Work permit and M.E visa to non b

[mccw]

I see a condominium in Chiang Mai offering units of sale at 1.3mil bht.

They then give you back 90,000bht per year (roughly 7% return); after 5 years they will buy it back off you for the same price or you can carry on with the 90k or do with it as you please.

Although a condominium; it is run as a serviced apartment building. Do they are renting at a premium; probably 3 or 4 months out of 1 year would pay the 90k due and the rest profits for the owners. Also the capital gained at 7% is cheaper than what a business loan from banks would be. So the numbers look to add up to me but would be interested in the comments of others.

I know there is risk the deal would not be honoured, but then at least I would have physical property on my name I should be able to rent privately.

(I have yet to check the finer details or visit the place. It is already built and up and running. I will take a look next week maybe.)

Edited March 18, 2013 by mccw

[BlackPuddingBertha]

I see a condominium in Chiang Mai offering units of sale at 1.3mil bht.

They then give you back 90,000bht per year (roughly 7% return); after 5

years they will buy it back off you for the same price or you can carry

on with the 90k or do with it as you please.

I see little green men in my beer.

[mccw]

I see a condominium in Chiang Mai offering units of sale at 1.3mil bht.

They then give you back 90,000bht per year (roughly 7% return); after 5

years they will buy it back off you for the same price or you can carry

on with the 90k or do with it as you please.

I see little green men in my beer.

A few years ago I saw Laguna I think it was in Puket offering 7% garranteed for 3 or 5 years or similar. But the properties were starting at 20million bhts. What happened to them?

Not a big name backing with this but same concept and less capital at risk.

[rgs2001uk]

Reached CM now has it, I remember the same BS being advertised in Pattaya a few years back, didnt believe it then dont believe it now.

[JSixpack]

Quite a scheme. I wouldn't put too much faith in it. But who knows? TIT.

[mccw]

Reached CM now has it, I remember the same BS being advertised in Pattaya a few years back, didnt believe it then dont believe it now.

Do you have any examples of their collapse or failure?

[ExpatJ]

If there is a farang man behind the scheme- stay away. If its non-farang then worth looking into. I say this as in my experience you are far more likely to be ripped off by a farang in business in Thailand than a Thai or other foreign national (apart from Nigerians, possibly

[mccw]

Mortgages are about 7-9% here no?

Commercial finance must be more.

So for the developer its an economic way of raising capital to put in to a new building or whatever, while still opportunity to make profits off the unit/ cover the payments.

Seems like a win win

If I were to rent the unit myself without any services included then to make the same 90k py would = rental price 7,500bht pm - a new unit in town could easily fetch more than this any way; but then be liable for some fees and things I've not checked yet, but still would ballance out to be around the same, just more work.

I'm not one to put all eggs in one basket, it would be a small part of portfolio.

Maybe I'll visit the building and think its ridiculas; just looking for feed back on the numbers.

Like am I missing some other funding forms that would make the 7% a stupid option for the developer and mean this must just be a scam?

[BlackPuddingBertha]

Reached CM now has it, I remember the same BS being advertised in Pattaya a few years back, didnt believe it then dont believe it now.

Do you have any examples of their collapse or failure?

The Pattaya ones are still advertising the same <deleted>. They wont collapse as long as people keep falling for it.

The scam is a mixture of classic Ponzi and fancy T&Cs.

[BlackPuddingBertha]

Seems like a win win

The little green men in my beer seem like they are swimming.

[rgs2001uk]

Reached CM now has it, I remember the same BS being advertised in Pattaya a few years back, didnt believe it then dont believe it now.

Do you have any examples of their collapse or failure?

Have one friend who bought property in Pattaya, he was told by the touts he could easily rent it out for x per month, he is now having to face the reality of todays market, he is renting it out for 1/3 of what he was told.

You are also assuming they can find a renter for your investment.

Have you considered this, maybe you are overpaying for the condo, all they are doing is giving you back the money you overpaid by stretched out over 5 years.

[USNret]

Doing cocktail napkin math, we can think this through. I've seen the same deal at a golf resort near Hua Hin a few years ago & I was intrigued, but never looked into it.

