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Owning vs Renting: the basic economics


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Another approach. You have choosen the area you want to live and know if you want a house or a condo.

Then it is a matter of finding properties matching your choice, getting the selling prices and rental prices. You probably have an idea how long you want to stay. The basic economics become

if "buying price + maintenance total + lost rendement - sale price" > "rent total" then renting is more economical else buying is more economical.

lost rendement = the amount of money you get investing the buying price or the negative of the total mortgage interest paid.

Maintenance costs, sale price, lost rendement and rent raises are unknown factors but you probable can estimate them from historical data.

Example you can buy for 4 million baht, no mortgage and want to stay for 10 years. Maintenance fees 20,000 a year. Investing 4 million gives you 4% yearly, over 10 years 545,000. Sale price estimated 3 million.

Rent is 20,000 a month and stays fixed for 10 years. Total 2,4 million

4 + 0,2 + 0.545 - 3 = 1,745 so renting wil cost 655,000 baht more.

I think nobody makes the decision based on the basic economics. The factor resale price and period of stay are too uncertian. Maybe some people can provide data over the last 10 years.

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I rented for 7 years at 10,000B/month. That cost me 840,000B.

I could have continued that until death.

I chose to buy at 1,100,000B. Over 15 years, interest approximately 600,000B. With payments of under 10,000B a month, I will no longer need to pay rent after those 15 years, and I am protected against future increases in rental cost. With a life expectancy of 75, I will save 3,600,000B minus maintenance plus rental cost increase before I die.

The argument that I could invest the money and receive a return is nonsense, I would never have obtained the money with a 10,000B a month outlay, it all would have gone on rent.

The elephant in the room is its not my house. Ultimately, however, it will be my daughter's. And its cost me nothing. Every month beyond year 15 is 10,000B a month saved.

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I rented for 7 years at 10,000B/month. That cost me 840,000B.

I could have continued that until death.

I chose to buy at 1,100,000B. Over 15 years, interest approximately 600,000B. With payments of under 10,000B a month, I will no longer need to pay rent after those 15 years, and I am protected against future increases in rental cost. With a life expectancy of 75, I will save 3,600,000B minus maintenance plus rental cost increase before I die.

The argument that I could invest the money and receive a return is nonsense, I would never have obtained the money with a 10,000B a month outlay, it all would have gone on rent.

The elephant in the room is its not my house. Ultimately, however, it will be my daughter's. And its cost me nothing. Every month beyond year 15 is 10,000B a month saved.

Is this apples and apples or apples and pears? Was the rented place of equal standing as the one bought? People have a tendency to make the calculations to favour their feelings ;)

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I rented for 7 years at 10,000B/month. That cost me 840,000B.

I could have continued that until death.

I chose to buy at 1,100,000B. Over 15 years, interest approximately 600,000B. With payments of under 10,000B a month, I will no longer need to pay rent after those 15 years, and I am protected against future increases in rental cost. With a life expectancy of 75, I will save 3,600,000B minus maintenance plus rental cost increase before I die.

The argument that I could invest the money and receive a return is nonsense, I would never have obtained the money with a 10,000B a month outlay, it all would have gone on rent.

The elephant in the room is its not my house. Ultimately, however, it will be my daughter's. And its cost me nothing. Every month beyond year 15 is 10,000B a month saved.

The thing I remember most vividly about 2000-2007 is that there's absolutely nothing you can say about property. "It's as cheap to buy as it is to rent, rent's just dead money, you've got to get on the ladder, in a few year's time the mortgage will seem like nothing, when I bought my..."

With profits bonds were the favoured investment of most ordinary folk for decades. The salesman took 5% of your dough right away and 1.5% every year - imagine that, fifty grand in your hand and fifteen grand a year for one afternoon browbeating a pensioner - and nothing was done about it. People had interest only mortgages with endowments to pay off the property, and it never occurred to them that if the endowment was such a great investment why the **** was anyone giving them money to buy a house rather than investing in the endowment themselves?

