Bkk Condo Investment: What Roi To Expect?

[mike111]

This might have been asked before, but Im hoping for fresh data.

I consider buying condos in bkk for investment. Im mainly interested in the return of investment (ROI), since I plan to benefit from the rent, and not from appreciation (so Im not going to buy & sell).

1. what is the ROI I can expect for condos in a good location, located near public transport (MRT, skytrain)?

2. isnt there already an oversupply of condos in bkk?.

3. any notable expenses to account for besides the condo cost (taxes, fees, etc.)?

TIA

[rgs2001uk]

4-5% if you are lucky, this doesnt take into account capitol growth.

[mike111]

tnx, is that after taxes, fees, etc?

[BlackPuddingBertha]

1. what is the ROI I can expect for condos in a good location, located near public transport (MRT, skytrain)?

I would ask an agent. Then I would divide his answer by two.

2. isnt there already an oversupply of condos in bkk?.

It looks that way to me.

3. any notable expenses to account for besides the condo cost (taxes, fees, etc.)?

Letting agent's fees? Repairs? Non-paying tenants?

[mike111]

BlackPuddingBertha,

tnx for ur reply, but what ur saying is true for rental properties anywhere in the world.

Im trying to understand the specifics of the bkk property market, from people who actually own & rent properties.

[BlackPuddingBertha]

tnx for ur reply, but what ur saying is true for rental properties anywhere in the world.

Im trying to understand the specifics of the bkk property market, from people who actually own & rent properties.

I dont quite see how questions 1 and 2 (and my answers) can relate to anything at all other than Bangkok.

As for 3, why should the nature of the downside be any different in Bangkok than in the rest of the world?

[WhizBang]

1. what is the ROI I can expect for condos in a good location, located near public transport (MRT, skytrain)?

My guess is that it will be quite low, if even positive at all. I live near the Asoke/Sukhumvit intersection (BTS/MRT) and there are so many EMPTY condos it's not funny.

2. isnt there already an oversupply of condos in bkk?.

Yes, a huge oversupply, and that drives down rental prices (but not costs).

3. any notable expenses to account for besides the condo cost (taxes, fees, etc.)?

Monthly condo fees must be paid regardless of your ability to rent the property. You can pay the monthly fee annually, usually for a small discount. Plus there is also an annual insurance fee. Rental income, I believe, is taxable. Don't forget the fee to your rental 'agent'. Last but not least, maintainence within the condo itself.

Good luck. No way I would invest in Thailand.

[trogers]

4-5% if you are lucky, this doesnt take into account capitol growth.

You may still be able to get 8% gross rental yield from older condo units in good locations.

[mike111]

4%-5%, in my option, isnt worth the hassle of investing overseas. These rates can be had for risk-free term deposits in some locations.

8% sounds better. but dont older condo require more maintenance which eventually diminishes the return to around 5%?

[mike111]

Good luck. No way I would invest in Thailand.

why? the fees u've mentioned exist in many other places. any particular reasons why property investment in thailand isnt lucrative?

[davejones]

Good luck. No way I would invest in Thailand.

why? the fees u've mentioned exist in many other places. any particular reasons why property investment in thailand isnt lucrative?

From what I've seen, there is a huge amount of land available for building, so they will be building new condos for decades to come. This oversupply keeps prices down, which is generally a good thing. It's a different market from somewhere like the UK, where planning permission is harder and more time-consuming to get. Bangkok already has a huge oversupply of condos, and many just sit empty for years. So unless you choose a great condo building in a great location, don't think it will be easy to rent at a good price.

There is a condo for rent in my building for 20K. It's also for sale for 6.5M. So if you bought at that prices and could actually rent it, you'd get a return of 3.7%. Take your costs out of that and you'd be left with close to zero. If you can't rent it out, then you'll be making a loss. The condo isn't currently rented out. That's just one example, but is typical of what I've seen in central Bangkok. And this is a pretty popular building. In less popular buildings I've seen condos up for rent for over a year, with no takers.

[mike111]

thanks, appreciate the info.

[trogers]

4%-5%, in my option, isnt worth the hassle of investing overseas. These rates can be had for risk-free term deposits in some locations.

8% sounds better. but dont older condo require more maintenance which eventually diminishes the return to around 5%?

Maintenance of the interior or the common areas? Common areas are covered by the sinking fund and monthly maintenance charges. Interior will depend on how recent the last redecoration was. Life of a redecoration would be 7-10 years depending on how the space is cared for.

Edited February 3, 2013 by trogers

[davejones]

Take a look at this post --> A guy found some "new" condos for sale in a 16-year old building. LOL. If that doesn't prove that prices are too high, I don't know what does.

