Thinking To The Future –Liquidating My Asset.

[Delight]

At some stage in the future I will wish to sell my condo –but still live there .

The logical option is to sell to an investor but then do a legal deal whereby I can lease it . The timescale of the lease will have to suit my needs . I expect it will end when I am pushing up the daisies.

My thoughts are that I will pay a fixed percentage of the selling price as the lease payment -5% seems about right. I pay all other costs –maintenance fees etc..The investor takes the long term view as to capital appreciation.

I am curious to know if this is a regular arrangement and how would the deal be constructed legally?

[pigeonjake]

they do something like that in france, were you buy the property at a very low price, but pay the old owner a little money every month, i hope some french members can come in on this,

only thing i would say on your way,, is i think 5% is somewhat low,

jake

[rgs2001uk]

Please tell me as an investor, whats in this for me?

Sounds as if you want to have your cake and eat it.

Maybe it has dawned on you you are stuck with an asset you cant shift and which may well have no capital appreciation.

I as the potential owner should have the lease to suit my needs, whats to stop you just walking away?

What protection would I have, end up with another overpriced condo I cant rent?

Lets assume your condo costs me 4 million, what would you consider to be a fair rental price.

It may well take me years to return my capital outlay, why should I purchase your problem?

[Delight]

Please tell me as an investor, whats in this for me?

Sounds as if you want to have your cake and eat it.

Maybe it has dawned on you you are stuck with an asset you cant shift and which may well have no capital appreciation.

I as the potential owner should have the lease to suit my needs, whats to stop you just walking away?

What protection would I have, end up with another overpriced condo I cant rent?

Lets assume your condo costs me 4 million, what would you consider to be a fair rental price.

It may well take me years to return my capital outlay, why should I purchase your problem?

If the market price is 4Million Baht and I sell it for 2 million baht -and then give a 5% return to the investor -then maybe it is attractive.

Market forces will control the deal.

My question was about the legal framework

[mrbojangles]

Please tell me as an investor, whats in this for me?

Sounds as if you want to have your cake and eat it.

Maybe it has dawned on you you are stuck with an asset you cant shift and which may well have no capital appreciation.

I as the potential owner should have the lease to suit my needs, whats to stop you just walking away?

What protection would I have, end up with another overpriced condo I cant rent?

Lets assume your condo costs me 4 million, what would you consider to be a fair rental price.

It may well take me years to return my capital outlay, why should I purchase your problem?

If the market price is 4Million Baht and I sell it for 2 million baht -and then give a 5% return to the investor -then maybe it is attractive.

Market forces will control the deal.

My question was about the legal framework

I have done something similar in the past in the UK. It worked out great for all concerned, except for the children of the guy I bought the house from, who saw their father spending their inheritence

The legal framework albeit drawn up by solicitors, was not complicated at all and although I don't know if it's common in Thailand or not, I can't see it being a problem. For the investor, your age and health is a major factor. However, if the investor is looking at renting out the condo and getting 5% back from you, that wouldn't be too bad a return.

Send me a pm when you are ready to go to the next stage.

[54321]

"If the market price is 4Million Baht and I sell it for 2 million baht -and then give a 5% return to the investor -then maybe it is attractive."

True, but you would have to take care in finding the right investor because he would have a vested interest in your demise!

[Delight]

"If the market price is 4Million Baht and I sell it for 2 million baht -and then give a 5% return to the investor -then maybe it is attractive."

True, but you would have to take care in finding the right investor because he would have a vested interest in your demise!

It's one thing to be interested and another to actually organize it. That said your point is valid.

[davejones]

Please tell me as an investor, whats in this for me?

Sounds as if you want to have your cake and eat it.

Maybe it has dawned on you you are stuck with an asset you cant shift and which may well have no capital appreciation.

I as the potential owner should have the lease to suit my needs, whats to stop you just walking away?

What protection would I have, end up with another overpriced condo I cant rent?

Lets assume your condo costs me 4 million, what would you consider to be a fair rental price.

It may well take me years to return my capital outlay, why should I purchase your problem?

What's in it for an investor is 5% long-term return on their investment.

The protection you have against being stuck with an overpriced condo is not to overpay in the first place.

