What To Offer On A Ff Condo?

[trogers]

It is not that difficult guys.

The easiest trick is to get an idea what the unit you want to buy would cost to rent. while, "for sale" prices may be all over the place, rental prices are much more realistic, unless they are being advertised solely towards farang. Someone might be floating selling their condo for an exorbitant price but trying that with a rental would lead to vacancy and it is very easy to compare rental prices, even in the same building their will be multiple owners renting and you surely have a zillion friends who know what it costs to rent. also, tons of buildings that rent that do not have any BS dual pricing system and have prices on the wall in the office on a map... send a thai if u r paranoid.

anyways, once you have the rental price, you know what the buy price is.

REMEMBER THE VALUE OF REAL ESTATE IS ALWAYS LOGICALLY BASED ON THE RENTAL PRICE...

But what is the quantified relationship between value and realistic gross rental rates? You need to be more specific. Give me your range between 10-20 times annual gross rent.

[BlackPuddingBertha]

The easiest trick is to get an idea what the unit you want to buy would cost to rent. while, "for sale" prices may be all over the place, rental prices are much more realistic, unless they are being advertised solely towards farang. Someone might be floating selling their condo for an exorbitant price but trying that with a rental would lead to vacancy and it is very easy to compare rental prices, .......

Well, yes, and that's probably why there are hundreds if not thousands of unsold and unrented condos all over Pattaya, though some of them do get dusted off and let for a month or three over "high season".

But how do you calculate a selling price when all the rental prices are negotiable and based on fantasy anyway?

anyways, once you have the rental price, you know what the buy price is.

REMEMBER THE VALUE OF REAL ESTATE IS ALWAYS LOGICALLY BASED ON THE RENTAL PRICE...

Only for run-of-the-mill properties where there is a large rental demand. I have owned and lived in properties in Europe that would probably never have found a tenant if they were up for rental, yet were worth many hundreds of thousands of Euros. And I had little trouble selling them at the asking price.

And again, what rental price do you base it on? The fantasy advertised monthly rental price on an agent's website or the price that some tenant actually pays per year? I know that the rent I pay for my unit is much less than half what would be asked for a monthly rental in January.

[texanaust]

The problem is how do you find out what is selling and for what?

That's simple: you can't. I've long believed that an official database report of property sales/prices from Land Offices as is available in many developed countries would make fascinating reading here.

Even if it was available to the public, the information would be useless. Most sale prices on the second hand market are report far below the actual amount to avoid taxes. For example, a unit is sold for 5 million, but report to the land department as sold for 3 million and now only have to pay taxes on the 3 million. I am not say this is right. It is just what I have come across in conversations and real estate dealings.

A Zillow or Trulia for Thailand would be so useful for sellers and buyers but where would they get the real info needed to build a database of actual sales prices?

I wonder how many sales of foreign freehold condos are reported low? It is one thing for a thai-thai transaction, but most people using a lawyer are probably going to front up to the land office with the sales contract in hand. Even if everyone does cheat the land office, perhaps someone could compile a list from the real estate agents and lawyers handling the transactions...obviously this is fraught with complications but it might be something that could eventually help agents sell more properties.

[Ulic]

If you are not embarrassed by your offer you are offering to much.

[trogers]

I wonder how many sales of foreign freehold condos are reported low? It is one thing for a thai-thai transaction, but most people using a lawyer are probably going to front up to the land office with the sales contract in hand. Even if everyone does cheat the land office, perhaps someone could compile a list from the real estate agents and lawyers handling the transactions...obviously this is fraught with complications but it might be something that could eventually help agents sell more properties.

Think of it like the difference between the asking rent for fully furnished and unfurnished.

Value appraised by the Land Dept is for no interior finishing and unfurnished. One unit may have been fitted out at Bt20k/sqm while the next door unit is just plaster and paint.

[texanaust]

If you are not embarrassed by your offer you are offering to much.

Best piece of advice I've heard yet.

[trogers]

If you are not embarrassed by your offer you are offering to much.

Best piece of advice I've heard yet.

Then perhaps you should spend your time looking at condo units and offering to buy them at Bt1000/sqm.

I am sure at this price you will just start to feel embarrassed. Then it must be the right price, fair to both sides.

Edited February 6, 2013 by trogers

[farang000999]

But what is the quantified relationship between value and realistic gross rental rates? You need to be more specific. Give me your range between 10-20 times annual gross rent.

that is for the individual to decide. for me personally it needs to be around 10% roi to consider.

[JomtienEats]

REMEMBER THE VALUE OF REAL ESTATE IS ALWAYS LOGICALLY BASED ON THE RENTAL PRICE...