[mike111]

what Im concerned of is that "rentable" condos bkk need to be in very good condition, which implies a not too old building and upscale amenities (pool, lobby, marble finishings etc.). All these translate into extra costs which are levied on the owner, and reduce the income.

Of course there are plenty of cheap, rundown units around bkk (as in anywhere else), but handling them is probably a huge headache (less-than-perfect renters, etc.)

[trogers]

what Im concerned of is that "rentable" condos bkk need to be in very good condition, which implies a not too old building and upscale amenities (pool, lobby, marble finishings etc.). All these translate into extra costs which are levied on the owner, and reduce the income.

Of course there are plenty of cheap, rundown units around bkk (as in anywhere else), but handling them is probably a huge headache (less-than-perfect renters, etc.)

Two of my largest units (3-bedrm 163sqm and 2-bedrm 121sqm) are in the oldest condo in Bkk, over 30 years old. Got myself into the committee and managed to convince the co-owners to replace the lifts and repaint the exterior of the building. Total cost is 1.5 months rent for each unit spread over 2 years. Just 0.75% off the gross rental yield for these 2 years.

And I will be increasing rent by about 10% coming April for both units.

Edited February 3, 2013 by trogers

[davejones]

what Im concerned of is that "rentable" condos bkk need to be in very good condition, which implies a not too old building and upscale amenities (pool, lobby, marble finishings etc.). All these translate into extra costs which are levied on the owner, and reduce the income.

Of course there are plenty of cheap, rundown units around bkk (as in anywhere else), but handling them is probably a huge headache (less-than-perfect renters, etc.)

Two of my largest units (3-bedrm 163sqm and 2-bedrm 121sqm) are in the oldest condo in Bkk, over 30 years old. Got myself into the committee and managed to convince the co-owners to replace the lifts and repaint the exterior of the building. Total cost is 1.5 months rent for each unit spread over 2 years. Just 0.75% off the gross rental yield for these 2 years.

And I will be increasing rent by about 10% coming April for both units.

What's your ROI? Do you mind sharing which building it is, or at least the area?

[mike111]

And I will be increasing rent by about 10% coming April for both units.

that's ok, but inflation in thailand is currently 3-3.5% p.a.. when was the last time u increased the rent? and by how much? u might be just keeping up w inflation.

can u realistically increase the rent by 10% p.a. and maintain ur tenants?

[trogers]

what Im concerned of is that "rentable" condos bkk need to be in very good condition, which implies a not too old building and upscale amenities (pool, lobby, marble finishings etc.). All these translate into extra costs which are levied on the owner, and reduce the income.

Of course there are plenty of cheap, rundown units around bkk (as in anywhere else), but handling them is probably a huge headache (less-than-perfect renters, etc.)

Two of my largest units (3-bedrm 163sqm and 2-bedrm 121sqm) are in the oldest condo in Bkk, over 30 years old. Got myself into the committee and managed to convince the co-owners to replace the lifts and repaint the exterior of the building. Total cost is 1.5 months rent for each unit spread over 2 years. Just 0.75% off the gross rental yield for these 2 years.

And I will be increasing rent by about 10% coming April for both units.

What's your ROI? Do you mind sharing which building it is, or at least the area?

ROI can only be known upon cashing out, meaning selling and getting capital gain. I think what you meant is Gross Rental Yield.

These units were bought in the last quarters of 2007. They are old units and I spent a sum to refurbished them before renting them out. Present yield for the 2-bedrm unit is slightly higher at 7.5% while the 3-bedrm is getting 7%. This was a result of a 10% drop in rent due to the Red Shirts burning Bangkok. I am raising them back up and my present Japanese tenants (for 2 years now) have agreed.

The building is Premier Condominum 200m inside Sukhumvit Soi 24 from BTS Promphong.

[BlackPuddingBertha]

ROI can only be known upon cashing out, meaning selling and getting capital gain. I think what you meant is Gross Rental Yield.

These units were bought in the last quarters of 2007. They are old units and I spent a sum to refurbished them before renting them out. Present yield for the 2-bedrm unit is slightly higher at 7.5% while the 3-bedrm is getting 7%.

Unless you are basing your calculations on today's values of the units and today's rents, they are erroneous.

You cannot take yesterday's purchase price and tomorrow's rent and correlate the two in any meaningful way.

The only thing you can say is that today's (real) purchase price is x, and today's (real) rent is y, and that will give you a valid real return today.

[cheeryble]

8% sounds better. but dont older condo require more maintenance which eventually diminishes the return to around 5%?

