Rent Too Cheap Related To Buying?

[trogers]

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

I remember the first property bubble in Thailand. A drive along the Bangna-trad road towards Pattaya in the late 80s and you see a couple of skeletal condo buildings raised up in the midst of a ricefield, and then abandoned.

[sirineou]

We talk about the financial issues , and we talked about the liquidity issues of rent versus Buy, and we can have a healthy debate about that.

What we have not talked about is, Pride in ownership!

In your own house, you are the king of your castle, ( your wife might disagree about that)

If you want to make any alterationsand or additions to it, you dont need to ask for permission, from your landlord.

and after a few drinks ( maybe more than a few) if the mood strikes you, you can set it on fire and watch it burn while you play the violin,

[THAIPHUKET]

ok, assume you found your place where you believe you want to be proud owner and be will be happy for the foreseeable future.

Prime location on the Ping river 10 km outside Chiang Mai on 1 rai. House well built, 30 years old. excellent condition, European building quality. A gem for Europeans, I guess, no so much for Thais who prefer newer designs.

Rent per year 300.000. How much would you pay for the property before you feel it's financially unattractive.

There ought to be some correlation . How much is the land worth?

[trogers]

ok, assume you found your place where you believe you want to be proud owner and be will be happy for the foreseeable future.

Prime location on the Ping river 10 km outside Chiang Mai on 1 rai. House well built, 30 years old. excellent condition, European building quality. A gem for Europeans, I guess, no so much for Thais who prefer newer designs.

Rent per year 300.000. How much would you pay for the property before you feel it's financially unattractive.

There ought to be some correlation . How much is the land worth?

I would pay around Bt20m for it.

[THAIPHUKET]

Assuming you are a rational person= 20 million means assuming you can use it another 60 years and or pass it on. Or you factor in an inflation rate of X over Y number of years. Correct?

[trogers]

Assuming you are a rational person= 20 million means assuming you can use it another 60 years and or pass it on. Or you factor in an inflation rate of X over Y number of years. Correct?

No. I do not have any emotional attachement to a site.

The figure is from the land's development potential. Build 18 units of walkup apartments and rent them out, all overlooking on to the river. Rake in at least Bt4m annual rental income for 30 years.

[eljeque]

In Pattaya, although maybe not all of Thailand to the same extent, a large number of foreigners and Thais as well, have bought or built houses and condos which they had planned on living in.

Although as a general rule, there is a return on investment ratio for rental property, there are enough aberations here, where there is property sitting empty (for a long time) or which cannot be occupied due to required repairs, that a smart foreigner can latch on to a very good deal in which the owner of the property receives less than 4% / year return before maintenance fees, taxes (company taxes), agent's fees, etc.

These are the occasions when renting is better than buying. These situations are not difficult to find by simply looking around on the bulletin boards, driving around, talking to people in the neighborhoods where you would like to live, AND staying away from real estate agents.

I pay 96,000 / year for a house which would sell for about 2,500,000. I have friends with even better deals, and it is because they have made the effort to look around.

Rent and invest elsewhere.

Property is an investment which needs to be maintained through not only repairs, but also making the effort to find a renter for the property, just like a business finding customers. If you can find an owner who made an investmen and does not maintain it well, you can take advantage of it by getting low rent.

Look around and see a lot of properties, and get back to owners whose properties have been available for along time. They will come way down on the rent.

Best of Luck

[fiddlehead]

Seems to me when you buy a house, you can sell it sometime later.

When you rent a house, you cannot.

So, the money you pay per month to buy it, is like putting savings in the bank.

The money you pay renting one, is like throwing it away.

I know i've been told that i think differently others, but this is how i see it.

ps

I bought a house for $18k about 33 years ago. It is worth about $125k now. Of course this was in the states where i'm allowed to own something but still..............

[sarahsbloke]

ps

I bought a house for $18k about 33 years ago. It is worth about $125k now. Of course this was in the states where i'm allowed to own something but still..............

PPS

I bought a house in the UK for 200,000UKP 6 years ago. It is worth about 400,000UKP now. Of course my former wife was awarded it in the divorce, I have never lived in a country where a married man was allowed to own anything.

