Rent Too Cheap Related To Buying?

[THAIPHUKET]

1. I have not been in this market, no idea.

2. What I would like to understand is the correlation of rent revenue versus purchase price.

Background, here in Chiang Mai, e.g. a shop house is for rent 10.000b /m, sales price however 5.000.000b which equals 41,6 years of rent. A very nice 1 family house at the Ping river rents for 25.000b/m, sales price 13.000.000b = 43,3 years of rent.

Thai-prices not Farang !

Why would anybody buy , pay taxes and upkeep plus have in 40 years a totally outdated property?

Property appreciation/ inflation need to go a looooooooong way before it makes sense.

What do I miss?

Are there any rational measures for property prices, a common denominator subject to area and type , of course?

[oldgeezer]

Your question is a reasonable one. And the answer is: NOONE should buy either a business or personal property unless it was intended to be passed on to heirs. Maintenance and upkeep costs in addition to lease dictate the wise do not consider buying either a home or a business property. The days of buying as an investment to build equity are over. And this is true in most other countries also.

I lease a beautiful home in an upscale neighborhood for a bit more than 1/300th of the sale price. And I have no maintenance costs except the yard and grounds. AND most importantly I have the flexibility to move if the notion strikes me.

[Arjay]

Your question is a reasonable one. And the answer is: NOONE should buy either a business or personal property unless it was intended to be passed on to heirs. Maintenance and upkeep costs in addition to lease dictate the wise do not consider buying either a home or a business property. The days of buying as an investment to build equity are over. And this is true in most other countries also.

I lease a beautiful home in an upscale neighborhood for a bit more than 1/300th of the sale price. And I have no maintenance costs except the yard and grounds. AND most importantly I have the flexibility to move if the notion strikes me.

[Arjay]

I disagree. In Pattaya most commercial property leases also stipulate "key money" in the contract from 3-5 years. This can add millions of baht in addition to the monthly rent. My house in Pattaya rents from 50,000-60,000 month depending on low/high season. The house is worth 8+ Million baht. That is a 7.5-8.5% annual return plus property appreciation! Try getting that in a bank account or stock market lately. Also to note there is no property tax or capital gains tax in Thailand. If it was a bad investment why are most wealthy Thai landowners?

[Arjay]

I'm sure you can get more than 7-8% investing in Greek government bonds. Take your chances :rolleyes:

[Arjay]

I'd like to add I had a condo I purchased for 1.9 Million baht. I rented it out steadly to a falang for 5 years at 27,000 baht per month. I then sold it for 2.8 million baht and payed 0 TAX! You do the math!

[richard_smith237]

My mortgage is cheaper than the rent at my previous apartment.

For my wife and I it is a method in which to save money while acquiring an asset.

However, as one poster has already mentioned we cannot move easily if we wish.

[lovelomsak]

I rent  2bedroom 2 baht townhouse for 2500 baht a month It isnot upscale but neither is it downscale it is good neighbourhood. Why would I even consider buying. That is less than the taxes on my home in Canada.

[Arjay]

Your question is a reasonable one. And the answer is: NOONE should buy either a business or personal property unless it was intended to be passed on to heirs. Maintenance and upkeep costs in addition to lease dictate the wise do not consider buying either a home or a business property. The days of buying as an investment to build equity are over. And this is true in most other countries also.

I lease a beautiful home in an upscale neighborhood for a bit more than 1/300th of the sale price. And I have no maintenance costs except the yard and grounds. AND most importantly I have the flexibility to move if the notion strikes me.

Niether does the "owner" cause your maintaining it for him and paying him too. Yes you can move but, your rent money is gone!

[Arjay]

I rent  2bedroom 2 baht townhouse for 2500 baht a month It isnot upscale but neither is it downscale it is good neighbourhood. Why would I even consider buying. That is less than the taxes on my home in Canada.

Yeah and you had to buy all the appliances and furniture too fool!

[Arjay]

I rent  2bedroom 2 baht townhouse for 2500 baht a month It isnot upscale but neither is it downscale it is good neighbourhood. Why would I even consider buying. That is less than the taxes on my home in Canada.

