Condos as an investment proposition?

[giibaht]

I am assuming to rent it out for about 10,000-12,000 baht per month with no problem (fully renovated and furnished). That will give me over 10% yearly investment return.

Can this go any wrong ?

What is the name of the condo exactly? I must admit that sometimes I can't differentiate between old apartment and condo buildings

Buying in a good location like Nimman is a good move to start with. With the many new condos in CM, it remains to be seen whether there's enough demand to absorb the supply, assuming that a significant number are buy-to-rent units. If not, there will be a depressing effect on achieved rents or occupancy rates. An old condo unit renovated to the same standard as new condos in the same location cannot rent for the same price obviously.

I noticed that Nimmana had put up a banner on Canal road advertising rental units. I wonder what's their rental rates. Also, Oneplus recently also started offering 1mth free for 1-year lease for some of their condos. A condo rental war will no doubt delight many TV members, including me

Perhaps ever-resourceful TV members have more anecdotes to share?

[Robert24]

Location is the most important.

I recommend Nimmanhemin area as it is constantly growing and improving with modern shops and restaurant. You will always find tenants to live there. Another option is near Maya or Central Festival.

My suggestion is to buy cheap studios in old buildings and spend some money to renovate it. New condos are too expensive.

You should think about minimum 10% yearly return.

For example:

I have bought studio room near Nimmanhemin 4 months ago for 500,000 baht in old building. Spent 200,000 baht for total renovation and furniture. I am renting this out for 7000 baht per month now, which gives me about 11% yearly return.

Of course if you get a good deal you can do better than 10%.

looks like a good investment. well done.

Now when calculating returns on property, I'd recommend to include a certain amount for future maintenance/renovation etc. So I always include a 2% of the initial investment for the ROI calculation, otherwise you are not 100% honest with yourself. (i.e. in this example that would be 14k annually). Also you need to make sure you include any tax liabilities in the calculation and obviously the condo maintenance fees.

Also as other people have mentioned, it is smart to not assume 100% rental occupancy, i.e. include in your calculation maybe 90-95% occupation if it's in a good location like Nimman, otherwise I would lower that amount.

So all in all, ROI is probably more around 8% in the above example. Still good though I must say.

[JulieM]

I think that's a great deal and the location is perfect for a lot of people. Renting it out for 10-12k should not be that hard.

[Dante99]

Interesting condo - Chiangmai Condominium - Nimmanhemin Soi 11.

Old building quite ugly looking from outside.

Excellent location and neighbourhood - top restaurants and bars, new and renovated townhouses, Salad Concept, Daily, Beer Republic on the same soi.

Quite big undercovered car park.

I just bought 2 connected rooms - 107 and 108 (2 chanote titles) for 900,000 baht total. Total rooms area 49 sq.m.

I am assuming 300,000 baht for total renovation and furnishing (including good soundproof windows).

Total cost for very nicely renovated 1 bedroom, 1 bathroom, 1 living room apartment in top location will be 1.2 mln baht.

That equals 25,000 baht per sq.m. New developments in the Nimman area minimum 80,000 sq.m.

I am assuming to rent it out for about 10,000-12,000 baht per month with no problem (fully renovated and furnished). That will give me over 10% yearly investment return.

Can this go any wrong ?

Only if there are no tenants.

Which is entirely possible.

old quite ugly building will limit interest

Do you have reserved/assigned parking spaces with each unit?

[WorkingTourist]

What is the name of the condo exactly? I must admit that sometimes I can't differentiate between old apartment and condo buildings

I believe this is the building: http://www.chiangmailocator.com/chiang-mai-condominiums-service-apartments-5112:chiangmai-condominium-nimmanhaemin-soi-11

An interior view of a 78 sqm. rental unit available for 15,000 THB/month (but booked until October): http://chiangmaiproperties.co.th/EN/Condo/Rent/Fully-furnished,-1-bedroom-condo-with-2-bathrooms-in-Chiangmai-Condo,-Suthep,-Mueang-Chiang-Mai/C1182.aspx

Another unit at 64 sqm. also 15,000 THB/month: http://chiangmaiproperties.co.th/EN/Condo/Rent/Partly-furnished,-1-bedroom-condo-with-2-bathrooms-in-Chiangmai-Condo,-Suthep,-Mueang-Chiang-Mai/C1698.aspx

@baywatch82 Is this your first purchase? Does unit 107/108 indicate that the units you bought are on the ground floor?