I think this is simplistic.

The thing with condos is the renovations are shared so many ways that actually quite major renovations still have a pretty minimal cost to individual owners (as we have just heard from TRogers).

The fact of the matter seems to be that actually common area fees seem to be less in older buildings, not more. The newer ones have often had the fees set by the developer and it may be very convenient to him to have an overly large sinking fund.

So IMO the older buildings are best IF they are properly maintained in which case they can last forever with regular upgrades just the same as the new ones will soon require.

Edited February 4, 2013 by cheeryble

[mike111]

trogers: ROI is calculated based on rental income. the profit one makes from selling is due to appreciation, and is unrelated to ROI.

in today's costs, a desent condo is around 15M-20M THB, and rental income would be around 20K THB/month.

a realistic income calculation is for 11 months of rent a year, due too expenses, temporary vacancy in between tenants and so on.

so the ROI for a condo in bkk seems to be: (20K x 11)/(20,000,000) = 3.6%

Given that the inflation in thailand is around 3-3.5%, an owner makes a realistic profit of 0-0.5%

[davejones]

trogers: ROI is calculated based on rental income. the profit one makes from selling is due to appreciation, and is unrelated to ROI.

in today's costs, a desent condo is around 15M-20M THB, and rental income would be around 20K THB/month.

a realistic income calculation is for 11 months of rent a year, due too expenses, temporary vacancy in between tenants and so on.

so the ROI for a condo in bkk seems to be: (20K x 11)/(20,000,000) = 3.6%

Given that the inflation in thailand is around 3-3.5%, an owner makes a realistic profit of 0-0.5%

You are totally wrong, and even your maths sucks. For starters... (20K x 11)/(20,000,000) = 1.1% (not 3.6%)

What has inflation got to do with rental return? If you get 20,000 baht a month for you condo, then that is how much you get. You don't get 0%. Please explain. If my tenant gives me 20,000 baht every month, why do you think I don't have that 20,000 baht. If inflation is 3%, in one year's time I'll be able to buy a little less with my 20,000 baht every month. But I'll still have 20,000. But rents tend to rise with inflation. Not always, but they do over time. So you're not really losing out. Obviously individual cases vary. But I doubt you will find any condos renting for 2003 prices or 1993 prices or 1983 prices.

ROI - return on investment. e.g. I buy a condo for 5 million and sell it for 6 million. So I made 20% profit. That is my return on investment. Inflation comes into play here, but not the way you say it does with rental income

You are very confused and don't understand even basic concepts.

Good luck with finding a 20 million condo for only 20,000 a month. I don't think you'll find many/any.

Edited February 4, 2013 by davejones

[iluvbeaches]

trogers: ROI is calculated based on rental income. the profit one makes from selling is due to appreciation, and is unrelated to ROI.

in today's costs, a desent condo is around 15M-20M THB, and rental income would be around 20K THB/month.

a realistic income calculation is for 11 months of rent a year, due too expenses, temporary vacancy in between tenants and so on.

so the ROI for a condo in bkk seems to be: (20K x 11)/(20,000,000) = 3.6%

Given that the inflation in thailand is around 3-3.5%, an owner makes a realistic profit of 0-0.5%

You are totally wrong, and even your maths sucks. For starters... (20K x 11)/(20,000,000) = 1.1% (not 3.6%)

What has inflation got to do with rental return? If you get 20,000 baht a month for you condo, then that is how much you get. You don't get 0%. Please explain. If my tenant gives me 20,000 baht every month, why do you think I don't have that 20,000 baht. If inflation is 3%, in one year's time I'll be able to buy a little less with my 20,000 baht every month. But I'll still have 20,000. But rents tend to rise with inflation. Not always, but they do over time. So you're not really losing out. Obviously individual cases vary. But I doubt you will find any condos renting for 2003 prices or 1993 prices or 1983 prices.

ROI - return on investment. e.g. I buy a condo for 5 million and sell it for 6 million. So I made 20% profit. That is my return on investment. Inflation comes into play here, but not the way you say it does with rental income

You are very confused and don't understand even basic concepts.

Good luck with finding a 20 million condo for only 20,000 a month. I don't think you'll find many/any.

20m baht condos for rent for 20k? Sounds quite doubtful but if so then maybe such large purchases aren't recommended. I doubt many Thais could afford such a property for another 20 years.

I rent out my condo while I'm away for 10k a month (9000thb plus internet and electric) and the condo cost 2m furnished and fitted. Did not use an agent, ad on prakard. But it is not an area with a lot of foreigners although it's 500m from two subway stations and close to a major road.

