Empty Properties

[ChiangMaiFun]

Rental yield is over 6% pa after common fees.

I think you are lucky to be getting that much. I doubt I would pay that, unless it reflected a bargain purchase price.

It would be interesting to know the OPs purchase price for his units, and how that compares with 40,000B rent.

I get an average of 7/8% net after common area fees/agents fees/renovation costs etc. little bit tighter this year and some units only returning 5/6% but I know of many that get 10% net because they bought over5 years ago.

[Darrel]

Which just goes to prove that rents and prices are far higher here than they should be.

[trogers]

Which just goes to prove that rents and prices are far higher here than they should be.

Not necessarily. Rental yield will depend on the purchase price. Eg. a 90 sqm 2-bedrm condo unit at Sukhumvit 61 purchased in 2006 would have cost Bt63k/sqm.

If rent is at Bt35k/mth, less Bt3k for common fees, net rent is Bt32k/mth giving over 6% pa yield.

But if you were to use a rental yield figure on recently completed projects to derive a rental price, the amount for rent will seem high because these projects were selling at Bt85-93k/sqm.

[Heng]

I usually get a good response from offering 'free months' (with 2 months deposit of course) without lowering my target rents. You'd be surprised at the number of people living month to month who really value getting a few months to live somewhere for 'free.' I've had some tenants who got pulled in by 'free rent' and are still with us 10+ years later.

[saakura]

Without the sizes of the units mentioned, it would be difficult for posters to give good advise.

[Darrel]

Not necessarily. Rental yield will depend on the purchase price. Eg. a 90 sqm 2-bedrm condo unit at Sukhumvit 61 purchased in 2006 would have cost Bt63k/sqm.

If rent is at Bt35k/mth, less Bt3k for common fees, net rent is Bt32k/mth giving over 6% pa yield.

But if you were to use a rental yield figure on recently completed projects to derive a rental price, the amount for rent will seem high because these projects were selling at Bt85-93k/sqm.

The only valid figure for calculation of a rental return will be todays value. Any other figure fails to take into account depreciation/appreciation. And any calculation of ROI without those is meaningless.

So all my comments are based on a percentage of todays property values.

Edited March 13, 2011 by Darrel

[trogers]

Not necessarily. Rental yield will depend on the purchase price. Eg. a 90 sqm 2-bedrm condo unit at Sukhumvit 61 purchased in 2006 would have cost Bt63k/sqm.

If rent is at Bt35k/mth, less Bt3k for common fees, net rent is Bt32k/mth giving over 6% pa yield.

But if you were to use a rental yield figure on recently completed projects to derive a rental price, the amount for rent will seem high because these projects were selling at Bt85-93k/sqm.

The only valid figure for calculation of a rental return will be todays value. Any other figure fails to take into account depreciation/appreciation. And any calculation of ROI without those is meaningless.

So all my comments are based on a percentage of todays property values.

Hmmm...I wonder what values my condo units will have tomorrow, or even a week from now. And to think real properties of listed companies do not get valued weekly or even monthly to satisfy market disclosure.

[Darrel]

Hmmm...I wonder what values my condo units will have tomorrow, or even a week from now.

Obviously only the almighty knows that.

What we probably do know is what similar properties may have changed hands for recently. The ulimate test of value is, of course, to put it on sale and reduce the price until someone actually buys it. Then you know today's value down to the last satang.

[kyb789]

Have you really invested into furnishings? Most of the condos I have looked at were pretty lame. People want to feel comfortable and at home. The best furnished condos will always go first. I saw one place with 2 recliner chairs for seating. A week later I saw an add in the paper for the same chair, 2-for-1. Go figure. If you bought one of those 2-seat sofas, forget it. People enjoy a nice long sofa, 3-seat, so they can stretch out.

Have you put some real money into decoration? Paint? Most thailand condos come in Hospital Room White. What about a kitchen? If I am going to pay 35kbaht, that place better have an awesome kitchen. Most Thai condos are laughable in this respect becasue single Thai's will not cook, but eat out. If you got a 2 or 3 bedroom, then most likely they have a family and will do some cooking. But most Thai's will not pay so much anyway, so you are after the foreigner market. In that case, they will expect to see a nice kitchen even if they don't use it.