Anyway, it does seem like the OP wants everything in his favor. I think he'll have to be much more flexible.

I would be interested in an arrangement like this but the rent would need to rise in line market rates. If the OP wants a fixed rent for say 10 years, then I'd expect in to pay it upfront. For example, if rent is now 20K/month and in 10 years time similar rents are 40k/month, then I would be losing 20k/month. In that situation it would be better for me to buy a condo and rent out from year to year, raising the rent as necessary.

To the OP - what guarantees would you give to the owner of rental payment, etc? What happens if you run out of cash and stop paying the rent?

[davejones]

Please tell me as an investor, whats in this for me?

Sounds as if you want to have your cake and eat it.

Maybe it has dawned on you you are stuck with an asset you cant shift and which may well have no capital appreciation.

I as the potential owner should have the lease to suit my needs, whats to stop you just walking away?

What protection would I have, end up with another overpriced condo I cant rent?

Lets assume your condo costs me 4 million, what would you consider to be a fair rental price.

It may well take me years to return my capital outlay, why should I purchase your problem?

If the market price is 4Million Baht and I sell it for 2 million baht -and then give a 5% return to the investor -then maybe it is attractive.

Market forces will control the deal.

My question was about the legal framework

I have done something similar in the past in the UK. It worked out great for all concerned, except for the children of the guy I bought the house from, who saw their father spending their inheritence

The legal framework albeit drawn up by solicitors, was not complicated at all and although I don't know if it's common in Thailand or not, I can't see it being a problem. For the investor, your age and health is a major factor. However, if the investor is looking at renting out the condo and getting 5% back from you, that wouldn't be too bad a return.

Send me a pm when you are ready to go to the next stage.

But it's the father's money and not the children's inheritance. Their inheritance is whatever he leaves them in his will, if anything at all. Too many people think that they have a right to other people's money.

[davejones]

"If the market price is 4Million Baht and I sell it for 2 million baht -and then give a 5% return to the investor -then maybe it is attractive."

True, but you would have to take care in finding the right investor because he would have a vested interest in your demise!

It's one thing to be interested and another to actually organize it. That said your point is valid.

So is this just a hypothetical question? Sounds like you don't really want to do it.

[Delight]

I reply to the points raised by davejones

davejones - what guarantees would you give to the owner of rental payment, etc? What happens if you run out of cash and stop paying the rent?

Me -I would assume that the rent would be paid up –front.

It is also in every bodies interest that I would pay the rent for the final year –also up front.

Given the circumstances that you describe then I would have one year to make alternate arrangements.

davejones -I would be interested in an arrangement like this but the rent would need to rise in line market rates.

Me -I think that the more appropriate arrangement is that the rent is set at fixed margin above base rates. The rent changes in line with those rates. Remember this is generally a no hassle investment –that said some low risk is inherent.

davejones- But it's the father's money and not the children's inheritance.

Me -This point touches my true motive. My family has no interest in having the condo bequeathed to them –too much hassle .This way I can give them the money ahead of any Will.

Edited September 10, 2012 by Delight

[davejones]

I reply to the points raised by davejones

davejones - what guarantees would you give to the owner of rental payment, etc? What happens if you run out of cash and stop paying the rent?

Me -I would assume that the rent would be paid up –front.

It is also in every bodies interest that I would pay the rent for the final year –also up front.

Given the circumstances that you describe then I would have one year to make alternate arrangements.

davejones -I would be interested in an arrangement like this but the rent would need to rise in line market rates.

Me -I think that the more appropriate arrangement is that the rent is set at fixed margin above base rates. The rent changes in line with those rates. Remember this is generally a no hassle investment –that said some low risk is inherent.

davejones- But it's the father's money and not the children's inheritance.

Me -This point touches my true motive. My family has no interest in having the condo bequeathed to them –too much hassle .This way I can give them the money ahead of any Will.

PM me some sample figures if this is something you might be interested in in next year or so.

[mrbojangles]

Please tell me as an investor, whats in this for me?

Sounds as if you want to have your cake and eat it.

Maybe it has dawned on you you are stuck with an asset you cant shift and which may well have no capital appreciation.

I as the potential owner should have the lease to suit my needs, whats to stop you just walking away?

What protection would I have, end up with another overpriced condo I cant rent?