But what is the quantified relationship between value and realistic gross rental rates? You need to be more specific. Give me your range between 10-20 times annual gross rent.

A rule of thumb in the west is 150xmonthly rent is very cheap and 250x is very expensive. However this doesn't take into account the standard of the property. Where property prices are very high, like the UK, this might be a small error. For a thai condo though - up to 30% might be the value of the interior, layout, design and contents.

So you might see a condo priced at 6mil, with a 20,000 monthly rent - both prices might be realistic if the place is in a very run down state. The condo might be worth 6mil to someone who wanted to refurbish it, but no-one would pay more than 20K per month to rent it. That's a 300x multiplier but that doesn't necessarily tell you that it is expensive. It might indicate that the owner doesn't want to renovate, is happy to continue to hold it until he finds a buyer, and doesn't mind getting a little rent while he waits.

[jcnbkk]

REMEMBER THE VALUE OF REAL ESTATE IS ALWAYS LOGICALLY BASED ON THE RENTAL PRICE...

But what is the quantified relationship between value and realistic gross rental rates? You need to be more specific. Give me your range between 10-20 times annual gross rent.

A rule of thumb in the west is 150xmonthly rent is very cheap and 250x is very expensive. However this doesn't take into account the standard of the property. Where property prices are very high, like the UK, this might be a small error. For a thai condo though - up to 30% might be the value of the interior, layout, design and contents.

So you might see a condo priced at 6mil, with a 20,000 monthly rent - both prices might be realistic if the place is in a very run down state. The condo might be worth 6mil to someone who wanted to refurbish it, but no-one would pay more than 20K per month to rent it. That's a 300x multiplier but that doesn't necessarily tell you that it is expensive. It might indicate that the owner doesn't want to renovate, is happy to continue to hold it until he finds a buyer, and doesn't mind getting a little rent while he waits.

Thanks for the approx. figures. And you make a good point with your example. I too have been casually looking in Bangkok, and even though the intention is a personal residence I use potential income as a value indicator. By estimation using comparable rentals, minus vacancy and repair costs, I come up with a rough idea of yearly rental income. Divide this into asking price, or offer price gives you an idea of how long before your return on investment. !0 years, not bad, 20 seems long, for what would be the condo value 20 years later if you then wanted to sell.

Price per sq. meter only give me an idea where that property falls in the range for the local area. CBD of Bangkok being higher than areas further out.

[trogers]

So you might see a condo priced at 6mil, with a 20,000 monthly rent - both prices might be realistic if the place is in a very run down state. The condo might be worth 6mil to someone who wanted to refurbish it, but no-one would pay more than 20K per month to rent it. That's a 300x multiplier but that doesn't necessarily tell you that it is expensive. It might indicate that the owner doesn't want to renovate, is happy to continue to hold it until he finds a buyer, and doesn't mind getting a little rent while he waits.

Does not make any sense to accept a gross return of Bt240k/year on a Bt6m investment, and refuse to invest a further Bt2m to refurbish and getting gross return of Bt480k/year for investing a total Bt8m.

The extra Bt2m investment itself will generate a gross return of 12%pa. So why would a prudent investor miss such an opportunity?

[BlackPuddingBertha]

Does not make any sense to accept a gross return of Bt240k/year on a Bt6m investment, and refuse to invest a further Bt2m to refurbish and getting gross return of Bt480k/year for investing a total Bt8m.

The extra Bt2m investment itself will generate a gross return of 12%pa. So why would a prudent investor miss such an opportunity?

In your quest for the best return you walk straight past the elephant in the room: will your extra 2MB/33% investment be reflected in 33% on the value of the place in 2, 5, 10, 20 years time?

You will only know the real return from your investment when you sell it and add the capital gain (or loss) to whatever rental it has produced over that time.

[trogers]

Does not make any sense to accept a gross return of Bt240k/year on a Bt6m investment, and refuse to invest a further Bt2m to refurbish and getting gross return of Bt480k/year for investing a total Bt8m.

The extra Bt2m investment itself will generate a gross return of 12%pa. So why would a prudent investor miss such an opportunity?

In your quest for the best return you walk straight past the elephant in the room: will your extra 2MB/33% investment be reflected in 33% on the value of the place in 2, 5, 10, 20 years time?

You will only know the real return from your investment when you sell it and add the capital gain (or loss) to whatever rental it has produced over that time.

Without the extra Bt2m investment, what will happen to the initial Bt6m after 10 years? Capital gain or loss? And with only 4%pa gross return over 10 years...

The point is that if someone is willing to invest Bt6m on an old condo and getting only 4% gross return pa, he would surely be looking at capital gain over time, and would also need to prevent capital loss from depreciation.