[kyb789]

Delete . Repeat post.

Edited March 13, 2011 by kyb789

[ChiangMaiFun]

Have you really invested into furnishings? Most of the condos I have looked at were pretty lame. People want to feel comfortable and at home. The best furnished condos will always go first. I saw one place with 2 recliner chairs for seating. A week later I saw an add in the paper for the same chair, 2-for-1. Go figure. If you bought one of those 2-seat sofas, forget it. People enjoy a nice long sofa, 3-seat, so they can stretch out.

Have you put some real money into decoration? Paint? Most thailand condos come in Hospital Room White. What about a kitchen? If I am going to pay 35kbaht, that place better have an awesome kitchen. Most Thai condos are laughable in this respect becasue single Thai's will not cook, but eat out. If you got a 2 or 3 bedroom, then most likely they have a family and will do some cooking. But most Thai's will not pay so much anyway, so you are after the foreigner market. In that case, they will expect to see a nice kitchen even if they don't use it.

Right let's go through this again... all my units are very high western standard including kitchens/bathrooms with granite tops, microwaves, double door fridges, cookers - rain showers, quality sofas, 50 inch TVs, DVD's - quality flooring, built in units and original art work.

These units would look good in any modern city. My ROI of 6/7/8% is REAL and allows for all deductions including agents fees, renovations etc. My recent unit (for example) cost 1.5 million to renovate- I only let on year contracts and my most recent tenant is a Japanese corporate let at 30,000 for a unit costing 5m - 7.2% gross and about 6% net

[trogers]

Have you put some real money into decoration? Paint? Most thailand condos come in Hospital Room White.

The reason most newer condo units in Thailand have white walls, floor and ceiling is that they are small, and with relatively low ceiling (2.3-2.5m). And white will never be white, especially for deep rooms. They turn grey...lol.

[Darrel]

My ROI of 6/7/8% is REAL and allows for all deductions including agents fees, renovations etc.

You are very lucky indeed to get that much. I wouldnt pay half of that.

[trogers]

My ROI of 6/7/8% is REAL and allows for all deductions including agents fees, renovations etc.

You are very lucky indeed to get that much. I wouldnt pay half of that.

This is why long term investors of condo units need to look into the location, the design and the layout of the units carefully before buying them. You want to target discerning tenants, and not those who would count every dime and will rent a unit even though the bedroom has no window, but it is cheap...lol!

If you have a condo unit that is located well, with a layout that uses space sensibly, tastefully decorated, and have amenities suited for your target group of tenants. you need only to consider your asking rent compared with competitors within your building or up along the road.

Four of my units are rented out to tenants whose companies pay the rent (through the tenant's name). This means my tenants have been given a specific budget. If the rent is less than this budget given, the tenants do not get to pocket the difference. Thus, they choose the best unit they can within their given budget. This point of "I wouldn't pay half of that" will not apply with my tenants...

My final condo unit, which is a 1-bedrm, is rented out to a group of office colleagues working in Iraq, and they use the unit for their R&R.

Edited March 14, 2011 by trogers

[ChiangMaiFun]

My ROI of 6/7/8% is REAL and allows for all deductions including agents fees, renovations etc.

You are very lucky indeed to get that much. I wouldnt pay half of that.

you mean you would not pay half of 30,000 rent for a 5m unit? are you serious? you would only pay 15,000? you obviously have no idea

[buddy]

Ezzra, would you mind pm-ing me with details of your properties and pics if possible?

Ezzra,

Please also PM me with details.

I am in Bangkok now and looking for long term rental (for years) off Sukhumvit rd area.

best regards

[steelepulse]

According to this site, http://www.globalpropertyguide.com/ ChaingMaiFun has hit his return spot on. The "rental yields" table on the right hand side of the homepage shows ROI and cost of 120 sqm condos in various countries.

[trogers]

According to this site, http://www.globalpropertyguide.com/ ChaingMaiFun has hit his return spot on. The "rental yields" table on the right hand side of the homepage shows ROI and cost of 120 sqm condos in various countries.

