Is It Possible To Buy A Condo & Live Off The Rent?

[lazar]

Coming to Thailand to live, hopefully forever and I am exploring several options in generating income. Is it possible to purchase a condo/flat and produce positive income in TL? Which scenarios, areas, types of tenants, etc.? Can I buy a condo for US$30-40k, rent for 15-20K baht and live up north for 8-10k (just rent, not food, clothes, travel etc)? Any help is much appreciated, please edu-ma-cate me! Thanks...

[johnnyk]

No.

[Heng]

Yeah, it can be done. Good to start with one or two units and see how it suits you (just like the folks that start an airline from one plane). If it does, then it's only a matter of juggling some capital and choosing desireable units (or perhaps building your own complex).

[trt]

Nope can't be done... not on those assumptions anyway

[mbkudu]

Coming to Thailand to live, hopefully forever and I am exploring several options in generating income. Is it possible to purchase a condo/flat and produce positive income in TL? Which scenarios, areas, types of tenants, etc.? Can I buy a condo for US$30-40k, rent for 15-20K baht and live up north for 8-10k (just rent, not food, clothes, travel etc)? Any help is much appreciated, please edu-ma-cate me! Thanks...

It can be done, but your numbers are not big enough.

[charles]

Can I buy a condo for US$30-40k, rent for 15-20K baht and live up north for 8-10k (just rent, not food, clothes, travel etc)?

30-40K USD is 1.2-1.6 million baht. In general such a place would not rent out for more than 10K. To get 15-20K you would normally have to buy a place for 2-3 million, and of course make it presentable.

In principle it could be done. But I'd wonder if the returns are worth it when considering e.g. problem tenants and your status as a non-Thai. Plus maintenance, likely tenant-free months and possible depeciation of the condo's value.

In the end you could probably get comparable returns in a much lower risk and much more flexible investment avenue outside of Thailand. Living in Thailand long-term doesn't mean you need to tie all your money up here.

Edited December 27, 2005 by charles

[steveromagnino]

It seems like a lot of work to make 10% or less gross. Travel time, bad paying tenants, finding tenants; owning property is not the doddle it is made out to be, and the chance of decent appreciation is unlikely at the moment given the yield and quantity of this sort of property makes it not so easy to just buy and sell 100% appreciation a year later.

Invest in the sharemarket or similar, and live off that.

Or create a perpetual motion machine, and live off of that. The cat and the jam sandwich taped together, that is the way of the future.

[slimdog]

Would have to say on the figures you provded, probably No.

To give an example (Maybe not the best, but all I could find quickly), you could just about afford to buy a studio condo in pattaya, (View Talay 2)

http://www.farang-services.com/?button=Details&id=586

This comes to B1.45 million, although I am sure you could negotiate some form of reduction..

Rental for a similar studio (also view talay 2)

http://www.apartment-pattaya.com/rates.php

This gives you a maximum return of just over B5,000, and as Charles said, you have to allow for periods of non-rental plus management fees etc, plus money out for maintenance.

It is possible to make money on property, but generally, the initial outlays are considerably more. It is possible to find someone desperate to sell, but even then I would say your expected returns are on the optomistic side..

[Chopper]

Can I buy a condo for US$30-40k, rent for 15-20K baht and live up north for 8-10k (just rent, not food, clothes, travel etc)?

30-40K USD is 1.2-1.6 million baht. In general such a place would not rent out for more than 10K. To get 15-20K you would normally have to buy a place for 2-3 million, and of course make it presentable.

In principle it could be done. But I'd wonder if the returns are worth it when considering e.g. problem tenants and your status as a non-Thai. Plus maintenance, likely tenant-free months and possible depeciation of the condo's value.

In the end you could probably get comparable returns in a much lower risk and much more flexible investment avenue outside of Thailand. Living in Thailand long-term doesn't mean you need to tie all your money up here.

<{POST_SNAPBACK}>

I have to disagree here: My friend purchased 5 units direct from a developer for circa. 600,000 baht each. They were bare shells and the upgrade albeit a high quality one was in the region of 300-400,000 baht per unit. Each of his units rents out for 17,000 baht per month. There current value is about 1.6 million baht per unit. A very worthwhile investment.

This covers about half of his monthly running costs as he does live well. He has significant other investments which top up his running costs. So in short too the OP; yes it can be done.

I would counsel however to certainly not through all of your money at this; ergo do not put all of your eggs in one basket so to speak.

Finally research thoroughly before committing yourself.

[johnnyk]

I have to disagree here: My friend purchased 5 units direct from a developer for circa. 600,000 baht each. They were bare shells and the upgrade albeit a high quality one was in the region of 300-400,000 baht per unit. Each of his units rents out for 17,000 baht per month. There current value is about 1.6 million baht per unit. A very worthwhile investment.