And thanks for sharing!

Edited January 24, 2015 by WorkingTourist

[Mooner]

I suppose everyone has their favorite condo for investment and mine is JC Hill Place , close to canal road, huey kaew road, Maya etc. Old building good management., new lifts coming, Will be painted and huge pool coming...good location and can be bought for 800k will and many rented for 8k...not everybodies cup of tea..but is mine.

That's a Winner catalogue condo.

[JulieM]

OK it's an ugly building but the price he paid for a Soi 11 Nimman condo...I still think it is a good deal.

[bangmai]

you can change the paint; you can't change the location.

[NigelKennedy]

Ugly JC Hill Place another renovation completed on 15th floor..

[baywatch82]

@baywatch82 Is this your first purchase? Does unit 107/108 indicate that the units you bought are on the ground floor?

And thanks for sharing!

Not first. I have 5 other already. All old and renovated. All in Nimman area. All rented out and give good return.

107/108 is on the 1st floor.

[bangmai]

To calculate ROI, I use a method taught to me by an Australian accountant. Take 40% of gross annual rent, and set that aside for taxes, fees, commissions, vacancies, repairs, and advertising. Use the other 60% for principle and interest. Sound like you paid cash....so 12,000 per month rent x 12=144,000.....take 60% of that= 86,400, which is your return on 1,200,000. 7.2% ROI, with nice reserve funds and no need to rent to trash-packers, people on tourist visas, people with bad credit, people with pets, or any combination....set up some reserve funds and buy dividend paying stocks, and reinvest the dividends.......your biggest payday might come with the wrecking ball. I've walked by that place many times, and while it needs a paint job, it is definitely alive. As far as car parking, there are at least a hundred restaurants and bars that would be quicker to walk to 9 times out of 10, and they don't have parking either. That also includes Maya and KSK, and there is a nice back way past the Male Hut (no pun intended) that will get you to KSK quickly. It's a walker's paradise for urban Thailand.

[baywatch82]

Anyway, new developents will never give you a good return.

I see people are buying new condos for 3 mln and advertising them for rent for 15,000 baht per month. I really don't understand that. My friend just advertised a big house that is worth 12 mln baht and rent 25,000 baht per month. What return is that ?

Another thing is - today condos are built from very cheap and not lasting long materials. Old condos are built from solid steal beams and good concrete. If you see building 20 years old - you see already all the cracks and nothng worse ever will happen to it. With new buildings you never know, and sometimes after 5 years are quite run down.

In best locations land value is very expensive, and condo developers have to sell units for very high price if they want to make any profit out of it, especially with the floor limitation law for example in Nimmanhemin. Also they are trying to save as much money as they can for quiality of building materials - but in pretty outside package.

After 20 years who cares anyway if building is 20 or 40 years old. Location is the most important. Look for example at European cities (London, Paris). Even 100 years old buildings in the best locations are worth much more than new developments 500m away.

[WorkingTourist]

I see people are buying new condos for 3 mln and advertising them for rent for 15,000 baht per month. I really don't understand that. My friend just advertised a big house that is worth 12 mln baht and rent 25,000 baht per month. What return is that ?

I think those “investors” are either planning to use the unit themselves (sometime in the future) or swayed by realtors with promises of “passive income” and ability to sell it more expensive, you know, with the rising middle class in China and ASEAN around the corner…

For laymen it might sound good with a 6% ROI (and many of these “investors” probably are laymen), which some developers will even guarantee (the first year or two). Of course they forget to factor in expenses, taxes, and periods of vacancy, and they have probably never looked at ETFs, which IMO is an easier way for a layman to get a passive income: looking at S&P’s MIDCAP 400 ETF I see a double-digit annualized ROI for the last five years.

Another thing is - today condos are built from very cheap and not lasting long materials. Old condos are built from solid steal beams and good concrete. If you see building 20 years old - you see already all the cracks and nothng worse ever will happen to it. With new buildings you never know, and sometimes after 5 years are quite run down.

Many old condos use the same column and beam construction that is used for new condos, and I’m quite sure the quality of concrete hasn’t gone down since these old buildings were erected.

As for “you newer know [with new buildings]”, I am not sure what you’re implying. Do you think some of them might collapse due to cheap construction?