Yeah and you had to buy all the appliances and furniture too fool!

My guess is you live in the middle of nowhere. Considering your rent 2,500 baht month the property is worth less than 500,000 baht. Your landlord is making at least a 6% annual return on his investment! More than any Canadian bank pays:lol:

[sarahsbloke]

My own living quarters

Outside Cm, 3 bedroom furnished House rental 7000bht/month, sale price 1,700,000 = 20 years rental

Doing the math

1.7 million Baht invested offshore trust fund (no tax), return 5 to 10 percent, 85,000-170,000 bht return per annum

12 months rental at 7,000 bht a month = 84,000 bht

So in the worst case renting gives a profit of 1,000bht a year with no expenses.

In the best case renting gives a profit of 86,000bht a year.

(last year I made about 100,000bht profit by renting as my investments made a 12 percent gain, I'll let you know about next year)

Considering the risk you are taking by buying as well (total loss, bad neighbours, etc), buying just doesn't make sense to me.

Edited July 11, 2010 by sarahsbloke

[sarahsbloke]

My mortgage is cheaper than the rent at my previous apartment.

For my wife and I it is a method in which to save money while acquiring an asset.

However, as one poster has already mentioned we cannot move easily if we wish.

If I may point out it is extremely unlikely that you are aquiring an asset (which is the whole point of this thread)

But your wife may well be aquiring an asset. (I am making a big assumption that one of you is a Thai national)

Edited July 11, 2010 by sarahsbloke

[hhgz]

"1. I have not been in this market, no idea."

Accordingly, it would behoove you to familiarize yourself with the market.

"2. What I would like to understand is the correlation of rent revenue versus purchase price."

You provided your own example, and answered your own question. Many real estate ads have both rental and purchase costs, and there you go.

[trogers]

My own living quarters

Outside Cm, 3 bedroom furnished House rental 7000bht/month, sale price 1,700,000 = 20 years rental

Doing the math

1.7 million Baht invested offshore trust fund (no tax), return 5 to 10 percent, 85,000-170,000 bht return per annum

12 months rental at 7,000 bht a month = 84,000 bht

So in the worst case renting gives a profit of 1,000bht a year with no expenses.

In the best case renting gives a profit of 86,000bht a year.

(last year I made about 100,000bht profit by renting as my investments made a 12 percent gain, I'll let you know about next year)

Considering the risk you are taking by buying as well (total loss, bad neighbours, etc), buying just doesn't make sense to me.

Trust funds have been know to failed. House may collapse, and land dissappear into a sink hole. Which is most likely?

[witold]

Many properties rent for a month or few months.  It is currently low season.  Prices will be considerably lower.  

People are in the habit of listing both a rental price and a selling price even though they have no intention of selling.  So they just post a very high selling price to discourage offers.  They might also do this to make the rental price appear that much more attractive.  

Real estate is a speculative business.  Part of what you pay for when you buy is the ability to profit on any sort of appreciation.  Future prospects for Thailand are great.  I'm sure all those beach front properties in Phuket seemed completely overpriced 10 and 20 years ago.  Guess who got rich; people who rented at a cheap price (and eventually got thrown out or had their rents raised) or the people who purchased?  

As someone already mentioned, commercial real estate is a different ball game with substantial additional payments (key money) necessary in addition to monthly rent.  

As a general rule, residential properties in Thailand rent for about 6-8% of selling price.  This is standard.  Deviation from this is rare.  

[sarahsbloke]

Trust funds have been know to failed. House may collapse, and land dissappear into a sink hole. Which is most likely?

Most likely is, Thai person takes house away from you ...... this forum is full of such people, and every other person I meet seems to have fallen into this particular hole, alternatively, I haven't met a single person who claims to have had a failed trust fund, maybe I will be the first person I know to have this happen.

Edited July 11, 2010 by sarahsbloke

[trogers]

Asking about correlation between rent revenue and purchase price is like asking the corrlation between Central Bank's interest rate and economic growth, neither make much sense.

If there is a shortage of rental space in a desired location compared with a sudden influx of renters, rents will increase due to the time lag to build more space. And the reverse is true.