This covers about half of his monthly running costs as he does live well. He has significant other investments which top up his running costs. So in short too the OP; yes it can be done.

<{POST_SNAPBACK}>

OK, but your friend has laid out close to 5 million total which is quite different from OP's scenario.

Plus he had to go through the headaches of the reno work and the lost rental time while the units were being readied.

[haha]

I gather you are trying to make about 100k baht income per year from about 40k dollars, right?

if so, have you considered investing in stocks that consistently pay out dividends in the 8% range?

40k dollars x 8% will get you about 3k dollars in dividends per year.

of course, there are no guarantees in life.... the price of the stock could go down. but then, that is a choice you would have to make - and live with.

www.stansberryresearch.com offers some financial advice that might help you in selecting stocks in the category described above.

[charles]

I have to disagree here: My friend purchased 5 units direct from a developer for circa. 600,000 baht each. They were bare shells and the upgrade albeit a high quality one was in the region of 300-400,000 baht per unit. Each of his units rents out for 17,000 baht per month. There current value is about 1.6 million baht per unit. A very worthwhile investment.

If this is true then good luck to your friend, but I'd say that the figures above are truly exceptional. I don't know when/where he bought the units or in what circumstances? However, as of now in Bangkok (for example) 600K would not get you anything more than a small studio in a low class development well away from the city center and mass transit. And there is no way you could get 17K for a unit in such a development no matter how much you "upgraded" it inside.

17K per month for a place that is worth 1.6 million to sell is way out of step with rent/value ratios here. Tenants stupid enough to pay that would be every landlords dream!

[Chopper]

I have to disagree here: My friend purchased 5 units direct from a developer for circa. 600,000 baht each. They were bare shells and the upgrade albeit a high quality one was in the region of 300-400,000 baht per unit. Each of his units rents out for 17,000 baht per month. There current value is about 1.6 million baht per unit. A very worthwhile investment.

If this is true then good luck to your friend, but I'd say that the figures above are truly exceptional. I don't know when/where he bought the units or in what circumstances? However, as of now in Bangkok (for example) 600K would not get you anything more than a small studio in a low class development well away from the city center and mass transit. And there is no way you could get 17K for a unit in such a development no matter how much you "upgraded" it inside.

17K per month for a place that is worth 1.6 million to sell is way out of step with rent/value ratios here. Tenants stupid enough to pay that would be every landlords dream!

<{POST_SNAPBACK}>

The purchases were made off plan direct from the developer a few years ago; revision 1 prices with 7% discount for cash on contract.

The units are 37 sq./m studios in a popular apartment block in Pattaya. The rents are not uncommon for similar size units in the same block albeit at the higher end of the scale.

My friend just recently had one tenant daft enough to pay one years rent in advance. Go figure that one...

The tenant could drop dead tomorrow. ...or fall of the balcony.

[TizMe]

The tenant could drop dead tomorrow.  ...or fall of the balcony. 

In either case, I doubt that he'll be concerned that he paid one years rent in advance....

[Noel]

I, for one, can confirm that in the right locations with the right product in Pattaya, Chopper is absolutely correct with the numbers he has quoted.

Year lets, particularly with money in advance are few and far between but can happen. Six month lets with one month in advance and a two month deposit upfront however, most certainly are commonplace.

And no, before the naysayers who have never been in the market and most likely never will be start rolling their eyes, I am not going on what a friend told me, I am talking from firsthand experience.

Of course nothing is guaranteed and if you only have a limited supply of eggs it would be unwise to put them all in one basket.

[raro]

Whoever invests in real estate right now is in IMHO damned stupid. The prices are through the roof and I expect them any time soon to crumble.

Just my two pennies...

[mbkudu]

Whoever invests in real estate right now is in IMHO damned stupid. The prices are through the roof and I expect them any time soon to crumble.

Just my two pennies...

This is what I was hearing two and a half years ago when I put down my chunk of change. I just don't see it happening, the crumbling part, that is. The prices going up furhter? Yes.

[cdnvic]

Maintnence fees, taxes, repairs, vacancies, insurance, etc will eat deeply into that income. You may be better off using the money to lease or mortgage a small guesthouse which gives you a more regular cashflow without being too much of a burden on your time if you have some good help.

cv

[Heng]

Whoever invests in real estate right now is in IMHO damned stupid. The prices are through the roof and I expect them any time soon to crumble.

Just my two pennies...

This is what I was hearing two and a half years ago when I put down my chunk of change. I just don't see it happening, the crumbling part, that is. The prices going up furhter? Yes.

My thoughts exactly. And I've been hearing the naysayers talking about crumbles and crashes since 1998. Stocks can go to zero. Real estate (barring incidents involving atomic energy perhaps) doesn't.

[johnnyk]

I gather you are trying to make about 100k baht income per year from about 40k dollars, right?

if so, have you considered investing in stocks that consistently pay out dividends in the 8% range?