Lets assume your condo costs me 4 million, what would you consider to be a fair rental price.

It may well take me years to return my capital outlay, why should I purchase your problem?

If the market price is 4Million Baht and I sell it for 2 million baht -and then give a 5% return to the investor -then maybe it is attractive.

Market forces will control the deal.

My question was about the legal framework

I have done something similar in the past in the UK. It worked out great for all concerned, except for the children of the guy I bought the house from, who saw their father spending their inheritence

The legal framework albeit drawn up by solicitors, was not complicated at all and although I don't know if it's common in Thailand or not, I can't see it being a problem. For the investor, your age and health is a major factor. However, if the investor is looking at renting out the condo and getting 5% back from you, that wouldn't be too bad a return.

Send me a pm when you are ready to go to the next stage.

But it's the father's money and not the children's inheritance. Their inheritance is whatever he leaves them in his will, if anything at all. Too many people think that they have a right to other people's money.

Absolutely agree. But his kids didn't see it that way. I am currently trying to convince my mother to do exactly the same. Spend the money whilst she can enjoy it and don't worry about leaving us anything.

[Khun Jean]

I did a few 'buy and lease back'. It is very uncomplicated.

The legal framework is just a sale and a rental contract.

I am only interested in the cheaper segment below 1 million baht as those give around 10% roi,

[davejones]

I did a few 'buy and lease back'. It is very uncomplicated.

The legal framework is just a sale and a rental contract.

I am only interested in the cheaper segment below 1 million baht as those give around 10% roi,

If you don't mind telling us, how do you manage to get such good rental income for such low-priced property. For example, a 1m baht condo that returns 10% means you'd get around 8,000 baht a month rent. But I've seen 2-3m baht condos with rents of only 10,000 baht. Do you think these 2-3m baht properties grossly overpriced? But I remember from another thread that you said it takes work to find the 1m baht condos. My friend has a 1.5m house that she's thinking of renting out, but she thinks she'd only get 4,000-5,000/month, based on other rentals in the street. So that's a very low return.

[Delight]

I did a few 'buy and lease back'. It is very uncomplicated.

The legal framework is just a sale and a rental contract.

Is the arrangement which you describe just as legally sound as a usufruct?

Is it possible to have an arrangement that includes a usufruct?

[TommoPhysicist]

I did a few 'buy and lease back'. It is very uncomplicated.

The legal framework is just a sale and a rental contract.

I am only interested in the cheaper segment below 1 million baht as those give around 10% roi,

If you don't mind telling us, how do you manage to get such good rental income for such low-priced property. For example, a 1m baht condo that returns 10% means you'd get around 8,000 baht a month rent. But I've seen 2-3m baht condos with rents of only 10,000 baht. Do you think these 2-3m baht properties grossly overpriced? But I remember from another thread that you said it takes work to find the 1m baht condos. My friend has a 1.5m house that she's thinking of renting out, but she thinks she'd only get 4,000-5,000/month, based on other rentals in the street. So that's a very low return.

Just outside CM you can buy condos for 150kbht, renting them at 2k/month would return you original investment in 5 years, that's a 20% ROI. IN CM you can buy similar condos for 250kbht, which also gives a good ROI.

Your house price return is fairly accurate for CM, (a 1.2-1.4M house returns approx 5k/month) houses are currently overpriced.

Edited September 10, 2012 by TommoPhysicist

[davejones]

I did a few 'buy and lease back'. It is very uncomplicated.

The legal framework is just a sale and a rental contract.

I am only interested in the cheaper segment below 1 million baht as those give around 10% roi,

If you don't mind telling us, how do you manage to get such good rental income for such low-priced property. For example, a 1m baht condo that returns 10% means you'd get around 8,000 baht a month rent. But I've seen 2-3m baht condos with rents of only 10,000 baht. Do you think these 2-3m baht properties grossly overpriced? But I remember from another thread that you said it takes work to find the 1m baht condos. My friend has a 1.5m house that she's thinking of renting out, but she thinks she'd only get 4,000-5,000/month, based on other rentals in the street. So that's a very low return.

Just outside CM you can buy condos for 150kbht, renting them at 2k/month would return you original investment in 5 years, that's a 20% ROI. IN CM you can buy similar condos for 250kbht, which also gives a good ROI.

