Value Of Farm Land Near Buriram

[Thailaw]

Time will tell, I have a Thai limited partners and we were called in to the Tax Office this year. The Tax man anywhere in the world is a bad. From what I understand it's not the company's they are looking at, but the nominees who are not paying tax that are under the microscope. Jim

I think that you understand incorrectly. The company is a distinct entity, separate and apart from its shareholders (nominees or otherwise). Partnerships are different, and income flows directly to the individual partners when earned. Shareholders only earn "income", which is taxable, when dividends are paid. Most of the companies that own property and are foreign controlled earn no income and pay no dividends, and hence the shareholders pay no tax. In some areas, the local taxing authority is claiming tax on "deemed lease income" where a company owns land and has one or more foreign directors on the theory that the property is constructively "leased" to the foreigner (since he cannot own land), and tax is charged on the value of the lease income. There is a basis under Thai law for doing this. This is a topic for another thread, but I do agree that creating a structure that exposes you to tax or additional tax is not good and should be avoided (if possible).

[jamescollister]

Time will tell, I have a Thai limited partners and we were called in to the Tax Office this year. The Tax man anywhere in the world is a bad. From what I understand it's not the company's they are looking at, but the nominees who are not paying tax that are under the microscope. Jim

I think that you understand incorrectly. The company is a distinct entity, separate and apart from its shareholders (nominees or otherwise). Partnerships are different, and income flows directly to the individual partners when earned. Shareholders only earn "income", which is taxable, when dividends are paid. Most of the companies that own property and are foreign controlled earn no income and pay no dividends, and hence the shareholders pay no tax. In some areas, the local taxing authority is claiming tax on "deemed lease income" where a company owns land and has one or more foreign directors on the theory that the property is constructively "leased" to the foreigner (since he cannot own land), and tax is charged on the value of the lease income. There is a basis under Thai law for doing this. This is a topic for another thread, but I do agree that creating a structure that exposes you to tax or additional tax is not good and should be avoided (if possible).

As I said time will , but the laws here are not much different than the west, they just don;t have the public service system yet. it's all been done on a local level. Things are changing fast and the computers will link everything up. It maybe many years ahead before the small players get pulled in. The bigger ones are getting done now, look at the Chinese rice company that used Thais to buy land, it was all confiscated by the court. My motto is play safe, so we are squeaky clean on the company front, but as I said they still pulled us in on a VAT thing. Jim

[rgs2001uk]

Most of my portfolio is "underperforming" at the present. I thank Bernanke & Co. for that. Indeed, it is the miserable rates of interest in the US and risks in the stock market that have encouraged me to think about land in Thailand as an alternative. I have 5 year CDs (in Dollars) earning 2% taxable. Not a difficult bar to reach or pass. If the girls can get B30,000 per year on a B700,000 investment, that is 4.25%. And if the land appreciates it is icing on the cake. Certainly not guaranteed like bank interest, but for a relatively small amount, perhaps worth a shot. What I really need is a crystal ball.....

"What I really need is a crystal ball...."

You aint the only one, if you find a decent second hand one going cheap give me a call.

Like you I am taking a proactive approach to my portfolio, the only trouble is where to put the money.

I dont want a top heavy or unbalanced portfolio, already have Asian mutual funds, there are only so many Rio Tinto shares you can buy, but thats a topic for another forum.

There are many who have seen retirement plans dashed, stuck with houses that cant be sold, pension plans decimated, exchange rates against them.

Many others wont see the full effects of this recession for another generation.

I personally know guys who have had to put plans to retire here on hold, there are others who just wont make it, even if they save every red cent they earn in the next ten years.

As for me, I have decided its time to buy more property, regular income from rent, and hopefully capital growth in the long term, this purchase will be viewed as a long term investment, hold property for at least 10 and probably 15 years then sell, but what the hell do I know.

[Thailaw]

Most of my portfolio is "underperforming" at the present. . . . If the girls can get B30,000 per year on a B700,000 investment, that is 4.25%. And if the land appreciates it is icing on the cake. Certainly not guaranteed like bank interest, but for a relatively small amount, perhaps worth a shot. What I really need is a crystal ball.....

. . . As for me, I have decided its time to buy more property, regular income from rent, and hopefully capital growth in the long term, this purchase will be viewed as a long term investment, hold property for at least 10 and probably 15 years then sell, but what the hell do I know.

You echo what I say above about the prospect of investing in land providing modest income in rent and potential gain through appreciation. But then you poo poo my consideration of buying land near Buriram and wouldn't "touch it with a barge pole". I can only assume that your buying land outside Issan and probably outside Thailand. If it is outside Thailand, that may be wise except for exchange rate issues. And renting at long distance has a lot of problems I wouldn't want to take on. In 2004-05 I was getting B40 for $1, now it is B30, which really hurts!. The reverse is unlikely -- I blame Bernanke & Co for that also. I wouldn't touch a condo here with a barge pole, unless perhaps in a distressed sale where the price had been cut in half -- very hard to find those. So, while I agree with you completely, I am not sure how to implement what it is that you are suggesting. I am fortuante in that my future is secure so long as I do not make too many really dumb investment decisions. If I find a cheap, reliable crystal ball, I'll let you know. Bon chance!