40k dollars x 8% will get you about 3k dollars in dividends per year.

<{POST_SNAPBACK}>

Please, please tell me more about these stocks that pay 8% dividends.

Where are they?

Russia? In your dreams?

[raro]

I've been playing a bit on the SET for a while and made some 25% p.a. No, I don't have any substantial knowledge of stock markets. Pulled out about a year ago and just kept the not-so-well performing stocks, which basically means I've got my money back and the profits are still invested. One stock was a complete write-off, though...

[haha]

I gather you are trying to make about 100k baht income per year from about 40k dollars, right?

if so, have you considered investing in stocks that consistently pay out dividends in the 8% range?

40k dollars x 8% will get you about 3k dollars in dividends per year.

<{POST_SNAPBACK}>

Please, please tell me more about these stocks that pay 8% dividends.

Where are they?

Russia? In your dreams?

<{POST_SNAPBACK}>

there are several. here are just a few I have been reading about...

ARCC, FBR, TNH, TWTUF, AW-UN.TO, BPF-UN.TO

RYN is a good one too but it only makes about 5% dividend.

that it. no more free info from me. I pay for this info.

if you want more info, just subscribe to the "12% letter" on www.stansberryresearch.com

[charles]

Stocks can go to zero.   Real estate (barring incidents involving atomic energy perhaps) doesn't.   

True to a point, but stocks are also in general a much more liquid "asset". As I'm sure you know, property in Thailand is (generally) not very liquid at all, unless offered at real knockdown prices. Unlike Western countries, the number of transactions in 2nd hand properties is dwarfed by those in new builds.

As you imply, at least if you have land under your property there is always some value in that. But here we are talking condominiums and certainly a lot of the older (in Thailand's case this means just 10-20 years) less than high class condominums have in reality very little capital value. A lot of them aren't exactly built to last anyway.

Edited December 29, 2005 by charles

[steveromagnino]

Well, you want to know about high div yield stocks? Look to low p/e industries without glamour and glitz and high free cash flow...lots of money spinning off and without the growth story, they just pay it back to da shareholders, like say the shipping industry in Thailand....

Precious Shipping PSL - as at 28/12/2005 8.23%; p/e 2.31

Regional Container Line RCL - div yield estimated at 9.8-11.5% p.a. for 2005-07F as at 28/12/2006 div yield 7.48% p/e 3.29(Tisco Research)

Thoreson Thai TTA as at 28/12/2005 div yield 13.86% p/e 2.73

Data from Tisco Securities; yes I can poke all sorts of holes in it, and even though TTA looks like the best of the lot for a variety of reasons I think it isn't.

Not exactly Russia, although I do take your point about risk and so on.

[Heng]

Stocks can go to zero.   Real estate (barring incidents involving atomic energy perhaps) doesn't.   

True to a point, but stocks are also in general a much more liquid "asset". As I'm sure you know, property in Thailand is (generally) not very liquid at all, unless offered at real knockdown prices. Unlike Western countries, the number of transactions in 2nd hand properties is dwarfed by those in new builds.

As you imply, at least if you have land under your property there is always some value in that. But here we are talking condominiums and certainly a lot of the older (in Thailand's case this means just 10-20 years) less than high class condominums have in reality very little capital value. A lot of them aren't exactly built to last anyway.

Yeah, I'm definitely talking about land and buildings, not condos. Also, I'm not saying it should be a choice between real estate and stocks. I'm just looking at the big picture and how it's easier to predict what will happen to land (which I relate to being a natural resource that is difficult to destroy/consume) than what will happen to companies (which are more like living entities which can get sick and/or die).

As for liquidity, I don't believe land is meant to EVER be liquidated or financed. It should be purchased for cash, held, rented out, and never sold*. Exceptions can of course be made for crazy bubble type situations. An acquaintence of the family once bought for 5 and sold for 95 in a matter of a few months.

Edited December 31, 2005 by Heng

[bangkapiboy]

I learned the hard way about the stock market. I remember losing my college loan money in the .com crash. Man I was like magic when I was picking the stocks. Then when the crash came I never thought the stocks could really go down to zero. Well, they really did! Just so much corruption in the stock market.

I am convinced real estate is for real now. heh.

[Heng]

It's indeed real. Hence the name. Nothing wrong with staying invested in the market either though (though of course never on margin or on college loan funds). At the very least, it's a better time killer academically following your stock investments than your real estate investments. Something you can look at everyday, as opposed to once a month or even once or twice a year for some real estate holdings.

[Superfly]

Do any people here who have actual experience in the market think it is unreasonable to expect around 7% yield on a B6M condo, brand new (actually not completed yet) 2 br, 90 sqm near Sathorn?

I was looking into purchasing one but won't be moving to Thailand for a few years and have no idea of the condition of the rental market. Any opinions would be greatly appreciated.

Thanks.