Similarly, if there is a sudden demand from buyers (do not ask for a logical reason here) and there is a shortage of space for sales, prices go up.

Only if the two demand spike up or down at the same time can there be close correlation between rental value and selling prices.

[Arjay]

My own living quarters

Outside Cm, 3 bedroom furnished House rental 7000bht/month, sale price 1,700,000 = 20 years rental

Doing the math

1.7 million Baht invested offshore trust fund (no tax), return 5 to 10 percent, 85,000-170,000 bht return per annum

12 months rental at 7,000 bht a month = 84,000 bht

So in the worst case renting gives a profit of 1,000bht a year with no expenses.

In the best case renting gives a profit of 86,000bht a year.

(last year I made about 100,000bht profit by renting as my investments made a 12 percent gain, I'll let you know about next year)

Considering the risk you are taking by buying as well (total loss, bad neighbours, etc), buying just doesn't make sense to me.

Hah! Offshore trust funds? Got an FDIC gurantee? Offshore invest fund invested in what? More like you loss 10% last year!

[Arjay]

Many properties rent for a month or few months.  It is currently low season.  Prices will be considerably lower.  

People are in the habit of listing both a rental price and a selling price even though they have no intention of selling.  So they just post a very high selling price to discourage offers.  They might also do this to make the rental price appear that much more attractive.  

Real estate is a speculative business.  Part of what you pay for when you buy is the ability to profit on any sort of appreciation.  Future prospects for Thailand are great.  I'm sure all those beach front properties in Phuket seemed completely overpriced 10 and 20 years ago.  Guess who got rich; people who rented at a cheap price (and eventually got thrown out or had their rents raised) or the people who purchased?  

As someone already mentioned, commercial real estate is a different ball game with substantial additional payments (key money) necessary in addition to monthly rent.  

As a general rule, residential properties in Thailand rent for about 6-8% of selling price.  This is standard.  Deviation from this is rare.  

Only thing non speculative is U.S. Treasury Bonds. Now paying under 4% for 10 years!

[Arjay]

My own living quarters

Outside Cm, 3 bedroom furnished House rental 7000bht/month, sale price 1,700,000 = 20 years rental

Doing the math

1.7 million Baht invested offshore trust fund (no tax), return 5 to 10 percent, 85,000-170,000 bht return per annum

12 months rental at 7,000 bht a month = 84,000 bht

So in the worst case renting gives a profit of 1,000bht a year with no expenses.

In the best case renting gives a profit of 86,000bht a year.

(last year I made about 100,000bht profit by renting as my investments made a 12 percent gain, I'll let you know about next year)

Considering the risk you are taking by buying as well (total loss, bad neighbours, etc), buying just doesn't make sense to me.

All you posters here paying under 10,000 baht per months rent. Don't seem to have enough capital for a middle class Thai house. Just your sour grapes for being a "jon(poor) falang in my opinion.

[Arjay]

Many properties rent for a month or few months.  It is currently low season.  Prices will be considerably lower.  

People are in the habit of listing both a rental price and a selling price even though they have no intention of selling.  So they just post a very high selling price to discourage offers.  They might also do this to make the rental price appear that much more attractive.  

Real estate is a speculative business.  Part of what you pay for when you buy is the ability to profit on any sort of appreciation.  Future prospects for Thailand are great.  I'm sure all those beach front properties in Phuket seemed completely overpriced 10 and 20 years ago.  Guess who got rich; people who rented at a cheap price (and eventually got thrown out or had their rents raised) or the people who purchased?  

As someone already mentioned, commercial real estate is a different ball game with substantial additional payments (key money) necessary in addition to monthly rent.  

As a general rule, residential properties in Thailand rent for about 6-8% of selling price.  This is standard.  Deviation from this is rare.  

If people are listing rental and sales prices with no intention of selling obviously their rental income is good. Yes?

[Arjay]

My own living quarters

Outside Cm, 3 bedroom furnished House rental 7000bht/month, sale price 1,700,000 = 20 years rental

Doing the math

1.7 million Baht invested offshore trust fund (no tax), return 5 to 10 percent, 85,000-170,000 bht return per annum

12 months rental at 7,000 bht a month = 84,000 bht

So in the worst case renting gives a profit of 1,000bht a year with no expenses.