[rgs2001uk]

Most of my portfolio is "underperforming" at the present. . . . If the girls can get B30,000 per year on a B700,000 investment, that is 4.25%. And if the land appreciates it is icing on the cake. Certainly not guaranteed like bank interest, but for a relatively small amount, perhaps worth a shot. What I really need is a crystal ball.....

. . . As for me, I have decided its time to buy more property, regular income from rent, and hopefully capital growth in the long term, this purchase will be viewed as a long term investment, hold property for at least 10 and probably 15 years then sell, but what the hell do I know.

You echo what I say above about the prospect of investing in land providing modest income in rent and potential gain through appreciation. But then you poo poo my consideration of buying land near Buriram and wouldn't "touch it with a barge pole". I can only assume that your buying land outside Issan and probably outside Thailand. If it is outside Thailand, that may be wise except for exchange rate issues. And renting at long distance has a lot of problems I wouldn't want to take on. In 2004-05 I was getting B40 for $1, now it is B30, which really hurts!. The reverse is unlikely -- I blame Bernanke & Co for that also. I wouldn't touch a condo here with a barge pole, unless perhaps in a distressed sale where the price had been cut in half -- very hard to find those. So, while I agree with you completely, I am not sure how to implement what it is that you are suggesting. I am fortuante in that my future is secure so long as I do not make too many really dumb investment decisions. If I find a cheap, reliable crystal ball, I'll let you know. Bon chance!

TL,

I have no wish to take over the thread or discuss my business/position on an open forum, if you want to converse further I look forward to hearing from you by way of a PM.

Thanks for the kind offer of a reliable crystal ball. Merci.

[happyaussie]

Sounds like my estimates are way off the mark. Which is fantastic. Means my plots are worth much more than I paid. Last year I bought a great hill plot near Wang Suphung (Loei area) sealed road, creek, dam, great views. 25,000 per rai. I had another offer of 25 rai with house (2 years old 2 bedroom block very livable), large dam, irrigation and land under papaya for 500,000. I missed that deal.

Both became available due to dire financial circumstances of owners. I certainly don't pray on these poor souls. Just happen to be in the right place at the right time, sometimes.

Good luck. Nothing wrong with helping the family.

[Thailaw]

Sounds like my estimates are way off the mark. Which is fantastic. Means my plots are worth much more than I paid. Last year I bought a great hill plot near Wang Suphung (Loei area) sealed road, creek, dam, great views. 25,000 per rai. I had another offer of 25 rai with house (2 years old 2 bedroom block very livable), large dam, irrigation and land under papaya for 500,000. I missed that deal.

Both became available due to dire financial circumstances of owners. I certainly don't pray on these poor souls. Just happen to be in the right place at the right time, sometimes.

Good luck. Nothing wrong with helping the family.

Good deals indeed! Depending how far your properties are from a city (the closer, the better), it sounds like you got great deals and have property worth much more than you paid. I would jump at the piece you bought last year at the price you paid. No decision yet. I am watch the situation in Europe and its impact on financial markets (Dow down 5% this month), and thinking that it may be a good time to buy US stocks. I hold no Euros (15 months ago I thought that was a good idea, now I do not), so what happens to the Euro and the EMU has no direct effect on me. I'll give it a few more weeks, watch how thing go outside Thailand, and then decide. Interesting times. Thanks for your input. Interesting and helpful.

[PattayaPhom]

This is a constant theme on the Isan forum! Price varies for all sorts of reasons. Is it on a tarmac road? Where's the nearest water/electricity supply? Most of all, is it unencumbered , and on chanote? Don't let anyone know a farang is even vaguely involved!

Land prices in Buriram are rising quite fast at the moment... so land can be a good buy, depending entirely on the location. The price of rice has very little to do with it.

The land has electricity supply available and there is a paved road to the property. The land is two adjoining parcels with two chanotes and is presently mortaged, but part of the sale proceeds would be used to clear the title. The issue of liens and encumbrances is more of procedural issue to ensure that the liens are removed with a payment of a portion of the proceeds to the lien holder at the time of sale. The land is presently owned by a relative, and the sale price is based more on debts needing to be cleared than any measure of "market price", which could be higher or lower. If the land is agricultural land, as it is,and likely has little industrial or residential value (at least for the foreseeable future), its value should be affected by the market price of the produce which it is capable of producing. Rising rice prices should certainy have an impact on the value of land on which rice can be productively grown, although the longer term strategy may be to change its use. The land is owned by relatives who want to clear their debts, so price negotiation is limited/nonexistent. I was told that a farang and his Thai wife recently purcahsed 30 rai in the area for B1.5 million (somewhat higher than the per rai price offered to me), but I immediately dismissed this as fluff or a "farang inflated" price. My motive is to help the family but at the same time it MUST provide a good long term investment for my daughters. My main concern is and will be the welfare of my children. It sounds like this may be an offer to pass on.