Your house price return is fairly accurate for CM, (a 1.2-1.4M house returns approx 5k/month) houses are currently overpriced.

How easy are they to rent out though, and are the people renting able to pay the rent and pay on time. I've always found (in the UK), that the lower end of the market is usually best avoided. ROI is better in theory, but too many deadbeat tenants in that section of renters.

[Khun Jean]

My experience is the opposite.

By having many cheaper condos my risk is spread. Prices are in the range that people can afford.

Occupancy is near 100% and payments are with a few exceptions on time.

I rent them out unfurnished, this helps to keep the tenants as they see it more as their own place and it would mean a lot of work when they want to move.

It also protects me from damages, because basically not much can go wrong with stone and concrete.

After a while you will recognize the deadbeats. You just send them away.

Edited September 10, 2012 by Khun Jean

[TommoPhysicist]

I agree with you KJ.

[davejones]

My experience is the opposite.

By having many cheaper condos my risk is spread. Prices are in the range that people can afford.

Occupancy is near 100% and payments are with a few exceptions on time.

I rent them out unfurnished, this helps to keep the tenants as they see it more as their own place and it would mean a lot of work when they want to move.

It also protects me from damages, because basically not much can go wrong with stone and concrete.

After a while you will recognize the deadbeats. You just send them away.

Sounds quite straightforward, especially as they're unfurnished. All the places I've rented out in the past have been furnished. Most tenants have been great, but it only takes one idiot to wreck everything. But that was in UK, not here.

[johnnyk]

they do something like that in france, were you buy the property at a very low price, but pay the old owner a little money every month, i hope some french members can come in on this,

only thing i would say on your way,, is i think 5% is somewhat low,

jake

I'm not French but lived there for several years. It's called "en viager" and it comes into play where an elderly person is "house rich" and "cash poor". The old person wants to remain in the home, maybe its their lifelong home or they are too old to move or...

The buyer agrees to pay a lump sum up front called the "bouquet" and xxx per month until the seller dies. Both amounts are negotiated through a notaire. If the seller is quite elderly it can work in the buyer's favour as the payments cease with death so it's possible the seller could pass away quite quickly and the buyer gets a deal.

OR -- the case of Madame Jeanne Calment:

In 1965, aged 90 years and with no heirs, Calment signed a deal to sell her former apartment to lawyer André-François Raffray, on a contingency contract. Raffray, then aged 47 years, agreed to pay her a monthly sum of 2,500 francs until she died. Raffray ended up paying Calment the equivalent of more than $180,000, which was more than double the apartment's value. After Raffray's death from cancer at the age of 77, in 1995, his widow continued the payments until Calment's death.

Mr. Raffray calculated she would not live very long past age 90. Unfortunately for him Madame Calment lived to be 122, the oldest documented human lifespan to date.

[WilliaminBKK]

Isn't this called a reverse mortgage ?

[jpinx]

Depending on which way around the deal is structured, a life insurance policy is a good way to ensure that there is a lump of cash to pay off the balance in the event of death prior to the final payment.

The case of the lady in France living too long is easily avoided by putting an end-date in the contract.

[johnnyk]

Isn't this called a reverse mortgage ?

No, not in North America at any rate. A reverse mortgage means you can borrow up to a certain % of the appraised value. In Canada that's 40%. My late friend did this when he ran out of money and his house was his only asset. They charged him a fat rate well above regular mortage rates and interest was calculated 2X a year, COMPOUNDING!

Basically, its a screwing. The math on 7-8% compounded every 6 months gets nasty very fast.The lender is first in line when the owner dies.

The French viager system is essentially a bet the owner will croak fairly soon and a bargain can be had. As in the case of Mme. Calment she didn't cooperate and lived on for 32 more years so the buyer and his widow paid more than double the amount they would have had it been purchased outright for a lump sum.

[trogers]

I did a few 'buy and lease back'. It is very uncomplicated.

The legal framework is just a sale and a rental contract.

I am only interested in the cheaper segment below 1 million baht as those give around 10% roi,

But I've seen 2-3m baht condos with rents of only 10,000 baht. Do you think these 2-3m baht properties grossly overpriced?