There's nothing anyone can say to anyone else about the economics of property. The internet isn't an accountancy tutorial at Glasgow University.

Or - to put it another way - the plural of anecdote isn't data. smile.png [Or, indeed, reason].

Edited by Craig krup
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I rented for 7 years at 10,000B/month. That cost me 840,000B.

I could have continued that until death.

I chose to buy at 1,100,000B. Over 15 years, interest approximately 600,000B. With payments of under 10,000B a month, I will no longer need to pay rent after those 15 years, and I am protected against future increases in rental cost. With a life expectancy of 75, I will save 3,600,000B minus maintenance plus rental cost increase before I die.

The argument that I could invest the money and receive a return is nonsense, I would never have obtained the money with a 10,000B a month outlay, it all would have gone on rent.

The elephant in the room is its not my house. Ultimately, however, it will be my daughter's. And its cost me nothing. Every month beyond year 15 is 10,000B a month saved.

The thing I remember most vividly about 2000-2007 is that there's absolutely nothing you can say about property. "It's as cheap to buy as it is to rent, rent's just dead money, you've got to get on the ladder, in a few year's time the mortgage will seem like nothing, when I bought my..."

With profits bonds were the favoured investment of most ordinary folk for decades. The salesman took 5% of your dough right away and 1.5% every year - imagine that, fifty grand in your hand and fifteen grand a year for one afternoon browbeating a pensioner - and nothing was done about it. People had interest only mortgages with endowments to pay off the property, and it never occurred to them that if the endowment was such a great investment why the **** was anyone giving them money to buy a house rather than investing in the endowment themselves?

There's nothing anyone can say to anyone else about the economics of property. The internet isn't an accountancy tutorial at Glasgow University.

Or - to put it another way - the plural of anecdote isn't data. smile.png [Or, indeed, reason].

Yes endowments were definitely a case of mis selling. A lot of people were gullible and fell for the adviser nonsense
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near my home it was quiet. one day a recycle company came and now it is noisy, noise of steel, trucks even coming at night. sometimes I wake up because I hear guys unloading.

It could be worse I suppose...

If someone opened a massage shop next to you instead of a recycling company you would still be waking up in the middle of the night for the same reasons.

Edited by blackcab
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near my home it was quiet. one day a recycle company came and now it is noisy, noise of steel, trucks even coming at night. sometimes I wake up because I hear guys unloading.

It could be worse I suppose...

If someone opened a massage shop next to you instead of a recycling company you would still be waking up in the middle of the night for the same reasons.

Anyone who hasn't "liked" this hasn't read it carefully. clap2.gif

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So - punchline - almost every rational farang will rent.

and irrational Farangs are willing to pay for the luxury of being able to make any changes according to their whims.

ph34r.png

LOL!

Not just farangs.

You should see some of the changes my Thai neighbor made to their house.

Took the landing out at the bottom of the steps and made the steps so steep they are a death trap.

They have a 4 year old.

I asked if he's ever fallen down those steep steps?

THey said, they always carry him up and down.

But yeah, you can make changes as you like.

Some will improve the house.

Some will destroy it.

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So - punchline - almost every rational farang will rent.

and irrational Farangs are willing to pay for the luxury of being able to make any changes according to their whims.

ph34r.png

LOL!

Not just farangs.

You should see some of the changes my Thai neighbor made to their house.

Took the landing out at the bottom of the steps and made the steps so steep they are a death trap.

They have a 4 year old.

I asked if he's ever fallen down those steep steps?

THey said, they always carry him up and down.

But yeah, you can make changes as you like.

Some will improve the house.

Some will destroy it.

They are probably from the province where single long steep stairs are the norm.

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Another for myself

The exchange rate is much more favorable to the us dollar. Three years ago, it was 28. Now it is 36 per usd.

