Buying to rent?

[cobra427]

Hi everyone, was toying with idea of a buy to rent property just want something to earn extra income over time, maybe buy another in another 5 years.

Would it be a wise investment? i could only afford around 1.4 million. I am a Thai/english national so ownership isn't a problem.

What could i buy with that money and where is the best place to let the property?

Andy

[asdecas]

Do you have any experience in the field of BTL? The Thai market is very different from the UK market - you will not get anything like the same ROI and the market is also much less liquid. Tread cautiously.

[cobra427]

No experience i'm afraid, i'd rather buy a house outright than get a house in the uk with 25 year mortgage.

[Jasun]

You can get a decent yield on an investment property in Thailand, but don't expect much in the way of capital growth (for a condo).

1.4m isn't going to buy you much, and remember you'll be paying juristic fees from the day you take possession so make sure it's something that'll rent fast. It'll be tough.

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[trogers]

Type of investment will depend on your age and your expected stay in Thailand.

If you are in your 30s and working here for the next 10 years, you may first consider buying the condo for your own occupation in lieu of paying rent. You may also want to explore more liquid form of investment with higher risk/return as a mix in your investment portfolio.

Bt 1.4m will not get you a condo unit in a high foreign demand location. Need at leastt Bt2.0m for that.

[bocceball1]

I applaud your moxy.....at least your thinking and as for me ...that's exactly how I made my money. With 1.4 million you have a few options.....

1. buy a house or townhouse .....remember in Real Estate....its all about location, location, location. You want to buy in an area where the trend for that area is GROWTH and the future looks good. You don't mention an area .....You probably want something close to you so you can deal with problems when they arise. Not sure how many new houses are out there at 1.4 million .....so you may be looking at an older home, which if you go that route will cost a bit of money to fix up (make sure to budget for that.

2. buy a condo....Again much of what was said about houses applies here to EXCEPT with condo's you have to consider "how the condo is managed" as many do very little managing except to take your money AND how much are the Juristic fees....

With that in mind .....you might want to think about something close to a University (ie student housing) and rent rooms out....

You don't give a lot of information.....best thing come up with a more definitive plan (not just I have 1.4 million and want to buy to rent) and come back here and present that ....and for sure TV posters will have more and better comments

[KittenKong]

Bt 1.4m will not get you a condo unit in a high foreign demand location. Need at leastt Bt2.0m for that.

That may be true in Bangkok but it certainly isn't the case elsewhere.

[trogers]

Bt 1.4m will not get you a condo unit in a high foreign demand location. Need at leastt Bt2.0m for that.

That may be true in Bangkok but it certainly isn't the case elsewhere.

Vacation places have high and low seasons, thus average rental yield can be dismal with high administrative cost of short term rentals.

Bangkok is still the yardstick with rental period between 2-3 years per tenant in my experience.

[rayongchelsea]

I have a vacation rental property.

Returns are poor, administration of the property not so easy, costs are highish.

Will sell and get back into the Bangkok market for the very reasons trodgers just stated..

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[bocceball1]

Just as an example....if your interested in Hua Hin ....Condo's at the Sports Villa ....(there is one available that I know of....PM if interested) for 880,000 Baht (studio) If you rent to an expat on long term basis for 4000/month your return is around 5%....should be easy to rent at that price....maybe can get more????

[trogers]

Just as an example....if your interested in Hua Hin ....Condo's at the Sports Villa ....(there is one available that I know of....PM if interested) for 880,000 Baht (studio) If you rent to an expat on long term basis for 4000/month your return is around 5%....should be easy to rent at that price....maybe can get more????

Interesting. I wonder what the net rental yield would be.

Assuming at studio of size 25 sqm.

Common fees - Bt875/mth x 12 - Bt10,500

Agent's fees 1.5 mths for a 2 year rental - Bt6,000

Gross rent received for 2 years - Bt96,000

Less: Agent's fee - Bt6,000 and common fees Bt21,000

Net rent received in 2 years - Bt69,000

Net rental yield per year - 3.92%

This calculation does not include loss of rental income between tenants.

Present fix deposit rates at bank for 2 years > 3% pa.

Would you invest in this condo unit with such a net rental yield?

[Andyfez]

There are no real laws protecting the landlord in Thailand. It can be difficult enough to manage a property in the UK, so I can imagine it will be dam_n near impossible in the Land of Opportunists.

If you're lucky you'll get a tenant who will pay you - maybe on time (also).

If you're lucky you'll get a tenant who may take care of your property.