The present owner currently has debts on the land...obviously it dosnt make any money or they wouldnt be selling...walk away, take out a savings bond with one of the banks...much safer for the kids

[PaddyThai]

My wife bought some land in several parts of Thailand 10 and 15 years ago. We spent money on one of the farms and developed the fish ponds, planted fruit trees, fencing and built a small farm house.

We have created an oasis of green productive land in the midle of Isaan. My mother-in law and her family benefited from living on the farm and we did not need to send her money for day to day living.

The land is now for sale and we have been offered 3.5 times what we paid for and spent on developing the land.

With world food prices on the rise I would say we could leave the property and sell it in a few years when it will have increased in price more.

I cannot think of too many better investments ion todays turbulent times. I have owned and lost lots in paper investments and feel good about developing property and making an honest profit.

I would be careful about allowing relatives to live on land as they could claim squatters rights if you were gone for over 10 years.

[Thailaw]

My wife bought some land in several parts of Thailand 10 and 15 years ago. We spent money on one of the farms and developed the fish ponds, planted fruit trees, fencing and built a small farm house.

We have created an oasis of green productive land in the midle of Isaan. My mother-in law and her family benefited from living on the farm and we did not need to send her money for day to day living.

The land is now for sale and we have been offered 3.5 times what we paid for and spent on developing the land.

With world food prices on the rise I would say we could leave the property and sell it in a few years when it will have increased in price more.

I cannot think of too many better investments ion todays turbulent times. I have owned and lost lots in paper investments and feel good about developing property and making an honest profit.

I would be careful about allowing relatives to live on land as they could claim squatters rights if you were gone for over 10 years.

I agree that buying agricultural land in the current economic environment makes sense, so long as you buy it at a "reasonable" priee. And getting a handle on what is a "reasonable" price for farm land in Issan is not easy. And foreigners not being legally able to own land in Thailand outright complicates the decision, especially in the current case. A lease with a nominal rent will solve he problem of "squatters'" (adverse possessors') rights easily. I have done nothing on this, as I have decided that the asking price (about B42,000 per rai) is too high. I would be interested in adding some land in Thailand to my daughters' assests, but it needs to be "properly" priced. But that is a problem here in Thailand, everything seems to be over priced, including land, condos, cars, etc. Perhaps I am just myopic, but I don't see many good investments staring me in the face in Thailand. So, in the famous words of U2, I "still haven't found what I'm lookin' for." But I do continue to look -- the looking is fun. Thanks for all of the thoughts, observations and ideas that have come from my original inquiry. They have been interesting and thought provoking. Best wishes to all for a prosperous New Year. TL

[Amsterdam]

I have followed this thread since the start (about 2 months)... you all make good points..

It would have been interesting to have followed this conversation from the Thai sellers point.. The seller probably dos not think more than 5 minutes about it. The Seller thinks I borrow x amount and want to buy a new car Y so I need x+y. usually this amount far exceeds the actual worth of the land which should be determined by the factors mentioned in this thread.

In the end I think there should be some kind of merger between the Issan method of valuating land and the Farang. Not everything makes sense to us farang. I am not saying go ahead and spend crazy amount of money but I would not make a big deal about 5 to 10k overpricing according to our views. When I (wife) purchased land 7 years ago I was undergoing the same dilemma as described here but now the land has more than doubled in value.. at the same time my home back in Amsterdam has not increased in value.

I (wife) am looking to purchase more land... and don't think it's a bad long term investment. The issue for me is not should I have land in my asset portfolio but what percentage and that all depends on the level of risk one is wanting to take. I consider land (bricks and stones) a saver investment than the stock market.

Cheers

Amsterdam

[SGD]

A good investment ? most probably no. A risky investment ? absolutely.

Invest the money outside Thailand in equities or even have some invested in Thailand and use the growth of that investment to fund any future land purchase.

I though of buying land and then woke up and realised that my kids are rather more worldly wise than to want some paddy fields in the back of nakhon nowhere. With the money they will have from more liquid investments, they can buy as much useless land as they want, or not !

Edited January 6, 2012 by SGD

[jamescollister]

A good investment ? most probably no. A risky investment ? absolutely.

Invest the money outside Thailand in equities or even have some invested in Thailand and use the growth of that investment to fund any future land purchase.

