Anyone In The Buy-To -Rent Out Game? Is It A Good Retirement Strategy?

[ExpatJ]

I am thinking of buying a condo in bangkok to rent out as an investment. But i'm worried about oversupply and difficulties in finding a tenant. Does any one have experience of finding a tenant- success or failure stories?

From what i can see the high end condos by the BTS - @6-7 million baht for a 1 bedroom would be easier to rent out, but the rental returns would be only @5% realistically (i.e. for 7 m condo i think you'd be lucky to rent it for 40,000 baht per month). The cheaper condos 1-5 million for 1 bedroom seem to have higher rental returns but also seem to be harder to rent out...

Has anyone here based there retirement funds on owning and renting out condos? Its something i am thinking about as a long term goal...If you have the cash to buy outright it seems there is no other investment product these days that give you cash every month and allows you to keep your initial investment.

[cheynewalk]

I think you have to look at the opportunity cost when considering your options. In your example you could invest that 7 million baht in a term deposit in a bank in Australia for around 7% interest for a return of just over 40,000 baht per month and your money relatively safe. Of course, inflation will eat into your capital and your apartment in bangkok may appreciate in value, though selling it may be a hassle, whereas the cash in the bank is easy to access.

[Khun Jean]

In my strategy 7M baht are at least 25 condos (basic 25-30sqm all concrete studio) rented out for 3000 baht each = 75.000 baht a month. from the start 100% occupancy as the target is the working class Thai and very seldom a foreigner (always a pain in the a** when it comes to payments!). You need a Thai 'manager/repairmen'. I pay mine 500 baht per condo per month, that includes repairs and materials for small jobs like leaking taps or broken light switches, etc. Other stuff that needs fixing or replacing are most of the time locks, hinges, light fixtures. This year until now a grand total of 2100 baht. Last year total was 8900 baht.

12 * 75000 - (25 x 12 x 500) - 8900 = 741100 Baht last year.

That is more than 10%. Works for me.

[trogers]

From what i can see the high end condos by the BTS - @6-7 million baht for a 1 bedroom would be easier to rent out

A 2-bedroom priced just over Bt7m will be easier to rent out than a 1-bedroom @ Bt6-7m. Rental rate for the 2-bedroom being at Bt45k. Location - 200m from BTS Phrom Phong...

[trogers]

In my strategy 7M baht are at least 25 condos (basic 25-30sqm all concrete studio) rented out for 3000 baht each = 75.000 baht a month. from the start 100% occupancy as the target is the working class Thai and very seldom a foreigner (always a pain in the a** when it comes to payments!). You need a Thai 'manager/repairmen'. I pay mine 500 baht per condo per month, that includes repairs and materials for small jobs like leaking taps or broken light switches, etc. Other stuff that needs fixing or replacing are most of the time locks, hinges, light fixtures. This year until now a grand total of 2100 baht. Last year total was 8900 baht.

12 * 75000 - (25 x 12 x 500) - 8900 = 741100 Baht last year.

That is more than 10%. Works for me.

ROI = Rental yield + Capital appreciation

[samran]

In my strategy 7M baht are at least 25 condos (basic 25-30sqm all concrete studio) rented out for 3000 baht each = 75.000 baht a month. from the start 100% occupancy as the target is the working class Thai and very seldom a foreigner (always a pain in the a** when it comes to payments!). You need a Thai 'manager/repairmen'. I pay mine 500 baht per condo per month, that includes repairs and materials for small jobs like leaking taps or broken light switches, etc. Other stuff that needs fixing or replacing are most of the time locks, hinges, light fixtures. This year until now a grand total of 2100 baht. Last year total was 8900 baht.

12 * 75000 - (25 x 12 x 500) - 8900 = 741100 Baht last year.

That is more than 10%. Works for me.

Just to be clear.....we are talking 25 condos purchased @ approx 280,000baht each. So essentially, a bog standard hor.pak...

[Khun Jean]

Just to be clear.....we are talking 25 condos purchased @ approx 280,000baht each. So essentially, a bog standard hor.pak...

Just a standard condo for single/couple working Thai people, there are a few hundred thousand of those in Bangkok.

Why would you need something flashy? To make less profit?

[samran]

Just to be clear.....we are talking 25 condos purchased @ approx 280,000baht each. So essentially, a bog standard hor.pak...

Just a standard condo for single/couple working Thai people, there are a few hundred thousand of those in Bangkok.

Why would you need something flashy? To make less profit?