Instead of paying cash for a house (and interest for a further mortgage), 100,000 usd is now worth 3.6 million baht compared to 2.8 million...and I have done nothing but keep it in dollars. Not many people (US) would of made that much by putting it down on a home 3 years ago, paying interest on mortgage, and trying , hopelessly, to sell it 3 year later for a profit. My rent is just 5000 baht. I would of been pouring money into a newly built house. I have no family...and a live in girlfriend (been together six years). Even she can do the math and agree.

Just an example. Not applicable for those countries with weaker exchange rates.

That 2.8m baht property worth 100k USD 3 years ago is now worth 78k USD if you owned it, using your example
The house that 'we' well I bought in about 2004/2005 was paid for with money from the UK when the rate was 72thb/1gbp. We really couldn't afford to buy it at todays rate. And we have lived in it full time since 2007 ...it could do with a bit of paint now though.
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most of my foreigner friend...got married....and got the house....and they are alright.... but they ain't young..... 40+ so the marriage have more chance to last i guess..... but for younger people..i think it is a risk to do so .... complicate subject..... renting is fine if you make some cash every month ..... but if you arrive in thailand with 5 millions baths...And wanna buy a house.....can you take the risk ?

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most of my foreigner friend...got married....and got the house....and they are alright.... but they ain't young..... 40+ so the marriage have more chance to last i guess..... but for younger people..i think it is a risk to do so .... complicate subject..... renting is fine if you make some cash every month ..... but if you arrive in thailand with 5 millions baths...And wanna buy a house.....can you take the risk ?

How long do you think 5 million baht is going to last in a younger persons pocket? It's not enough to live on long term let alone buy a house

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most of my foreigner friend...got married....and got the house....and they are alright.... but they ain't young..... 40+ so the marriage have more chance to last i guess..... but for younger people..i think it is a risk to do so .... complicate subject..... renting is fine if you make some cash every month ..... but if you arrive in thailand with 5 millions baths...And wanna buy a house.....can you take the risk ?

How long do you think 5 million baht is going to last in a younger persons pocket? It's not enough to live on long term let alone buy a house

I live on around 500k a year with a family of 5.

Some of my single pals live on 250k a year.

So I think 5M would last between 10 and 20 years for most normal people.

Edited by MaeJoMTB
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most of my foreigner friend...got married....and got the house....and they are alright.... but they ain't young..... 40+ so the marriage have more chance to last i guess..... but for younger people..i think it is a risk to do so .... complicate subject..... renting is fine if you make some cash every month ..... but if you arrive in thailand with 5 millions baths...And wanna buy a house.....can you take the risk ?

How long do you think 5 million baht is going to last in a younger persons pocket? It's not enough to live on long term let alone buy a house
I live on around 500k a year with a family of 5.

Some of my single pals live on 250k a year.

So I think 5M would last between 10 and 20 years for most normal people.

Most Normal people don't live in the jungle. You're post is kinda sad. I'm assuming you're not thai..

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How long do you think 5 million baht is going to last in a younger persons pocket? It's not enough to live on long term let alone buy a house

I live on around 500k a year with a family of 5.

Some of my single pals live on 250k a year.

So I think 5M would last between 10 and 20 years for most normal people.

Most Normal people don't live in the jungle. You're post is kinda sad. I'm assuming you're not thai..

I live 12Km from the center of Chiang Mai, have a 3 bedroom house (owned not rented).

Go into town every day to hang out with my pals in a coffee bar.

Eat 1 or 2 meals out every day, and western food at home.

Edited by MaeJoMTB
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most of my foreigner friend...got married....and got the house....and they are alright.... but they ain't young..... 40+ so the marriage have more chance to last i guess..... but for younger people..i think it is a risk to do so .... complicate subject..... renting is fine if you make some cash every month ..... but if you arrive in thailand with 5 millions baths...And wanna buy a house.....can you take the risk ?

How long do you think 5 million baht is going to last in a younger persons pocket? It's not enough to live on long term let alone buy a house
I live on around 500k a year with a family of 5.