Yes, these condos are overpriced, and it is because the prices have been raised by speculation - flippers working on new project launches.

Buying older condo units in good location, refurbish them and rent them out gives you better rental yields, and also modest capital appreciation. Prices of such condo units are from Bt45-50k per sqm located between Prakhanong and Asoke.

[WilliaminBKK]

Isn't this called a reverse mortgage ?

No, not in North America at any rate. A reverse mortgage means you can borrow up to a certain % of the appraised value. In Canada that's 40%. My late friend did this when he ran out of money and his house was his only asset. They charged him a fat rate well above regular mortage rates and interest was calculated 2X a year, COMPOUNDING!

Basically, its a screwing. The math on 7-8% compounded every 6 months gets nasty very fast.The lender is first in line when the owner dies.

The French viager system is essentially a bet the owner will croak fairly soon and a bargain can be had. As in the case of Mme. Calment she didn't cooperate and lived on for 32 more years so the buyer and his widow paid more than double the amount they would have had it been purchased outright for a lump sum.

Got it. I'm clear now I think.

So in Canada cash in hand (up to 40%) live there till death but interest is building and the estate gets shafted potentially more than the value of the property if you live to 100, in France cash in hand for whatever amount and an usufruct to live in the home until death however long but no interest on the amount fronted ?........both systems are sort of sad ? Sorry OP I understand why you are asking I'm just trying to learn.

[davejones]

Depending on which way around the deal is structured, a life insurance policy is a good way to ensure that there is a lump of cash to pay off the balance in the event of death prior to the final payment.

The case of the lady in France living too long is easily avoided by putting an end-date in the contract.

No-one selling would agree to an end date, because that would leave them homeless (and probably penniless) when they were very old. If the French woman had agreed to a maximum 20 years, then she would have been homeless and 110 years old. The whole point of the contract is so that the seller can stay in the house until they die, so an end date is not possible practical.

[davejones]

Isn't this called a reverse mortgage ?

No, not in North America at any rate. A reverse mortgage means you can borrow up to a certain % of the appraised value. In Canada that's 40%. My late friend did this when he ran out of money and his house was his only asset. They charged him a fat rate well above regular mortage rates and interest was calculated 2X a year, COMPOUNDING!

Basically, its a screwing. The math on 7-8% compounded every 6 months gets nasty very fast.The lender is first in line when the owner dies.

The French viager system is essentially a bet the owner will croak fairly soon and a bargain can be had. As in the case of Mme. Calment she didn't cooperate and lived on for 32 more years so the buyer and his widow paid more than double the amount they would have had it been purchased outright for a lump sum.

Got it. I'm clear now I think.

So in Canada cash in hand (up to 40%) live there till death but interest is building and the estate gets shafted potentially more than the value of the property if you live to 100, in France cash in hand for whatever amount and an usufruct to live in the home until death however long but no interest on the amount fronted ?........both systems are sort of sad ? Sorry OP I understand why you are asking I'm just trying to learn.

I don't agree that the French system is sad. It's a way for a property owner to release equity and still live in the house, and a way for the buyer to possibly get a cheaper property.

The Canadian system doesn't seem too bad either. Yes, the interest compounds, but the person is getting to live rent free.

But the whole idea of both is to release equity. The alternative is the owner maybe being very poor in old age.

[johnnyk]

The French viager system seems on the way out, I see fewer and fewer of them in the listings. Perhaps people were scared off by the Mme. Calment episode. I agree it was a way of releasing equity in a time when there were far fewer financial instruments to buy houses. As said, the real reason was to allow people to continue living in their home with some income beyond inadequate state pensions.

In my Canadian friend's case he was broke other than his one asset, the house. His motivation was he had lived in it from age 4 and was very sick from cancer, emphyzema etc. He knew he had limited time left and the idea of packing and moving was simply not on for him so the reverse mortgage was his only option. He took a lump sum then drew it down as needed. On sale of the house the lender was first in line.

Here in Canada there are lots of tv commercials selling the reverse mortage idea. They air mainly in the daytime, clearly pitched at retired folks who may need cash. It all sounds very attractive but as said, and as my friend found out, the miracle of compound interest can be a nasty bite to the estate down the road.

Edited September 11, 2012 by johnnyk