But over a 5 year period (or more) I can bet that 70% of tenants will not do this.

You're a foreigner - so immediately Thais expect that anything like this does not need to be paid for. That you can afford it, so they can consider it a gift.

Please also note that rentals are generally more short-term here, so can be a real nuisance to make a profit.

If you're planning to rent to foreigners it's very seasonal, so expect gaps when you won't get money.

You will note that many Thai landlords can use more forcible means to ensure payment. Us as foreigners cannot afford to be anything other than gentlemen as guests in this country.

Edited October 22, 2013 by Andyfez

[ezzra]

As some one who has several properties to rent, first of all, 1.4 mill will buy you a small house/condo

in the peripheries of Bkk or the boondocks in up country,

Being a landlord, you need to be able find suitable tenants, make sure they pay their rent on time

and look after and maintain the property up to a good living standard,

said amount invested will bring you no more than 5-7,000 baht a month in rent, of which, maintenance

fees, up keeps fees and taxes will have to be deducted and that if you're lucky the tenant did not

absconded with out pay and that you get paid in time all the time,

[KittenKong]

Bt 1.4m will not get you a condo unit in a high foreign demand location. Need at leastt Bt2.0m for that.

That may be true in Bangkok but it certainly isn't the case elsewhere.

Vacation places have high and low seasons, thus average rental yield can be dismal with high administrative cost of short term rentals.

Besides being debatable that is not relevant. You said that you cant buy a condo in a high foreign demand location for under 2MB and this is totally incorrect (unless you are talking exclusively about Bangkok, in which case you should qualify your comment).

I know several buildings in Pattaya/Jomtien with many long-term foreign tenants in studios/"1-beds" that can be bought for well under 2MB, and these aren't even the bottom of the market. At the bottom the prices are well under 1MB, though personally I would not want to live or own in those buildings. The demand is there though.

I also know of many much more expensive buildings where off-season occupancy is abysmal and ongoing costs are astronomical, but of course those are the places a sensible landlord would avoid.

[SDM0712]

Hi Andy

I a UK Estate Agent and still have an agency in NW London, now for around 15 years. I opened up a branch in Phuket because of boredom combined with a disbelief of how unprofessional things are here !

I can tell you that here in Phuket you can probably pick up a new DCondo type condo for around 1.4, and that should should rent out all day long for 10,000/12,000 a month, we have a few currently with tenants in at these figures. They are small but, as others have said, location is always the key. For this particular spot there is an international school locally and many of the tenants are teachers who don't mind the small accommodation, but like them because they are clean, have a gym and pool.

On those figures without figuring in service and other charges you are looking at a return of around 8.5% to around 10%.

My advise would be to do some homework, try and get a foreign freehold (which will cost more) rather than a 90 years lease (really 30 and two "promises" of further 30 year extensions, so far unchallenged and untested in Court).

Regards

Stephen

Edited October 22, 2013 by SDM0712

[KittenKong]

I have a vacation rental property.

Returns are poor, administration of the property not so easy, costs are highish.

Will sell and get back into the Bangkok market for the very reasons trodgers just stated..

As usual with property, location is everything.

From your screen-name one might suppose that your vacation property is near Rayong. If so it's no wonder the returns are poor as there is little demand for vacation rentals there. I'm surprised you should say that costs are high though.

[johnhock]

You can expect about 7% return from this you will pay service charge and maintenance costs etc! I now have 6 units for 1.4 , you could buy a studio unit in pattaya, with a good agent you should be able to keep it full most of the time, if you need more help get in touch good luck.

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[PattayaPhom]

VT1 Jomtien, you will get between 8-10% return, its proven year in year out so forget what the neysayers think. No real capitol gain but will sell without a problem.

[trogers]

VT1 Jomtien, you will get between 8-10% return, its proven year in year out so forget what the neysayers think. No real capitol gain but will sell without a problem.

One would hope for a price increase of average 4% per year to cover inflation, else capital will erode away over time.

[umbanda]

My Thai wife owns a small and simple building with 7 rooms with private bathrooms, no kitchen, to rent to students at Chiang Rai Universities.

She bought the lot and build on with a bank loan of 1.500.000 thb to pay in 4.000thb/monthly payments. That was 10 years ago. She rent the rooms at the average rent for this area, 2.000thb/month + utilities = 14.000thb/month income - maintenance expenses - taxes..

That is about 11.000thb/monthly cash flow, and the value of the property now is about 4.000.000thb. She owes 300.000thb.