[moe666]

There are pros and cons to renting and to buying. As many people found out recently property values donot always go up. Since the majority of people will buy there house and property on the installment plan, if they live in said house for 30 years they will have paid more in intrest than the orginal cost of house. On and please donot mention intrest is deductiable on tax, give me 1000dollars and at the end of the year I will give you back 300dollars sounds like a good deal for me.

Yes pros and cons to both.

[trogers]

Seems to me when you buy a house, you can sell it sometime later.

When you rent a house, you cannot.

So, the money you pay per month to buy it, is like putting savings in the bank.

The money you pay renting one, is like throwing it away.

I know i've been told that i think differently others, but this is how i see it.

ps

I bought a house for $18k about 33 years ago. It is worth about $125k now. Of course this was in the states where i'm allowed to own something but still..............

Whether to buy or rent also depend much on the time frame. If I planned to stay 3 to maybe 5 years, it may make more sense to rent due to the risk of getting caught on the downslope of the property cycle. As some will tell you, prices do not always go up and stay up.

But it will make sense to those who plan to stay long and may even retire here, as you have said, the rent you pay might as well be used to pay the mortgage.

[dave111223]

I recently purchased a commercial townhouse to move my businesses, which is currently renting in Bangkok.

My reasons for buying instead of continuing to rent:

Existing shop is 1 floor (maybe 60 square meters) on a mid-size street (2 lanes each way) and it cost 13,000 per month in the first year.

That then went up to 14,000 in the second year (~8%) and i have no doubt that it would continue to go up by a couple of 1000 per year for every year to come.

We are moving to a townhouse with 4 1/2 floors, on a major road (4 lanes each way) after put 700K down the monthly mortgage payment is 18,000 per month over 20 years.

You could probably rent a similar building for around 15K per month, but it would be in poor condition and require a lot of renovation unless you want your business to look like someone's old garage.

Other pros for us buyer were:

- Never having to worry about renegotiating the lease, or increased rent each year

- Pay the government rate for electric/water, instead of the X5 jacked up rates that landlords want to charge.

- Any renovations are increasing the value of your property instead of someone elses.

- Knowing where your business is going to be in 3, 5, 10 years...instead of always wondering what you are going to do in the next couple of years.

Cons:

- Major stress. Obtaining the mortgage, buying and renovating the property will give you some grey hairs.

- Money down, you're got to have some cash to put down.

[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.

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

First I have a pool villa in a farang enclave on Phuket, can't get too much better than location.

Secondly - How the hel_l was I to know that as soon as the builders were out, the tanks would be on the streets of Bangkok and Bloody Surayud comes down meddling and spouting off about looking into nominee ownership? 'Bolted', 'Horse' and 'Locking stable door after' spring to mind.

[Lancelot]

Let me muddy the waters a bit

I've been in Thailand for seven years on a retirement visa. However, my visa is really "A One Year Extension of Stay." Why on earth would I want to buy a long term asset (to live in) when the Thai government only allows me to remain here year by year?

Any way, my annual rent is roughly .4% of the purcase price, so, for me rent is cheap

[trogers]

Let me muddy the waters a bit

I've been in Thailand for seven years on a retirement visa. However, my visa is really "A One Year Extension of Stay." Why on earth would I want to buy a long term asset (to live in) when the Thai government only allows me to remain here year by year?

Any way, my annual rent is roughly .4% of the purcase price, so, for me rent is cheap

Annual rent at 4% of purchase price probably means an old unfurnished place. You would have already spent a tidy sum to fix it up and on furnishings.

[DMC1]

Rent if you think you will only be here for a few years. Take your time to scope things out if you are thinking of buying. Look at cheaper older properties in a better location rather than going for an expensive new development further out.

I rented for 7 years before I bought my house. I am much happier in the house that I have bought because I have made it into what I want and I intend to live in it for many many years. The rented house never really felt like home but it did the job.

[donx]

Let me muddy the waters a bit

I've been in Thailand for seven years on a retirement visa. However, my visa is really "A One Year Extension of Stay." Why on earth would I want to buy a long term asset (to live in) when the Thai government only allows me to remain here year by year?

Any way, my annual rent is roughly .4% of the purcase price, so, for me rent is cheap

Annual rent at 4% of purchase price probably means an old unfurnished place. You would have already spent a tidy sum to fix it up and on furnishings.