Some of my single pals live on 250k a year.

So I think 5M would last between 10 and 20 years for most normal people.

Your talking GBP right.

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How long do you think 5 million baht is going to last in a younger persons pocket? It's not enough to live on long term let alone buy a house

I live on around 500k a year with a family of 5.

Some of my single pals live on 250k a year.

So I think 5M would last between 10 and 20 years for most normal people.

Most Normal people don't live in the jungle. You're post is kinda sad. I'm assuming you're not thai..
I live 12Km from the center of Chiang Mai, have a 3 bedroom house (owned not rented).

Go into town every day to hang out with my pals in a coffee bar.

Eat 1 or 2 meals out every day, and western food at home.

So you live on 1300 baht /day? With a family of 4? That's so far below poverty it's sad. How do you pay for kids University or even basic schooling, health care.. Omg it's just scary

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most of my foreigner friend...got married....and got the house....and they are alright.... but they ain't young..... 40+ so the marriage have more chance to last i guess..... but for younger people..i think it is a risk to do so .... complicate subject..... renting is fine if you make some cash every month ..... but if you arrive in thailand with 5 millions baths...And wanna buy a house.....can you take the risk ?

How long do you think 5 million baht is going to last in a younger persons pocket? It's not enough to live on long term let alone buy a house
I live on around 500k a year with a family of 5.

Some of my single pals live on 250k a year.

So I think 5M would last between 10 and 20 years for most normal people.

Your talking GBP right.
No read previous post, it's 500k baht a year

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most of my foreigner friend...got married....and got the house....and they are alright.... but they ain't young..... 40+ so the marriage have more chance to last i guess..... but for younger people..i think it is a risk to do so .... complicate subject..... renting is fine if you make some cash every month ..... but if you arrive in thailand with 5 millions baths...And wanna buy a house.....can you take the risk ?

How long do you think 5 million baht is going to last in a younger persons pocket? It's not enough to live on long term let alone buy a house

Sent from my SC-01D using Tapatalk

i think its possible...but what i want is to be able to invest one million in something....ang get double return after X years ?

So i guess i will follow the general advice..

I will rent.... and i wont get marry lol ..... Thanks ya all for your precious information !

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most of my foreigner friend...got married....and got the house....and they are alright.... but they ain't young..... 40+ so the marriage have more chance to last i guess..... but for younger people..i think it is a risk to do so .... complicate subject..... renting is fine if you make some cash every month ..... but if you arrive in thailand with 5 millions baths...And wanna buy a house.....can you take the risk ?

How long do you think 5 million baht is going to last in a younger persons pocket? It's not enough to live on long term let alone buy a house

Sent from my SC-01D using Tapatalk

i think its possible...but what i want is to be able to invest one million in something....ang get double return after X years ?

So i guess i will follow the general advice..

I will rent.... and i wont get marry lol ..... Thanks ya all for your precious information !

Been doing this since mid 2007. Twenty million to acquire 5 condos from the secondary market and living on rental incomes with my wife (no kids).

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most of my foreigner friend...got married....and got the house....and they are alright.... but they ain't young..... 40+ so the marriage have more chance to last i guess..... but for younger people..i think it is a risk to do so .... complicate subject..... renting is fine if you make some cash every month ..... but if you arrive in thailand with 5 millions baths...And wanna buy a house.....can you take the risk ?

How long do you think 5 million baht is going to last in a younger persons pocket? It's not enough to live on long term let alone buy a house

Sent from my SC-01D using Tapatalk

i think its possible...but what i want is to be able to invest one million in something....ang get double return after X years ?

So i guess i will follow the general advice..

I will rent.... and i wont get marry lol ..... Thanks ya all for your precious information !

