. :jap:

Thanks - I decided not to continue to bother to reply to the flamer - the topic was about whether to buy a condo or not and I tried to outline why I did - this thread is not about tax or threatenng fellow posters. This happens on ThaiVisa way too much - sad really - some people sit there and just shoot, shoot,shoot

[ChiangMaiFun]

I own several condos in CM and here are the reasons why if anyone is interested in my experience:

Plus's

• I live in one - central, well renovated (by me) and secure - good services
• I own the title (Chanod)
• I receive about 8% return on the condos I rent out (net) 9/10% gross (deducting common area fees etc.)
• None are empty - fingers crossed!
• I receive income in 'local' currency - no exchange rate fees/no ATMs - this saving in addition to the returns quoted

Minus's

• condo management can be 'ify'
• condo politics
• maybe a risk of no renters (not so far!)
• have to spend time marketing
• have to pay agents commissions
• no or very little capital growth - expect to break-even - I do it for revenue not capital but do make profit on my own renovations
• selling takes a lot of time and patience

My view is save the rent and buy - prices are keen - why pay 25,000 (300,000) a year when you outlay 3m? it's 10% down the drain - room pays for itself in 10 years - each year you reduce your capital expenditure by 10% so first year 2.7 etc. etc. after 10 years it's cost you NOTHING - sound like a good plan?

I have made some mistakes and bought 2 or 3 when I first came here - overpaid - dont trust agents evaluations. I offloaded one at a 200,000 loss but this was my stupidity - won't happen again. Now I understand more and happy to own my 'home' - it also 'feels' nicer than renting and I can put my own pictures up etc. you can't own a house, of course, unless you get married - no intention of that!

Go slow, be wise... take your time and buy - that's what I did (missed out some of the 'wise' and 'slow' part when I first got here) - but now it's fine with my local income, good farang tenants - and happy lifestyle.

There are two problems with your economics:

1. You say that with a 10% return "after 10 years it's cost you NOTHING". That implies that all alternative investments have a return of ZERO, with an equal amount of risk. Any return you earn on the 3 mil baht you could have invested increases your hypothetical 10 year deal.

2. I've rarely seen a property where you can get a 10% return as a landlord. Based on comparable sales, the house I'm renting is worth 20 times my annual rent.

So I say rather than lay out millions of baht up front, find a better rental deal.

That's a fair point - but I also didn't calculate (better things to do) the savings on ATM charges/bank charges and Exchange rates etc. yes if you invested that money in the West you may get 3% so you can revise my estimate down 3% to 7% then up again for the savings on the local currency - my point is that there are advantages in condo purchasing - you want to rent and give profit to your landlord 'up to you'. It works for many of us to have local currency - anyway best wishes whatever - at least you were polite!

[WinnieTheKhwai]

Um, if Thailand ever makes serious work of collecting taxes on rent, then rents will just go up across the board by the same amount (or more), leaving the basic profit largely the same.

So to all the 'just-rent' gentlemen jumping up and down foaming at the mouth about the grayish tax situation: be careful what you wish for.

Edited July 6, 2010 by WinnieTheKhwai

[jayinoz]

I own several condos in CM and here are the reasons why if anyone is interested in my experience:

Plus's

• I live in one - central, well renovated (by me) and secure - good services
• I own the title (Chanod)
• I receive about 8% return on the condos I rent out (net) 9/10% gross (deducting common area fees etc.)
• None are empty - fingers crossed!
• I receive income in 'local' currency - no exchange rate fees/no ATMs - this saving in addition to the returns quoted

Minus's

• condo management can be 'ify'
• condo politics
• maybe a risk of no renters (not so far!)
• have to spend time marketing
• have to pay agents commissions
• no or very little capital growth - expect to break-even - I do it for revenue not capital but do make profit on my own renovations
• selling takes a lot of time and patience

My view is save the rent and buy - prices are keen - why pay 25,000 (300,000) a year when you outlay 3m? it's 10% down the drain - room pays for itself in 10 years - each year you reduce your capital expenditure by 10% so first year 2.7 etc. etc. after 10 years it's cost you NOTHING - sound like a good plan?

I have made some mistakes and bought 2 or 3 when I first came here - overpaid - dont trust agents evaluations. I offloaded one at a 200,000 loss but this was my stupidity - won't happen again. Now I understand more and happy to own my 'home' - it also 'feels' nicer than renting and I can put my own pictures up etc. you can't own a house, of course, unless you get married - no intention of that!

Go slow, be wise... take your time and buy - that's what I did (missed out some of the 'wise' and 'slow' part when I first got here) - but now it's fine with my local income, good farang tenants - and happy lifestyle.

There are two problems with your economics:

1. You say that with a 10% return "after 10 years it's cost you NOTHING". That implies that all alternative investments have a return of ZERO, with an equal amount of risk. Any return you earn on the 3 mil baht you could have invested increases your hypothetical 10 year deal.

2. I've rarely seen a property where you can get a 10% return as a landlord. Based on comparable sales, the house I'm renting is worth 20 times my annual rent.

So I say rather than lay out millions of baht up front, find a better rental deal.

That's a fair point - but I also didn't calculate (better things to do) the savings on ATM charges/bank charges and Exchange rates etc. yes if you invested that money in the West you may get 3% so you can revise my estimate down 3% to 7% then up again for the savings on the local currency - my point is that there are advantages in condo purchasing - you want to rent and give profit to your landlord 'up to you'. It works for many of us to have local currency - anyway best wishes whatever - at least you were polite!