Totally understand. I think it is a very unique strategy. My only concern is I guess administration. Who handles things like bills, electricity etc? Any issues with the body corporate/bulding admin in terms of fees, they way things need to get done.

What about capital appriciation?

All genuine questions as I'm fascinated with this approach.

[Khun Jean]

Just to be clear.....we are talking 25 condos purchased @ approx 280,000baht each. So essentially, a bog standard hor.pak...

Just a standard condo for single/couple working Thai people, there are a few hundred thousand of those in Bangkok.

Why would you need something flashy? To make less profit?

Totally understand. I think it is a very unique strategy. My only concern is I guess administration. Who handles things like bills, electricity etc? Any issues with the body corporate/bulding admin in terms of fees, they way things need to get done.

What about capital appriciation?

All genuine questions as I'm fascinated with this approach.

Maybe the strategy is unique for a 'farang', most of the time a Thai is the landlord.

I use a Thai manager/handyman (family member Chinese/Thai) that takes care of it. Of course you need someone you can trust otherwise small details can escape you and can escalate. Issues with building admin are almost non existend. There is no fitness room where the aircon is being swithed off. No swimmingpool that can get dirty, low maintanance is 'normal' Most of the buildings have no elevators. Not much that can break down.

Bills are on the tenants name. So electricity is not my concern. Water bills are with most contracts included up to a limit. Manager/handyman writes down water meters every month and uses this time also to check if everything is in order, maybe a small chat with the tenants who seem not to be bothered by these visits but see it as an opportunity to get some things fixed when necessary. Biggest 'problem' is that some tenants use gas for cooking. Easily spotted when condos are visited every month, and a few electric stoves and rice cookers are always in the back of his truck. Never know when you can sell something for some extra cash. He also sells and fixes things like tv's, microwaves, fridges etc and arranges transport when people want to move their stuff etc. When people move out they can sell their stuff to him and he sells it to the next tenant if what they want matches what is in 'stock'. No furniture or appliances is included in the rental price.

Service costs are very low, think around 1000 baht a year for the cheapest and around 200 per month for the more expensive or better quality ones. This service cost is always included in the rent and i pay them once a year to minimize administrative work.

Capital appreciation is for me less of a concern. I never cash out, i roll over older ones to newer. Once you are 'in the market' prices can go up or down without to much effect. Just keeping up with inflation is enough.

Cheaper condos don't depreciate at all, maybe only when bought from plan or brand new.

The risk allover is pretty low. The risk for the middle and higher end condo market seems a lot higher and without the higher rewards.

[samran]

Thanks for that Khun Jean, very informative..

[johnnyk]

OP mentions a 1-bedrom condo @7 million baht that might generate 40K/month in rent. I think that may be a stretch. Will people pay that much for 1 bedroom? My buddy used to rent a very nice 10th floor unit walking distance to Asoke skytrain. He paid 35K/month for 150m2, 2 bedroom + maid's room, full western kitchen and 2 balconies in a well-maintained building.

[RAZZELL]

Thanks for that Khun Jean, very informative..

Seconded

Would, another perhaps even easier strategy be to build or buy a block of apartments? All your problems would be in the same place then

RAZZ

[london]

Khun Jean, your investment is fabulous.

I had thought along similar lines, but not to the grand number that you have acquired.

My only concern was the actual administration and financial liability IF there was a problem with either the tenants or with the monthly rental payment. Certainly, to have a manager or someone whom you trust is the BIG plus to this....and sadly, I don't have those contacts to make it a viable proposition. I wish I did.

My investments have all been in 1 bedroom condos, initially buying under 3 million (some 15 years ago !) and more recently (4 years ago) in the 4.5 million range. All are returning a minimum of 7%. I leave the management in the hands of the building's staff and (touch wood) haven't had a problem. I haven't bought any more in Thailand in the last 4 years, although i have been buying in other parts of Asia.

I think that for the OP it CAN be a good stable income stream...BUT you have to be familiar with the country, with the systems here and not to invest all your eggs in one basket.

Oh, always MAINTAIN your property and make sure that the buildings are well maintained and that the Building's finances are sound.

[THAIPHUKET]

London, you invested in other Asian countries, which ones

would you consider nowadays, cities and what to look out for?

[THAIPHUKET]

Khun Jean, thanks for sharing.

if you would buy today, would you adjust for changes in rental demand? E.g. size, fixtures, whatever.

BTW I assume you speak Thai?

[THAIPHUKET]

Khun Jean, thanks for sharing.

if you would buy today, would you adjust for changes in rental demand? E.g. size, fixtures, whatever.