Been doing this since mid 2007. Twenty million to acquire 5 condos from the secondary market and living on rental incomes with my wife (no kids).

this is amazing....... you did Great !!!! #Respect

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most of my foreigner friend...got married....and got the house....and they are alright.... but they ain't young..... 40+ so the marriage have more chance to last i guess..... but for younger people..i think it is a risk to do so .... complicate subject..... renting is fine if you make some cash every month ..... but if you arrive in thailand with 5 millions baths...And wanna buy a house.....can you take the risk ?
How long do you think 5 million baht is going to last in a younger persons pocket? It's not enough to live on long term let alone buy a house

Sent from my SC-01D using Tapatalk
i think its possible...but what i want is to be able to invest one million in something....ang get double return after X years ?
So i guess i will follow the general advice..
I will rent.... and i wont get marry lol ..... Thanks ya all for your precious information !

Been doing this since mid 2007. Twenty million to acquire 5 condos from the secondary market and living on rental incomes with my wife (no kids).

this is amazing....... you did Great !!!! #Respect

A close mate and his Mrs just bought a 7 million baht 4 story guest house a stones throw from jomtien beach. I set it up for him on air bnb as well and straight away with zero experience they are booked out with middle class thais and Russians. Living on the ground floor they have zero expenses and I'm thinking about doing the same thing... Whatever you do DO NOT Listen to the jaded posters on TV unless it's info on the cheapest beer in a new beer bar

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First, I'm going to take the piss, then hopefully bring it around to the topic. I may fail miserably bringing it around.

What the hell is a Flying Sor Kor 1? (I'm not sure I got that right). There's an article this morning about people encroaching on National Park land based on "Flying Sor Kor 1", which I assume to mean a title for one plot of land that is not the same as the occupied land. That boggles my mind.

My nightmare scenario is building a house or buying a condo on a plot of land, only to find out somebody else's Flying Sor Kor 1 actually refers to the plot of land my home is on- and I have a month to vacate.

Which brings it to the serious side, that I haven't seen addressed. That's the P(s), which is the probability of getting scammed out of any real estate investment. Whether by a spiteful wife, a crooked lawyer, an unscrupulous real estate agent, changes in foreign ownership or visa requirements, or if (God forbid) a Flying Sor Kor 1 decides to land crap on my little patch of paradise.

Fortunately, I'm on a temporary assignment so I'll never have to worry about the risks of buying in Thailand, where obscure real estate terms seem to occasionally pop into the news- terms that could have a devastating effect on ownership rights.

I'll save my nickels and make a buy/rent decision when I get back to where I understand the rules and the odds of being scammed.

Edited by impulse
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A close mate and his Mrs just bought a 7 million baht 4 story guest house a stones throw from jomtien beach. I set it up for him on air bnb as well and straight away with zero experience they are booked out with middle class thais and Russians. Living on the ground floor they have zero expenses and I'm thinking about doing the same thing... Whatever you do DO NOT Listen to the jaded posters on TV unless it's info on the cheapest beer in a new beer bar

Great until his Thai misses dumps him, and moves her Thai husband in.

Or she takes out a loan out on the place so she can go gambling.

Or Immigration arresting and deporting him for working illegally.

Then your mate has lost 7M bht.

I could have lived over 14 years on that money without doing a shred of work, or risking my money on the whims of a Thai lady. Or lived on my own for 25 years. With no risks at all.

Edited by MaeJoMTB
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Some people only think about money, investments and so on.

For us here with wife & kids, the house is not a money investment but an investment for us to have a nice place to stay we call Home.

I don't understand that somebody have such a hard time understand that? Well frankly I don't care too.

Great point, but the flipside is those of us who have no wife, no kids, and no desire to put down roots right where we are. We're renters by choice, not because we're poor and couldn't buy if it was important to us. But to some of us, it's just not important. And it's a little demeaning to be called out as losers (not your post, BTW- but that's a quote from another post here)

For example, my employer, a multi-national corporation, with annual revenue in the 10's of billions of dollars- rents here in Thailand. Because they strip out all the emotion and the warm and fuzzy and the hopes of a real estate windfall weighed against the costs and the risks of the market, and the other uses for the investment $$$- and the equation says "rent". Just like my personal equation says, "rent".