Just to clarify. Lancelot said his annual rent is roughly 0.4% not 4%. This I find hard to believe unless he's banging the landlord

If the purchase price is 1,000,000 baht, then his rent would be 4,000 baht/year and if the purchase price was 10 million baht, his rent would be only 40,000 baht/year. This is assuming the rent is 0.4% of the purchase price.

So Lancelot, is the 0.4% a mistake?

[dave111223]

If the purchase price is 1,000,000 baht, then his rent would be 4,000 baht/year

I've seen condos that are worth around 1M, that rent out around that price range per month. Doesn't sound that outlandish.

[trogers]

If the purchase price is 1,000,000 baht, then his rent would be 4,000 baht/year

I've seen condos that are worth around 1M, that rent out around that price range per month. Doesn't sound that outlandish.

I am also looking for a Bt1m condo renting out at Bt340/month. Know of any?

[donx]

If the purchase price is 1,000,000 baht, then his rent would be 4,000 baht/year

I've seen condos that are worth around 1M, that rent out around that price range per month. Doesn't sound that outlandish.

Per month, yes. Per year? Are you serious???

[dave111223]

If the purchase price is 1,000,000 baht, then his rent would be 4,000 baht/year

I've seen condos that are worth around 1M, that rent out around that price range per month. Doesn't sound that outlandish.

Per month, yes. Per year? Are you serious???

Ah yes i mean per month, sorry. 4000 per year is totally ridiculous i agree.

[Pakboong]

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.  

At the link below you will find the price rental ratios for Asian countries. Thailand is in the bottom half.

http://www.globalpropertyguide.com/Asia/price-rent-ratio/

[THAIPHUKET]

At the link below you will find the price rental ratios for Asian countries. Thailand is in the bottom half.

http://www.globalpro...ice-rent-ratio/

Very interesting link, Thai/BKK data is brand new !

http://www.globalpropertyguide.com/Asia/Thailand/Rental-Yields

[evanson]

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.

Do they have year round mould, crumbling concrete caused by rapidly alternating heat/damp, rapidly peeling paint/varnish (of whatever quality), incessant termites eating their timber year round, not to mention the numerous species of ant doing the same. Vines, creepers clogging up their plumbing? Can't say I ever noticed any of it to the fraction of a degree we had in the uk which is equally cold.

[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.

Do they have year round mould, crumbling concrete caused by rapidly alternating heat/damp, rapidly peeling paint/varnish (of whatever quality), incessant termites eating their timber year round, not to mention the numerous species of ant doing the same. Vines, creepers clogging up their plumbing? Can't say I ever noticed any of it to the fraction of a degree we had in the uk which is equally cold.

Yes, as you have mentioned and those @#!ing squirrels...lol

[battersea]

Hi there ! I am interested in buying a condo. I just want to own a little place of my own in Thailand. As long as i can get the internet and study i will more or less be happy anywhere eg.Bangkok , Chiang Mai or Southern Thailand. I know you say location is important for future investment and i agree with you. I have a budget of about 1.5 million baht and i have an internet business that nets me £2k per month.I just have a few questions if you could help me ;

1) Since i am not a temporary resident yet (ED visa next year) does that rule me out completely from getting a mortgage from a Thai bank or Broker ?

2) Can you make any suggestions on areas in which to buy ?

3) I have browsed the internet and found many condos in my price range can you recommend any companies to contact to help with this ?

4) Are there any things i should be aware of eg. Annual Service Fees , Condo Ownership Papers , transfer Fees etc ?

[jomtienman]

My question is this. If you know how much a Pattaya condo will rent for, then how do you calculate it's fair market purchase price. The link quoted by THAIPHUKET says, for Thaialnd, 16 years rent. (yield 6.25%). This seems right to me but I'd be interested in the views of other members.

I'm not thinking in terms of making an investment. I'm thinking "At what multiple of the annual rent would a farang condo owner agree to sell rather than let" (especially if he has no further personal interest in owning that property)

[LivinLOS]

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!

No because the same amount to buy invested is pulling in (easy) 10x my annual rental.

So my rent, and the other 9x it, is 'free' when considered against spending the same cash to buy.

The time value of money.. Some people need to understand it.

[LivinLOS]

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?

Thats what remains of my last 'million dollar villa' !!

[LivinLOS]

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!

30% per annum for the last 5 years..

Over 300% total since I moved to Thailand.