My concern about your deal is the low purchase price of the condo. That means it's a fairly low end unit.

I assume under this scheme it would not be owner-occupied. They expect the unit to remain empty & available for rental. The developer will take care of the rental, and share his bounty with you at the rate of 90,000 per year. Anytime that you did spend there would be subtracted from your annual profits.

So do the math... For how much can you expect to rent a 1.5M baht condo? And how many weeks out of the year would they succeed in actually renting it out to vacationers? My guess is there will be a high vacancy rate, they'd be lucky to have it occupied 1/3 of the time; and a condo of that calibre wouldn't fetch that much when it was rented. So take whatever profits they make for the year, subtract out 90K to give to you, set aside what's needed for building maintenance and maid services in between renters, and my guess is there's nothing left for the developer. In other words, this deal will collapse as soon as they stop selling units, which is their main source of revenue.

You know the CM market better that me, so fill in the above numbers and see what you get.

[mccw]

Serviced apartments rent at quite a premium. 30k pm I should think for a one bed one living room not huge but well designed to make use of space- about 48sqms. See Natara residence or Kantary Hills - they go for more than this.

I need to see what the units and building are actually like obviously. But based on 30k pm ; so 3 months is my 90k and the rest in to profits for developer. Staff etc really a minor spread over many units. Occupancy, hmm this can not be certain on. Kantary hills was full last time I tried to book my parents in. Natara seems to be half empty. There are others around town, depends on target, marketing etc. Chiang Mai is just starting to get internationalised I think and could see years ahead of increasing demand/ occupancy. With apartments like this the occupiers would be longer term residents so more than the 1rd of year high season I think. Half a fair guesstimate or more. I I making that is the view the developers are taking.

1.3mill is an attractive price; yeah, the lower end of new condo sales but there are some other nice designed full furnished condos starting at around these prices; they are aimed at owner occupiers though so maybe compared to a view for quick sales to raise capital for the biz expansion its not overly cheap.

I'm thinking to look at it like I'd be buying it as just a normal condo and what I could rent it for; then if the 7% yearly promise pays it a bonus, if not then I just have a condo I can rent myself at a decent yield anyway.

[USNret]

I'm not taking issue with your analysis, but it's good to play devil's advocate. So, to continue your thoughts... If you get longer-term residents, they would be getting a sharply reduced rate as compared to a daily or weekly rate. Long-term residents bring a lower vacancy rate, but also pay less on a weekly basis.

Re: Your "years ahead of increasing demand" -- these trends take a long time to come to fruition. But your investment has a 5-year horizon. So your entire deal may be done before you see the trends you hope for. This has happened to me before.

You're right that staffing costs are low, but for vacation rentals the tenant does not pay for utilities (TV, internet, water, electric), so factor that in. Also, I would not be seeking a development with the lowest possible maintenance overhead. We've all seen what happens to communities where maintenance is short-changed: Algae-infested pools, cracked walls and walks, leaky roofs, etc. So assure yourself they set aside enough for ongoing operations, plus set-asides for longer-term things like periodic roof repair, road maintenance, etc. Otherwise, the owners (you) have to pony up for unexpected repair bills from time to time which can eat up all your profits.

How often would furnishings have to be upgraded in your unit, and who foots the bill? (hint: it's probably you). I don't know, but anyone who has managed long-term rentals can talk about how long furnishings would last, plus paint, flooring, appliances, countertops, etc.

Final thing, and not a minor consideration in the LOS... Is the management company trustworthy? Or might they say, 2 years hence, we're sorry, but occupancy has been lower than projected and therefore, per para 14-J, subsection IIIe of your contract we are reducing your annual returns to offset our losses. How would you be able to validate their claims of low vacancy?

You asked earlier in this discussion for examples of success or failure in an investment like this. I didn't notice any replies. More to the point, I'd like first-hand stories from some who has actually done this. Did they, in fact, make the promised money? If so, who was the developer/manager? I'd like to get on board with a property with the same management team.

[davejones]

These schemes always sound shady to me. Why not buy a proper condo and rent out yourself. Seems easier and safer.

If the company don't have the money now, where will they get it from in 5 years time. Sounds like a ponzi scheme.