Not because they couldn't afford to buy the entire BKK block our building sits on, or because I couldn't afford to buy (or rent) a much nicer place than I actually live in- if I wanted to. My place fits my needs today, but it won't fit my needs in a year or two when it's time to pack up and head off to the next assignment. So buying makes no sense to me personally.

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A close mate and his Mrs just bought a 7 million baht 4 story guest house a stones throw from jomtien beach. I set it up for him on air bnb as well and straight away with zero experience they are booked out with middle class thais and Russians. Living on the ground floor they have zero expenses and I'm thinking about doing the same thing... Whatever you do DO NOT Listen to the jaded posters on TV unless it's info on the cheapest beer in a new beer bar

Great until his Thai misses dumps him, and moves her Thai husband in.

Or she takes out a loan out on the place so she can go gambling.

Or Immigration arresting and deporting him for working illegally.

Then your mate has lost 7M bht.

I could have lived over 14 years on that money without doing a shred of work, or risking my money on the whims of a Thai lady. Or lived on my own for 25 years. With no risks at all.

Good observation and one that I put to him as well. He said it was hers to keep as he is worth several million dollars and they are together 11 years already.

Just to ad he could have gone the company route as well

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Edited by mcfish
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I was renting a large townhouse in Thonglor for 65k baht a mth for past 10yrs. I felt all that money was wasted. 3yrs ago, I put down a deposit on a 12m condo and moved in last year. The exact condo one level up from me just sold for 21m last mth. Incidentally, the house I bought long time ago in Australia for a song is worth millions and returning thousands of dollars in rent. I regret following the advice I got when I first came to Thailand to stick with rental and not purchase. I guess each situation is different, but for me, the best value, capital gains and future security has come from property ownership.

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I was renting a large townhouse in Thonglor for 65k baht a mth for past 10yrs. I felt all that money was wasted. 3yrs ago, I put down a deposit on a 12m condo and moved in last year. The exact condo one level up from me just sold for 21m last mth. Incidentally, the house I bought long time ago in Australia for a song is worth millions and returning thousands of dollars in rent. I regret following the advice I got when I first came to Thailand to stick with rental and not purchase. I guess each situation is different, but for me, the best value, capital gains and future security has come from property ownership.

Post back in 15.3 years when you reach the break even point and let us know how you did. Or when you sell the place, whichever comes first.

I hope you do well, but there's a lot of sand traps and water hazards and scheming locals between here and there.

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I'm sure there are risks. My property is poorly built. When I asked the agents why people would pay 21m price for a poor property, they mentioned that selling for 150,000 Baht per square meter for a new property in Thonglor is still cheap compared to the newer developments going on now selling for 250,000 plus in the area. It could be that Thailand may have a property crash soon....but then again when I travel to Aust, Singapore, HK often and compare, BKK still seems like very good value for money. Also, when you buy in a good desirable location, I think the investment is safer. Being a condo I have freehold title. So in the worst case even if the market crashes, I can live here or can rent it out for high rent as this area appears to be in high demand.

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I'm sure there are risks. My property is poorly built. When I asked the agents why people would pay 21m price for a poor property, they mentioned that selling for 150,000 Baht per square meter for a new property in Thonglor is still cheap compared to the newer developments going on now selling for 250,000 plus in the area. It could be that Thailand may have a property crash soon....but then again when I travel to Aust, Singapore, HK often and compare, BKK still seems like very good value for money. Also, when you buy in a good desirable location, I think the investment is safer. Being a condo I have freehold title. So in the worst case even if the market crashes, I can live here or can rent it out for high rent as this area appears to be in high demand.

Whilst you made a good move it's highly unlikely you have doubled your money. I say that because unless you actually saw the contract and witnessed the transaction then you wouldn't know. There is so much BS spread among the expats here it's quite staggering so be wary of any price sensitive info

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