Forgotten= How much would you be willing to pay today??

[london]

London, you invested in other Asian countries, which ones

would you consider nowadays, cities and what to look out for?

Hi Thaiphuket,

I have invested in Indonesia and Malaysia.

I only invest in either capital cities or large population centres where there is strong employment growth.

In Indonesia, I have been wary of Jakarta, but I prefer Bandung and Surabaya. I have been buying there for the last 7 years.

In Malaysia, KL just jumped out at me about 2 years back as being grossly undervalued and I bought at that time. I still believe it is, but buying conditions have changed since then and the minimum buy in price for foreigners is 550,000 Ringitt. I still is value though.

I hope this helps.

Regards

[Khun Jean]

Thanks for that Khun Jean, very informative..

Seconded

Would, another perhaps even easier strategy be to build or buy a block of apartments? All your problems would be in the same place then

RAZZ

To build would be for me not the best thing to do. I know not enough to undertake such a project. Also i don't have enough cash for it, and i like to be as debt free as possible. Short term financing (1-2 years) would be considered if it is a great deal you otherwise would miss. The condo's we own are on purpose in different buildings and areas. This will prevent loss of investment when a building was not build properly or areas which can become less popular.

Also rolling over the oldest for newer condo's is an ongoing process. You never want to have condos' that are to old.

[Khun Jean]

Khun Jean, thanks for sharing.

if you would buy today, would you adjust for changes in rental demand? E.g. size, fixtures, whatever.

Forgotten= How much would you be willing to pay today??

In the segment 25-40m2, Thai oriented condo market i find it easier to rent out unfurnished condo's. The demand is higher as people prefer their own stuff. If people are without anything we have some basic furniture to help them over and usually we sell it to them for a cheap price and buy it back later even cheaper. A basic condo, nicely painted and with good doors and locks, basic bathroom with shower, toilet and wash basin with mirror.

Floors are tiled, with a halve tile along the bottom of the walls to prevent (water) damage and for easy cleaning.

Prices for these condo's have to be well under 300k to be considered. There are lots of them!

[THAIPHUKET]

Thank you London,

550.000 MYR are 5,5m THB. What does that buy you, seems to are aiming at a higher market than MR Jean?

Would you see potential foot traps in these countries more or less the same?

What I am asking can you do this more or less from here , entrusting some vehicle to invest your money with a high degree of probability to get in back?

Edited July 18, 2011 by THAIPHUKET

[london]

Thank you London,

550.000 MYR are 5,5m THB. What does that buy you, seems to are aiming at a higher market than MR Jean?

Would you see potential foot traps in these countries more or less the same?

What I am asking can you do this more or less from here , entrusting some vehicle to invest your money with a high degree of probability to get in back?

Hi Thaiphuket,

Yes, your calculation is spot on.

It will buy you a VERY good 3 bedroom apartment in the better areas of KL. Our investment is in a 4-5 star building, 3 bedrooms, 3 bathrooms, lounge, dining, study, maids quarters, balcony etc. The building is well maintained and with the amenities that you would expect: pool, kids pool, tennis court, etc. Yield: 7.8%

Certainly, you won't have any problem buying a good quality apartment there for this money. Also, if you are looking at a mortgage, the Malaysian banks are very responsive. Also, as an added attraction, look up Malaysia 2nd home (a government program). You'll find a lot of information there and one or two pleasant surprises re visas etc.

Also, the 550,000 MYR has the added benefit of putting a base under your property.

In Indonesia, our total investment is MUCH higher.....but we have bought a number of properties. Frankly, Indonesia is a tougher market to guarantee your investment will be safe, but that said, the facts are as follows: excluding the currency movements, the properties we have there have appreciated by an average of 20% pa (excluding rentals). If we include the currency appreciation, then the return has been over 30% pa ......no, I am not joking. There are many properties to be had there for under 1 million baht...but such properties also have their own issues.

I don't invest anywhere if I have the slightest doubt that i will lose capital. If in doubt, I won't do it. Simple.

Yes, you can run it all from Thailand, but Malaysia will be easier to handle than Indonesia. I have been lucky to have a good agent.

From my point of view, Malaysia is safer than Indonesia...BUT my feeling is that the growth from Indonesia will be higher. Malaysia is similar to Thailand and does have its own issues, whereas Indonesia is still a little bit of the wild west, but that is changing rapidly and if what I feel will occur there over the next 10 years, well, I want to be part of it.

I hope this helps....and Good Luck.

Regards