In the best case renting gives a profit of 86,000bht a year.

(last year I made about 100,000bht profit by renting as my investments made a 12 percent gain, I'll let you know about next year)

Considering the risk you are taking by buying as well (total loss, bad neighbours, etc), buying just doesn't make sense to me.

TRUST FUND? You mean daddy puts the money in your trust fund and you spend it!

[evanson]

Here in the tropics, upkeep of a house is very costly and very time consuming. I've heard many times how a renter would like to repaint/refurbish their rental, but it's their money, and you think the Thai landlord's going to pay upkeep?

So the present unfortunate options are: You build/buy your own house to do with as you will but find reselling it can take years, or, you live in a dump, spend the minimum possible to make it habitable, and hope the landlord doesn't chuck you out.

I've now had the former for 3 years and wish to Christ I'd stuck with the latter.

Edited July 11, 2010 by evanson

[Arjay]

Here in the tropics, upkeep of a house is very costly and very time consuming. I've heard many times how a renter would like to repaint/refurbish their rental, but it's their money, and you think the Thai landlord's going to pay upkeep?

So the present unfortunate options are: You build/buy your own house to do with as you will but find reselling it can take years, or, you live in a dump, spend the minimum possible to make it habitable, and hope the landlord doesn't chuck you out.

I've now had the former for 3 years and wish to Christ I'd stuck with the latter.

Location,location,location. Then price.Timing is everything. Never buy in a seller's market

[trogers]

Here in the tropics, upkeep of a house is very costly and very time consuming.

I heard the same in countries with winter snow, from house owners in East Hampton on Long Island, NY.

[alexanderthai]

I would say " the rent and price" are related.

But depand on " financal stiuation of landlord and domestic economic plus period of time"

Best case

- Price is increasing , rent is increasing

Normal case

- Price is a bit increasing , rent is a bit increasing.

Worse case

- Price is stable or decreasing, rent is decreasing.

Therefore, when you check the price and rent, you should survey the market. Sometimes,the landlord is a rich person.They don't care what the economic crisis but they care about their return more than the period of shutting the shop until new clients coming.

[trogers]

I would say " the rent and price" are related.

But depand on " financal stiuation of landlord and domestic economic plus period of time"

Best case

- Price is increasing , rent is increasing

Normal case

- Price is a bit increasing , rent is a bit increasing.

Worse case

- Price is stable or decreasing, rent is decreasing.

Therefore, when you check the price and rent, you should survey the market. Sometimes,the landlord is a rich person.They don't care what the economic crisis but they care about their return more than the period of shutting the shop until new clients coming.

Best period to buy is when banks 'extend and pretend'...

[imaneggspurt]

My own living quarters

Outside Cm, 3 bedroom furnished House rental 7000bht/month, sale price 1,700,000 = 20 years rental

Doing the math

1.7 million Baht invested offshore trust fund (no tax), return 5 to 10 percent, 85,000-170,000 bht return per annum

12 months rental at 7,000 bht a month = 84,000 bht

So in the worst case renting gives a profit of 1,000bht a year with no expenses.

In the best case renting gives a profit of 86,000bht a year.

(last year I made about 100,000bht profit by renting as my investments made a 12 percent gain, I'll let you know about next year)

Considering the risk you are taking by buying as well (total loss, bad neighbours, etc), buying just doesn't make sense to me.

I agree, and id feel like a gypsy, you can never own the land its on, and after a maximum of 20 years it will have fallen down,

[Kf6vci]

YMMV but many landlords are hurting these days. They face vacancies (I know property owners who have houses and condos vacant for years and counting) and falling rents. Then there are HOA fees and the often poor built quality. After 15-20 years, you got to rebuild!!

Drive around Pattaya, on the wrong side of Sukkhumvit and you can see how terrible the market is. Rows of new town houses with shops downstairs and no takers, be it buyers or renters.

"Build - and they will come"? We have yet to see a bottom and the Baht is wildly overvalued.

Chris