We are looking to buy a new lot for the same kind of deal. Same kind of lots in this area cost about 1.000.000thb. Banks finances 70% of the cost of the lot and the construction for up to 30 years, at 7% interest rate.

We are doing this because we are surrounded with that kind of properties and building sites, for this kind of projects, and for mix-use row townhouses. Small store and garage on ground floor, and 1 or 2 stories over with 1 or 2 bathrooms. Another very good investment, if is on the right location. Contractors are selling those small townhouses for up to 3.000.000 thb and rents for up to 8.000 thb/month.

We live 5 minutes away for 2 big universities in Chiang Rai. Any more info, just e-mail me..

[umbanda]

Just as an example....if your interested in Hua Hin ....Condo's at the Sports Villa ....(there is one available that I know of....PM if interested) for 880,000 Baht (studio) If you rent to an expat on long term basis for 4000/month your return is around 5%....should be easy to rent at that price....maybe can get more????

I agree. Last year I was very close to buy a condo in a very nice building facing Cha Am Beach for that kind of money. Full of foreigners and Thai university students. Easy to rent for about 6.000/bath. Somebody presented a better offer than mine. Probably cash. We were buying using a bank loan. The same condo in Hua Hin will be at least double in price...Hua Hin is just 20 minutes away from Cha Am, and a nicest town in my opinion.

[rayongchelsea]

I have a vacation rental property.

Returns are poor, administration of the property not so easy, costs are highish.

Will sell and get back into the Bangkok market for the very reasons trodgers just stated..

As usual with property, location is everything.

From your screen-name one might suppose that your vacation property is near Rayong. If so it's no wonder the returns are poor as there is little demand for vacation rentals there. I'm surprised you should say that costs are high though.

Full booked nov thru to march..it just that the property is too far from my residence in Bangkok.

Therefore difficult to manage especially short term lets.

Costs are high because it is a large upscale development with an enormous swimming pool and common area.

It is a very popular area and always has been with the Thais and Scandinavians.

What is true however is that there is no long stay market and that I misunderstood.

Sent from my iPad using Thaivisa Connect Thailand mobile app

[SDM0712]

In terms of rental period we do a bit of holiday rental but really find it a bit messy. The majority of our tenancies are rather year with no early break clause.

Stephen

[Benmart]

There are no real laws protecting the landlord in Thailand. It can be difficult enough to manage a property in the UK, so I can imagine it will be dam_n near impossible in the Land of Opportunists.

If you're lucky you'll get a tenant who will pay you - maybe on time (also).

If you're lucky you'll get a tenant who may take care of your property.

But over a 5 year period (or more) I can bet that 70% of tenants will not do this.

You're a foreigner - so immediately Thais expect that anything like this does not need to be paid for. That you can afford it, so they can consider it a gift.

Please also note that rentals are generally more short-term here, so can be a real nuisance to make a profit.

If you're planning to rent to foreigners it's very seasonal, so expect gaps when you won't get money.

You will note that many Thai landlords can use more forcible means to ensure payment. Us as foreigners cannot afford to be anything other than gentlemen as guests in this country.

Very valid points and wise advice. Me, I'm one of those odd renters of a condo. I paid the twelve months and two months security upfront, take care of the condo as if it were mine, no noise, no parties and spotless clean. I take care of minor issues myself and keep the owner informed but don't overburden him with minutia.

Good luck on the adventure, but caution is advised. The market right now, in Pattaya at least, is flooded with new units. The older ones may be difficult to sell and buyers seem to want all sorts of concessions from the sellers since they are aware of the glut.

In any event, unless you are in an extreme hurry, perhaps the wait and see approach might be prudent.

[Benmart]

VT1 Jomtien, you will get between 8-10% return, its proven year in year out so forget what the neysayers think. No real capitol gain but will sell without a problem.

Is the 8-10% return what you are getting? I doubt that anyone can tell this young man what he will get, rather only what a particular return has been based on past performance with a like property.

No one can forecast the future on ROI for real estate, stock market, precious metals, etc. I read all the adverts that are posted about guarantees for rental returns, etc. and certainly hope they are true, but rather doubt it in all cases.

I am not aware of any foolproof, risk-free, guaranteed, protected, fail-safe investments in the LOS. IMO life has no guarantee except that everyone will eventually take their last breath.

Other than that, if you don't try, who knows? To the OP, Good luck my friend.

[robertson468]

Type of investment will depend on your age and your expected stay in Thailand.