Not sure if rental yield shown in the survey is net of common fees. But the conclusion that smaller units give higher rental yield is correct with my units.

My two 1-bedrm units:

Cost to buy, renovate and furnish - Bt1.7m (45sqm) renting at Bt15,000/mth gross, and Bt2.2m (62sqm) renting at Bt17,300/mth gross.

Edited March 15, 2011 by trogers

[ChiangMaiFun]

According to this site, http://www.globalpropertyguide.com/ ChaingMaiFun has hit his return spot on. The "rental yields" table on the right hand side of the homepage shows ROI and cost of 120 sqm condos in various countries.

One aspect which many fail to take into account (and why many buy condos to rent out here) is that you get income in 'local' currency - this is a huge 'secondary gain' - no ATM fees, no Transfer fees etc. etc.

[Darrel]

you mean you would not pay half of 30,000 rent for a 5m unit? are you serious? you would only pay 15,000? you obviously have no idea

Precisely. I would expect to pay about 4% rent for a decent place in Europe and I see no reason at all why I should pay more than that here.

If someone can explain to me what is so wonderful about here that makes rental property worth such a high return I would like to hear about it. The very fact that so many places are empty simply proves that they just arent worth it.

I'm afraid that these magically high returns are just an example of the all-pervading Thai notion of "if it doesnt sell put the price up".

[trogers]

you mean you would not pay half of 30,000 rent for a 5m unit? are you serious? you would only pay 15,000? you obviously have no idea

Precisely. I would expect to pay about 4% rent for a decent place in Europe and I see no reason at all why I should pay more than that here.

If someone can explain to me what is so wonderful about here that makes rental property worth such a high return I would like to hear about it. The very fact that so many places are empty simply proves that they just arent worth it.

I'm afraid that these magically high returns are just an example of the all-pervading Thai notion of "if it doesnt sell put the price up".

And you are now staying in Europe?

[jdinasia]

you mean you would not pay half of 30,000 rent for a 5m unit? are you serious? you would only pay 15,000? you obviously have no idea

Precisely. I would expect to pay about 4% rent for a decent place in Europe and I see no reason at all why I should pay more than that here.

If someone can explain to me what is so wonderful about here that makes rental property worth such a high return I would like to hear about it. The very fact that so many places are empty simply proves that they just arent worth it.

I'm afraid that these magically high returns are just an example of the all-pervading Thai notion of "if it doesnt sell put the price up".

And you are now staying in Europe?

To be fair --- with these people already taking 20% less, that must be killing their ROI.

BTW -- this isn't Europe .. but finding decent housing at a fair price is easy in Thailand. Market does drive price to some extent but with good eyes and a brain you can do OK

[trogers]

you mean you would not pay half of 30,000 rent for a 5m unit? are you serious? you would only pay 15,000? you obviously have no idea

Precisely. I would expect to pay about 4% rent for a decent place in Europe and I see no reason at all why I should pay more than that here.

If someone can explain to me what is so wonderful about here that makes rental property worth such a high return I would like to hear about it. The very fact that so many places are empty simply proves that they just arent worth it.

I'm afraid that these magically high returns are just an example of the all-pervading Thai notion of "if it doesnt sell put the price up".

And you are now staying in Europe?

To be fair --- with these people already taking 20% less, that must be killing their ROI.

BTW -- this isn't Europe .. but finding decent housing at a fair price is easy in Thailand. Market does drive price to some extent but with good eyes and a brain you can do OK

Those who are suffering low ROIs are the ones who bought their condo units at peak prices of Bt75k/sqm or more from early 2007 till the present.

There are local apartments renting 20+ sqm air-con studio units at Bt5k/mth or less if you are not picky about the kind of neighbors, or the extra traveling time into the city. Old townhouses 20+km away from the CBD can be had for Bt6k/mth. You need only to weigh your quality of life with the money saved.

Edited March 16, 2011 by trogers

[Darrel]

Those who are suffering low ROIs are the ones who bought their condo units at peak prices of Bt75k/sqm or more from early 2007 till the present.

As I mentioned previously ROI based on the purchase price is not a valid way of calculating rent. It is only a valid way of calculating ROI. Rent should be calculated as a percentage of the current property value.