[JomtienEats]

So you might see a condo priced at 6mil, with a 20,000 monthly rent - both prices might be realistic if the place is in a very run down state. The condo might be worth 6mil to someone who wanted to refurbish it, but no-one would pay more than 20K per month to rent it. That's a 300x multiplier but that doesn't necessarily tell you that it is expensive. It might indicate that the owner doesn't want to renovate, is happy to continue to hold it until he finds a buyer, and doesn't mind getting a little rent while he waits.

Does not make any sense to accept a gross return of Bt240k/year on a Bt6m investment, and refuse to invest a further Bt2m to refurbish and getting gross return of Bt480k/year for investing a total Bt8m.

The extra Bt2m investment itself will generate a gross return of 12%pa. So why would a prudent investor miss such an opportunity?

Indeed. A condo in this state will have been owned and have deteriorated over a long period. The owner now wants to sell. He doesn't want to gamble on a renovation. Anyone who bought it would be looking to renovate, either to live in or to rent out.

[BlackPuddingBertha]

Without the extra Bt2m investment, what will happen to the initial Bt6m after 10 years? Capital gain or loss?

That will only be known in 10 years or whenever the place gets sold. Hence my comment.

And to assume that simply spending 33% on renovations would automatically double the rental return over the whole duration of the rental period of a Thai condo is not something that I would be prepared to do. If you were talking about an apartment in London W1 that would be another story.

[Gary A]

The very first consideration is the condo complex management. The grounds,buildings and swimming pool(s) should be neat and clean regardless of age. Security must be good and obviously within eyesight at any given time. The maintenance fund should be fat and healthy. Electricity should be billed directly from the power company and not priced by the condo managers. The maintenance fee should be stable and not increased on the management's whim. Mine is 10 baht per square meter of space and has remained the same for the past 8 years. The fund has always had and has a surplus.

Next is the location of the unit itself. Some complexes are quite large so the easier it is to walk to transportation and conveniences the better. The view depends on the person who lives there. Some put great value on a sea view. The breeze is nice to have but salt air creates all sorts of corrosion problems. Things rust, air conditioners corrode and electronics don't last near as long. It depends on what that view is worth monetarily now and what extra maintenance it costs later.

Some people like the high rise upper floor units. I don't like the normally dark narrow halls and the fire hazard risks those units have, not to mention power problems and the elevators not working especially in an emergency situation. I nearly bought a nice unit on the 17th floor of a building and the day I had to tell the owner whether I wanted it or not, the elevator wasn't working. I had my mind made up to buy the unit, but that changed my mind.

My friends told me that I was paying too much for my unit as compared to similar units. I bought it anyways because I liked everything about it. Maybe I paid the premium because I wasn't looking for an investment. I bought it to keep and live in. A separate bedroom was a must for me. I couldn't handle living in a shoe box studio unit.

Being a landlord usually sucks. I did rent mine to a good friend for a few years but since he moved out, I keep it for myself. It stays empty most of the time but it is here when I want to use it. This trip has been a long at about 6 weeks but the place has been neglected and needed some attention. It is now very nearly finished. The major repair was the tile floors. Some of the tiles came loose and I was sick of the cream colored tile anyways. The rent money was nice to have but my wife surprised me when she told me that I couldn't take that money with me to the next life, so to enjoy it now while I still can.

The cost of a particular unit is basically worth however much the buyer is willing to pay for it and what he wants to use it for. Maybe I should add that I have had some tempting offers for mine. It has doubled in value. It just isn't for sale.

[BlackPuddingBertha]

The maintenance fee should be stable and not increased on the management's whim.

No management can increase basic common fees just because they want to. It requires a "for" vote from a quorum of owners at a GM.

[Gary A]

The maintenance fee should be stable and not increased on the management's whim.

No management can increase basic common fees just because they want to. It requires a "for" vote from a quorum of owners at a GM.

Tell that technical fact to the View Talay Jomtien A&B condo owners. That fund was always broke when the rates were already quite high. Not so long ago the swimming pool had a problem so they left it sit empty because they said that they couldn't afford to fix it. The rates were increased because the owners wanted water in the swimming pool.

Not all condo complex managers are created equal. Would you believe that some managers are thieves?

[BlackPuddingBertha]

Tell that technical fact to the View Talay Jomtien A&B condo owners. That fund was always broke when the rates were already quite high. Not so long ago the swimming pool had a problem so they left it sit empty because they said that they couldn't afford to fix it. The rates were increased because the owners wanted water in the swimming pool.

If the owners wanted it then presumably they voted for it.