Good location condos get approx 8% return- yet very little growth and there is more risk. Yet go outside the main and most popular Condo complexes and yield heads down to 4% or even below. Houses are a joke at 3% yield or less.

10% is a hard find- yet a couple of mates have found 10% yields. Yet in the last year it will be getting a lot harder to keep the place occupied at 10% yields.

I will be looking at purchasing Condos again in CMai when I feel the political situation is more stable.

Those adverts for 1.1 MIO 1 bed Condos look like good value- yet to be completed Condos. Anyone bought one 'Off the plan'. Never known anyone to buy Off the plan or incomplete in Thailand. As you really need to see how the development turns out.

Yet those who take the large risk may get a 50% + gain when the development is complete. Worth a look- IMO.

[CobraSnakeNecktie]

Um, if Thailand ever makes serious work of collecting taxes on rent, then rents will just go up across the board by the same amount (or more), leaving the basic profit largely the same.

So to all the 'just-rent' gentlemen jumping up and down foaming at the mouth about the grayish tax situation: be careful what you wish for.

or sales prices go down to reflect lower net rents. More likely sales prices will just go sideways to erode the time value of the investment. Which is what has largely happened in Thailand for the last 5 years.Many places around the world for that matter.

A seller can say they earned a modest nominal profit in sales price after x years but the time period they had to hold it decreased the real value of the principle via lost opportunity cost and it's compound interest.

There are concepts of supply side versus demand side price discovery. Landlords can ask whatever but still there needs to be demand to create a price point. I think it would be hard to point to any real estate market and conclude its based on supply factors only. I should hope not in chiang mai because they are building a lot in face of a possible global deflation.

The tightest correlation to sales/rental prices tends to be aggregate income levels of the population. If aggregate incomes increase then it drives land prices higher and thus housing sale prices and rents follow.

What do people think. Will aggregate income levels increase in CM in the coming years? Will the global economy tip to inflation or deflation? It has a great bearing on future real estate values.

[Andreas84]

Good Luck to the OP- did you purchase the Condo? :jap:

No, I decided to rather join forces with a family member and buy a condo in Oslo, Norway, to lease it. Then use my part of the rental income to rent a condo here. Much safer and better investment :-)

Anyway, I appreciate that several people took the time to give detailed and valuable input!

For long term, I will try to find a cheaper condo, but I will look for something more around 80 m2 for around 15.000 baht, not 140 m2 as of now, for 25.000 baht. However, for a centrally located condo of high quality (Huay Kaew, Nimmanhemin, Western standard) I believe this is what one has to pay.. If anyone has good examples proving otherwise, it would be interesting to see.

Edited July 6, 2010 by Andreas84

[amexpat]

So to all the 'just-rent' gentlemen jumping up and down foaming at the mouth about the grayish tax situation: be careful what you wish for.

Yes, that's me all right.

It was getting tiring and very messy with so many of us doing it. I find that when I jump up I always "jump" down as well. Maybe that is what generates all that foam.

But the other-people's-tax situation is just so exciting I can't help it.

.

[likite]

The old chestnut of buying against selling just keeps coming up. Here are a few of my own points

The list of reasons against buying any property in a foreign country is a long one and Thailand of course is no different, here are few.

1. What will the state of the condo be like in 3, 5 10 years time? Still saleable? Look at some of the older condos would you like to buy there and/or live there?

2. Future visa restrictions may come into force, you can't take the property with you if you want or need to move on. Also over time personal circumstances do change! Can you afford to walk away from 2-3 million Baht? I know I can’t.

3. Neighbours from hel_l can arrive at anytime and make your life a misery. Where do you go what do you do? If you rent you move within days.

4. Trying to sell can take years.

5. Cash is king and allows flexibility for any change in circumstances in the future.

6. Buying a house in someone else's name is asking for trouble.

7. What ever the income return you would have had on the cash ploughed into a property here will be lost. Keep the money invested outside of Thailand. In cash (very safe) maybe 4%. Invested in the stock market 8%income return is easily found. You can easily double that by taking an additional risk and buy and sell.

8. Cover some or all of your monthly rental from the income generated by the investments.

9. The cost of kitting out a bought property with TV, beds, furniture etc is not cheap and this comes out of your pocket and over time they need to be replaced at your expense.

10. You have no liability for the cost repairs/maintenance they are the landlords responsibility. The air con packs up, painting the property, not your expense.

11. You have the option of moving every few years or so into a brand new property if you so wish.

The list for buying..........

1. Have a sense of belonging and permanence…………………..

Just my thoughts.............

[sarahsbloke]

That's a fair point - but I also didn't calculate (better things to do) the savings on ATM charges/bank charges and Exchange rates etc. yes if you invested that money in the West you may get 3% so you can revise my estimate down 3% to 7% then up again for the savings on the local currency - my point is that there are advantages in condo purchasing - you want to rent and give profit to your landlord 'up to you'. It works for many of us to have local currency - anyway best wishes whatever - at least you were polite!

I seem to be making between 6 and 12 percent investing my money in the west at the moment.

I made about 100 percent on my pension fund in the last 4 years.

Unless you just plant your money in the bank, you get far more than 3 percent