If you are in your 30s and working here for the next 10 years, you may first consider buying the condo for your own occupation in lieu of paying rent. You may also want to explore more liquid form of investment with higher risk/return as a mix in your investment portfolio.

Bt 1.4m will not get you a condo unit in a high foreign demand location. Need at leastt Bt2.0m for that.

I do wish people would engage their brain before opening their mouths and talking about something they clearly know nothing about. A Russian Friend of mine just bought a brand new Condo for 1M baht and by the time he furnished it total outlay was about 1.4M baht. As to where to buy? I would recommend any holiday place - Pattaya, Phuket, Koh Samui et al. In fact he bought the condo on Koh Samui. It is quite small, but it has everything a couple would need, either for a holiday or longish stay. There are also loads of local agents who one can register with to get customers. He could expect to get about 9/10K per month return plus electric charges and any others you consider appropriate - internet, water........? The three most important considerations are location, location, location. Good luck.

[how241]

VT1 Jomtien, you will get between 8-10% return, its proven year in year out so forget what the neysayers think. No real capitol gain but will sell without a problem.

Sounds about right !

[bocceball1]

VT1 Jomtien, you will get between 8-10% return, its proven year in year out so forget what the neysayers think. No real capitol gain but will sell without a problem.

Sounds about right !

WOW!!!! sounds fantastic!!! Where do I sign up? NOT!!!!

In Real Estate ....the often quoted "location, location, location" is said.....BUT remember in economics...."Supply and Demand"....Just guessing ...but what is the number of UNSOLD condos in Pattaya....100,000? 200,000? and how many of the ones sold sit empty? an equal number?...and How many projects are in the pipeline to be built?

So wishful thinking about the return, capital gains, etc!!!!

Here's a link to an interesting report on the Pattaya condominium situation in Q1 2012....(yes I know its old ...but look at the trends!)

http://pattayacondoguide.com/pdf/Pattaya-Market-Report-2012.pdf

Edited October 22, 2013 by bocceball1

[amerioca]

Just as an example....if your interested in Hua Hin ....Condo's at the Sports Villa ....(there is one available that I know of....PM if interested) for 880,000 Baht (studio) If you rent to an expat on long term basis for 4000/month your return is around 5%....should be easy to rent at that price....maybe can get more????

Interesting. I wonder what the net rental yield would be.

Assuming at studio of size 25 sqm.

Common fees - Bt875/mth x 12 - Bt10,500

Agent's fees 1.5 mths for a 2 year rental - Bt6,000

Gross rent received for 2 years - Bt96,000

Less: Agent's fee - Bt6,000 and common fees Bt21,000

Net rent received in 2 years - Bt69,000

Net rental yield per year - 3.92%

This calculation does not include loss of rental income between tenants.

Present fix deposit rates at bank for 2 years > 3% pa.

Would you invest in this condo unit with such a net rental yield?

About correct for a condo. Add for a small studio apartment 150000 Bt every 10 years, which makes it 15000 per year for renovation. Add 15000 bt every 10 years for building maintenance reserves. Deduct 20 months in 10 years, of time where the apartment is empty plus add the maintenance fee you have to cover for this time (this is a best case scenario for Bkk - in the resort areas this time frame will be significantly longer.) Now deduct average annual consumer price inflation of 3% (2012). (http://www.factfish.com/statistic-country/thailand/inflation%20rate).

There goes your 3%. You would have your ROI in approximately 26 years (if they did not tore the building down by then) - meaning, that is when you have your invested money back. Now you may think, that with 3% consumer price inflation, your apartment would increase in value to that percentage. Wrong. Real Estate is not considered a consumer good but is categorized as investment goods. Meaning that in every ordinary case, the older your building, the less your apartment is worth - the actual value of a building in Thailand is the land it is build on not what is on the land. Exceptions are found in high density areas with a high demand on living space, which are usually found in large cities with progressive market outlook, or luxury investment goods (here comes the old location, location, location but there is more to it ...the right location, for the right price at the right time).

Other than in Bkk, the property markets for low/mid end objects are relatively depressed (not a negative or positive statement, just a benchmark for an an environment where offer exceeds demand beyond 30% but the pricing segment does not adjust the same way).

Bottom line. Go for it if you want to owe and live in your own place. Otherwise invest in stocks or some bonds where you still may be able to get a yield of 5 - 8% annually on conservative models.

[MikeOwen]

VT1 Jomtien, you will get between 8-10% return, its proven year in year out so forget what the neysayers think. No real capitol gain but will sell without a problem.

But you won't buy one for 1.4 million THB