Renovating For Profit - Is It Possible?

[w11guy]

I've renovated a few house in the UK for re-sale and was wondering if it's possible to do the same things here.

Some issues I see is that condos that need to be renovated are mostly in old buildings, and once renovated they may be difficult to sell because people might not be interested in buying in an old building.

Another issue is that many condos seem difficult to sell, so even after renovation you may be stuck with the condo. I know many condos in Silom and Suk that have been on sale for years. Owners won't drop the price at all. But I've seen a few farangs drop the price 20-30% for a quick sale, but mostly these price drops seem to be from an unrealistic price to a realistic price, so they may not be genuine discounts. Is there a way to find out past sale prices like you can in the UK?

Another option would be to rent until you can sell, but there are so many condos that can't be rented that even that seems a bit of a risk.

But the right condo in the right location might be what's needed.

Has anyone else had any success or failure with renovating for profit? If you've had a success, then what did you do that made you succeed? If you failed, then what do you think you did wrong?

[Darrel]

"Is there a way to find out past sale prices like you can in the UK?"

No. Any such information here would indeed make for fascinating reading.

There are people in Pattaya who buy cheap older condos (usually "fire sales") and renovate them. Sometimes this means replacing everything with modern stuff of dubious taste, and sometimes it just means a coat of paint badly applied. They then put them up for sale at the usual inflated asking prices and wait for an eventual pigeon to land. I have seen similar techniques being employed in Rayong.

As far as I know most of them rely on being told in advance about potential fire sales in order to buy at reasonable prices, thus leaving some potential for profit. They often seem to get this advance info from agents involved in selling units for people who aren't around to check on what is happening (ie the executors of dead people, ill people, people in jail etc).

[w11guy]

"Is there a way to find out past sale prices like you can in the UK?"

No. Any such information here would indeed make for fascinating reading.

There are people in Pattaya who buy cheap older condos (usually "fire sales") and renovate them. Sometimes this means replacing everything with modern stuff of dubious taste, and sometimes it just means a coat of paint badly applied. They then put them up for sale at the usual inflated asking prices and wait for an eventual pigeon to land. I have seen similar techniques being employed in Rayong.

As far as I know most of them rely on being told in advance about potential fire sales in order to buy at reasonable prices, thus leaving some potential for profit. They often seem to get this advance info from agents involved in selling units for people who aren't around to check on what is happening (ie the executors of dead people, ill people, people in jail etc).

So I need to pop along to the Bangkok Hilton and see if the inmates have any property to sell.

[dksharron]

People start buying condos and houses at retail prices.

They want to sell them later at similar prices.

A second-hand buyer usually does the same, unless he gets it at an auction or a fire sale. Even if he gets it at a good price, there are so many condos for sale, that even a well-priced one will take a while to be seen.

Then there are transaction costs at the land office. Approx 6%, depending on how long the unit was owned by the prior owner, and then how long you own it.

If you are buying for monthly income, and then sale in 10 years, that is fine, but only for flipping in a few months to a year, the transaction costs including the agent fees and the land office costs will eat away any profits.

[Darrel]

So I need to pop along to the Bangkok Hilton and see if the inmates have any property to sell.

I've viewed a couple of condos that were owned by jailbirds but they were actually awaiting Her Majesty's pleasure in the UK.

[meand]

I would think the way to make money here is focus on finding motivated sellers and negotiating prices down. The nice part is nobody would ever know what you paid. You'd still have to factor in all the taxes/fees of course.

[trogers]

This business model, buy-renovate-sell, is only feasible during the down swing of a property cycle.

Buy - when there are many distressed properties with favourable locations for selection.

Renovate - when prices of materials fall and contractors lacking jobs.

Sell - when there is a lack of new projects being launched offering easy financial terms.

Edited July 8, 2012 by trogers

[w11guy]

This business model, buy-renovate-sell, is only feasible during the down swing of a property cycle.

Buy - when there are many distressed properties with favourable locations for selection.

Renovate - when prices of materials fall and contractors lacking jobs.

Sell - when there is a lack of new projects being launched offering easy financial terms.

I found it to be easier during a rising market in the UK because it is so easy to sell the finished house. With rising prices you are also less likely to make a loss. When prices are falling you may be able to buy at a good price but by the time you've renovated prices have fallen further and it's harder to sell because many are waiting for prices to fall further.

[w11guy]

People start buying condos and houses at retail prices.

They want to sell them later at similar prices.

A second-hand buyer usually does the same, unless he gets it at an auction or a fire sale. Even if he gets it at a good price, there are so many condos for sale, that even a well-priced one will take a while to be seen.

Then there are transaction costs at the land office. Approx 6%, depending on how long the unit was owned by the prior owner, and then how long you own it.

If you are buying for monthly income, and then sale in 10 years, that is fine, but only for flipping in a few months to a year, the transaction costs including the agent fees and the land office costs will eat away any profits.

I didn't realise that taxes were so high here. But it also explains why there are so many dilapidated houses in Bangkok, as there is no incentive for builders to buy and renovate. There should be 0% tax on properties being completely renovated, as that will help bring the housing stock up to a good standard. But getting that way in the UK now. Property taxes are shockingly high.

[trogers]

This business model, buy-renovate-sell, is only feasible during the down swing of a property cycle.

Buy - when there are many distressed properties with favourable locations for selection.

Renovate - when prices of materials fall and contractors lacking jobs.

Sell - when there is a lack of new projects being launched offering easy financial terms.

I found it to be easier during a rising market in the UK because it is so easy to sell the finished house. With rising prices you are also less likely to make a loss. When prices are falling you may be able to buy at a good price but by the time you've renovated prices have fallen further and it's harder to sell because many are waiting for prices to fall further.

The comparative advantage of a real property is its location. Buying one with a great location cheap is the ultimate achievement in real estate investment. Values of such properties will be the first ones to swing up when the property cycle bottoms out.

Your answer seems to point out two deficiencies: lack of financial power and relative short term horizon for investment in real estate.

Perhaps you should invest in more liquid assets.

Time periods of past property cycles in Bangkok varied between 7 and 10 years - peaks were at 1982, 1990, 1997 and 2007. Time to start acquiring choice distressed properties would be 15-18 months after a peak, and time to start selling them off is also after such a time frame. This means being able to hold them for 2-3 years.

Do not forget 2 points in a rising market. Selling a property that you have to someone is different from buying a property from someone, Does he have the financial means to buy from you compared to the easy credit and low interest offered by new developments? And second, the market is always rising just before the bubble bursts.

[RAZZELL]

There always seems to be the odd condo for sale at President park on soi 24 which need's a refurb.

RAZZ