In best locations land value is very expensive, and condo developers have to sell units for very high price if they want to make any profit out of it, especially with the floor limitation law for example in Nimmanhemin. Also they are trying to save as much money as they can for quiality of building materials - but in pretty outside package.

After 20 years who cares anyway if building is 20 or 40 years old. Location is the most important. Look for example at European cities (London, Paris). Even 100 years old buildings in the best locations are worth much more than new developments 500m away.

There are plenty of new things built in London and Paris that are more expensive than 20-40 year old concrete buildings 500m closer to the city center.

Location is important, but it’s not everything. For example a panorama view of Doi Suthep adds to the value, where small windows looking out at the neighboring building detracts.

After all, if location was everything, you would not be able to buy in Chiangmai Condominium at such low price.

As for “in 20 years”: It depends on what you are comparing. I can show you a lot of 20+ year old buildings that most foreigners would consider slum, and regardless of how many layers of paint you add, it will never come close to even the cheap stuff built today. As for the better quality stuff built today, it has enough affordances to make me confident that it will still be an attractive buy in 20 year.

[giibaht]

Can this go any wrong ?

What is the name of the condo exactly? I must admit that sometimes I can't differentiate between old apartment and condo buildings

I believe this is the building: http://www.chiangmailocator.com/chiang-mai-condominiums-service-apartments-5112:chiangmai-condominium-nimmanhaemin-soi-11

After my usual cuppa in Nimman this afternoon, I strolled over to check out this condo. (Such are the pleasures of living a life of leisure in this fair city )

Below is pic showing the back of this condo. Presumably bw82's units doesn't face the new hotel (?) under construction behind.

One of the things that can go terribly wrong with buying a condo in Nimman is the danger of new developments just beside the one you bought at. While admittedly such things can happen anywhere in Thailand, it is more acute in Nimman due to limited land and high demand.

[bangmai]

As far as the new construction....it can take a few years for defects and settling to surface. The "new" building will never be new again, and some of the folks won't by a resale whether it is one or 100 years old. Many Chinese buyers are really looking for a place outside of China to park there money, and Thailand is a commuter flight compared with the US, also one of their favorite places to buy. The highest end condos here are 200,000 thb psm, that's only 10% of what they are getting in Manhattan. Still relatively cheap. FWIW, quality-wise, residential construction peaked in the 60s in the US...each decade after became cheesier and cheesier. The old homes were built with old growth timber, by craftsman, today's homes are stapled together by Central Americans, who likely are more familiar with cardboard than quality. Some of the insulation and energy technology is impressive, but it can all be retrofitted onto older homes. Styrofoam insulates considerably better than stone; but would you want to live in a beer cooler?

[JulieM]

Can this go any wrong ?

What is the name of the condo exactly? I must admit that sometimes I can't differentiate between old apartment and condo buildings

I believe this is the building: http://www.chiangmailocator.com/chiang-mai-condominiums-service-apartments-5112:chiangmai-condominium-nimmanhaemin-soi-11

After my usual cuppa in Nimman this afternoon, I strolled over to check out this condo. (Such are the pleasures of living a life of leisure in this fair city )

Below is pic showing the back of this condo. Presumably bw82's units doesn't face the new hotel (?) under construction behind.

One of the things that can go terribly wrong with buying a condo in Nimman is the danger of new developments just beside the one you bought at. While admittedly such things can happen anywhere in Thailand, it is more acute in Nimman due to limited land and high demand.

I don't see the problem. If you have any kind of view you have to assume you are going to lose it soon around Nimmen. I use to have a view of Doi Suthep but that was blocked first by a hotel and then a condo even closer to my place. But if I bought a south facing view at the Unique Condo I'd be a bit pissed that after less than a year of enjoying the view I am now staring at the Nimmena development just meters from my window.

[giibaht]

I don't see the problem.

I'm referring to the "just meters from my window" phenomenon that will be a HUGE problem.

[JulieM]

Why? I lived in New York City for years and often had neighbors within arms reach. No big deal if you ask me.

[giibaht]

Why? I lived in New York City for years and often had neighbors within arms reach. No big deal if you ask me.

Well, it's a big deal for most people.

I've been to a few recently completed condos. Invariably, those condos with this "meters from my windows" problem has numerous balance units left unsold on that particular side of the building. Similarly, investors who bought such units will have greater difficulty renting out such units as compared to his neighbors who don't have such issues.

So it's the preferences of the majority that will determine how desirable (or undesirable) the condo is.