Maybe the landlord bought a condo at a firesale for a pittance, or bought it while on yaba and paid 10 times what its worth. Neither has the slightest relevance to the rental value.

And in fact if you really want to calculate ROI you need to take into account the actual value today of the property minus the purchase price, and indeed the relative value of the currency in which the funds were sourced. Few do, it seems.

[Darrel]

http://www.globalpropertyguide.com/

Fascinating. I see that prices in Europe are all around the 4% that I mentioned, yet many "cheap" countries like those in SEAsia, Latin America, etc. are significantly higher. Presumably this is related to the types of unit being included in the calculations, and the type of person renting them. Otherwise they make little sense.

Either way it will be a cold day in hell before I pay 6, 7, 8% of a property's value in rent.

[trogers]

Those who are suffering low ROIs are the ones who bought their condo units at peak prices of Bt75k/sqm or more from early 2007 till the present.

As I mentioned previously ROI based on the purchase price is not a valid way of calculating rent. It is only a valid way of calculating ROI. Rent should be calculated as a percentage of the current property value.

Maybe the landlord bought a condo at a firesale for a pittance, or bought it while on yaba and paid 10 times what its worth. Neither has the slightest relevance to the rental value.

And in fact if you really want to calculate ROI you need to take into account the actual value today of the property minus the purchase price, and indeed the relative value of the currency in which the funds were sourced. Few do, it seems.

We are talking about rental yield, and not ROI.

ROI for real properties is a total of two components: rental yield and change in capital value. For flippers, ROI is purely from this change in capital value as they do not want to hold the property long enough to rent it out.

The change in the price of a condo unit does not have a strong correlation to the change in rental value. They are driven by different demand and supply factors, and the former is strongly embroiled in the influence of speculation and easing financial conditions. These few years, prices of new developments are still rising while rental values have been falling. Price movements of older condo units (5 years or older) have seen less change. My condo units are of 15 years old and 25+ years old and selling prices of similar units within the same two developments have not changed much over these two and a half years, with the small difference in selling prices attributable to height, orientation, and interior.

Thus, my rental yield calculations are still accurate.

[ChiangMaiFun]

you mean you would not pay half of 30,000 rent for a 5m unit? are you serious? you would only pay 15,000? you obviously have no idea

Precisely. I would expect to pay about 4% rent for a decent place in Europe and I see no reason at all why I should pay more than that here.

If someone can explain to me what is so wonderful about here that makes rental property worth such a high return I would like to hear about it. The very fact that so many places are empty simply proves that they just arent worth it.

I'm afraid that these magically high returns are just an example of the all-pervading Thai notion of "if it doesnt sell put the price up".

Well... the market speaks! I usually get 7/8% net and get 3/4% net in Europe - you can think what you like but I get what the market gives me - I explained that this year it has lowered a tad to 6/7%. You can't compare with Europe - you can get many things cheaper here and more expensive here than your dear old Europe - and what??? you can buy a house here for 25% the cost in Europe and there is no point me going back to Europe and saying 'I'm not buying because I can get it cheaper in Thailand'.

[Darrel]

We are talking about rental yield, and not ROI.

I saw several different people talking about several different things.

[Darrel]

Well... the market speaks! I usually get 7/8% net and get 3/4% net in Europe - you can think what you like but I get what the market gives me - I explained that this year it has lowered a tad to 6/7%. You can't compare with Europe - you can get many things cheaper here and more expensive here than your dear old Europe - and what???

Hmm. Thailand is full of properties that are empty and either for sale or for rent (and indeed this is the title of the thread). Europe is quite different: most places available for rent or sale go in days or weeks at most. If they dont go quickly everyone knows that there is something wrong with them or they are seriously overpriced.

Hence my doubt as to the validity of the figures that are bandied about. Maybe people do sometimes get 8% when they finally get a tenant here, but it is patently obvious that there are far more properties than potential tenants (or buyers for that matter) and as such the numbers just dont add up. I still think that this is classic Thai style pricing: it it doesnt move, increase the price.

[pauljones]

Incentives to the receptionist and building staff if they find you a renter/buyer.