I think if you are looking to make money you should concentrate on condos in Thai areas on bts, mrt extensions. Look at the new lines developing, near big schools or big businesses. Make the price less than paying for a mortgage. M

Not only are you spending less for capital outlay (who wants to lock up 20m in Thailand?!) but there is more room for capital growth and rental rates seem to be around the same. For Thais they won't spend more than 8-10,000 because then they could just take a loan. Only reason mine got rented is because it is very close to a huge school.

[trogers]

trogers: ROI is calculated based on rental income. the profit one makes from selling is due to appreciation, and is unrelated to ROI.

in today's costs, a desent condo is around 15M-20M THB, and rental income would be around 20K THB/month.

ROI = Total rental Income + Capital Gain (or - Capital Loss)

From your definition, a person buying at the peak of a bubble and selling it at 30% of his purchase price will still have a positive ROI counting just total rents he collected before selling the unit?

Terms like appreciation and depreciation are used in accounting. Gain and loss are actual values after cashing out.

Let me know which Bt15-20m condo is renting out at Bt20k/month. I will rent it for my own use using the rental income from my Bt3m condo, which is also Bt20k/month...

Edited February 4, 2013 by trogers

[mike111]

davejones:

I was running over several scenarios for the ROI, and the one I posted was for a 6,5M THB condo being rented for 20K THB/month.

20K*12/6,500,000 = 3.7%

A more realistic estimate is an 11 months rent, which gives an ROI of 3.38% (what I've above).

The 20M condo with a 20K rental income gives 1.1%, which is even worse.

Now, as for what is ROI, and me being confused, and the other mumbo jumbo u posted:

http://www.rentalsonline.com/landlords/rental_property_roi.asp

Do your financial homework first before flaming.

[trogers]

davejones:

I was running over several scenarios for the ROI, and the one I posted was for a 6,5M THB condo being rented for 20K THB/month.

20K*12/6,500,000 = 3.7%

A more realistic estimate is an 11 months rent, which gives an ROI of 3.38% (what I've above).

The 20M condo with a 20K rental income gives 1.1%, which is even worse.

Now, as for what is ROI, and me being confused, and the other mumbo jumbo u posted:

http://www.rentalson...roperty_roi.asp

Do your financial homework first before flaming.

Investing in condo in Thailand has a simpler calculation because there is no mortgage. You pay out in full.

You need only 2 figures to decide if it is time to sell - gross rental yield (based on present market value if you want) and present market value of the condo unit.

But we all know how difficult it is to value a property, esp an old refurbished unit. As individuals, we may do it once every 5 years, since taxation on selling one is less after keeping the unit for 5 years. Public-listed companies here are required to value their real assets once every 3 years.

Edited February 4, 2013 by trogers

[aussiebebe]

1. what is the ROI I can expect for condos in a good location, located near public transport (MRT, skytrain)?

That's such a general question, it's hard to answer. If you define a good location as being near the BTS then you can and should research condo sale prices and rent for yourself. If you look on Prakard.com - that's a great source of information as it lists condos by areas, then has sub-sections for each development. You can get an idea of what prices units are selling for and then contact people renting units out and see how low they're willing to go - that will give you solid info from which you can calculate ROI.

2. isnt there already an oversupply of condos in bkk?.

I live to the south of Bangkok and I've observed how developments sprung up as the BTS line was extended from On Nut to Bearing. Even modestly appointed units had at least an 80,000baht/m2 price and presently rent well due to the convenience. The problem I see is evident if you look at how much further south they are extending the BTS line; work is already started and completion is due in a few years. They have literally another 20km of line to build condos around and there is plenty of land.

[BlackPuddingBertha]

But we all know how difficult it is to value a property, esp an old refurbished unit.

In most countries apartments (condos) and houses on estates (villages, sub-divisions) are considered to be the easiest type of property to value due to there being so many similar examples of them. That it may be difficult to do so here says a lot to me about the market and asking/achieved prices.

The properties that are truly hard to value are the unique ones, and I doubt that there are many Thai condos that fall into that category.

[trogers]

But we all know how difficult it is to value a property, esp an old refurbished unit.

In most countries apartments (condos) and houses on estates (villages, sub-divisions) are considered to be the easiest type of property to value due to there being so many similar examples of them. That it may be difficult to do so here says a lot to me about the market and asking/achieved prices.

The properties that are truly hard to value are the unique ones, and I doubt that there are many Thai condos that fall into that category.

I think you are talking about in most developed countries. Not here because there is no common data pool, and under-declaration is a common practice at the Land dept.