I though of buying land and then woke up and realised that my kids are rather more worldly wise than to want some paddy fields in the back of nakhon nowhere. With the money they will have from more liquid investments, they can buy as much useless land as they want, or not !

Who knows what tomorrow will bring, but today we live off the proceeds of land in Thailand. If I waited for my pension from QZ I would have had to work until I died or lived baked beans and dog food. Who knows where things will be in 10 or more years. One thing sticks in my mine over the years. When I was a young lad I was offered an appartment in Singapore. Cost one years pay[ Australia,] now you will see no change from 5 mil. Anyone in OZ have a job for me that pays 5 mill a year. Jim

[cdmtdm]

A good investment ? most probably no. A risky investment ? absolutely.

Invest the money outside Thailand in equities or even have some invested in Thailand and use the growth of that investment to fund any future land purchase.

I though of buying land and then woke up and realised that my kids are rather more worldly wise than to want some paddy fields in the back of nakhon nowhere. With the money they will have from more liquid investments, they can buy as much useless land as they want, or not !

when the crunch comes and it will ... i will be very happy to have held useless farming land , that will enable me to feed my family with whatever we chose to grow and provide a roof over our heads ... for those that prefer investing in equities , super funds or hold out for pensions good luck you will need it ... talk to people that lived through the depression they will give you the survival tools , what we are facing for the first time is a worldwide correction ..get ready its coming !! for those that like a look on the other side check this

its a 29 part series and is thought provoking to say the least ...

[PaddyThai]

Agree with last two posters.

I have won and lost playing the stock market but never felt secure with just paper wealth.

Decided about 13 years ago to plant trees on one of, my wife's, farms and watch them grow every year. we did not need an immediate income from the land and were happy to let the trees grow and eventually produce fruit. The local old people go to one of, my wife;s, farms to collect firewood and mushrooms.

Food prices worldwide are going up. the materialistic consumerist society is shaking at it;s foundations. There are few if any solid investments. I would prefer to have rice, fruit, vegies and fish than bars of gold when the sh++it hits the fan.

[zzaa09]

Agree with last two posters.

I have won and lost playing the stock market but never felt secure with just paper wealth.

Decided about 13 years ago to plant trees on one of, my wife's, farms and watch them grow every year. we did not need an immediate income from the land and were happy to let the trees grow and eventually produce fruit. The local old people go to one of, my wife;s, farms to collect firewood and mushrooms.

Food prices worldwide are going up. the materialistic consumerist society is shaking at it;s foundations. There are few if any solid investments. I would prefer to have rice, fruit, vegies and fish than bars of gold when the sh++it hits the fan.

Well....this a realistic and healthy thought.

Something the more enlightened intellectuals would never consider.

Self-sufficiency and humble independence. Can't put a value on this.

[Thailaw]

A good investment ? most probably no. A risky investment ? absolutely.

Invest the money outside Thailand in equities or even have some invested in Thailand and use the growth of that investment to fund any future land purchase.

I though of buying land and then woke up and realised that my kids are rather more worldly wise than to want some paddy fields in the back of nakhon nowhere. With the money they will have from more liquid investments, they can buy as much useless land as they want, or not !

"equities outside Thailand" -- a risky investment? absolutely. And probably one that over the next five year will not even keep up with inflation in Thailand. So, with your kids "more liquid investments", they will probably be able to buy less land (or anything else) in Thailand with the principal and return/interest than could have been purchased with just the principal today. And if they are really "worldly wise", as you suggest, they will understand that you do not need to use an asset to make holding it financially beneficial, although, as has been suggested, being able to use it yourself in severe times may provided added value to land or other physical assets. My father made a fortune buying slum apartment buildings in New York. He hated to even go there. They were eventually razed and luxury condos were built in their place. I have no crystal ball and neither do you, but I expect that agricultural land will increase in value at least as fast as the price of the commodity that it can produce. That, over the next 5 years, will probably out pace your liquid equity investments outside Thailand (assuming that you ot your kids can even sell them for what you paid for them x years earlier). Should an entire asset portfolio be comprised of land in Thailand or Issan more particularly? Of couse not, but worldly wise individuals know that asset diversification provides the greatest return for a given level of risk. Some suggest that not more than 5% of your portfolio should be in non-liquid assets, but it depends on how large the portfolio is and how illiquid is the asset in question. Agricultural land in Issan is probably in the middle of the liquidity range, and should not be classified as "illiquid".

The investment I originally asked about is probably not the right one for me or my kids, but not because it is land in Issan. Having read your totally nonsense post, I will reconsider the merits (and demerits) of the investment. Sometimes reading a really dumb post can encourage that, especially when it says to do what it is you are doing, albeit for the wrong reasons. Thanks for that! "Worldly wise"? Not even close.

Edited January 8, 2012 by Thailaw