Owning vs Renting: the basic economics

[Naam]

"land at 600k/rai" = dirt cheap! the last lot sold in my moo baan (july 2015) was THB 28,000 / wah², 10 years ago i paid 17,800 / wah².

Poor investment there Naam ........ 50% rise in 10 years.

Should have purchased in Mae Rim ....... 2000% rise in 10 years.

You could have been RICH!

[jpinx]

I'm guessing that you're guessing. In my own experience I am on very good terms with the landlord and lady, I can pretty much do what I want so long as it does not impact on any other condo in the building and I'd expect to undo do it when I leave. The building is well maintained, cleaned, secure, cctv, etc,etc, No rent increase for 6 years.

[peteregion]

Makes no sense at all even to consider buying property in a country where you don't have the right to live.

Then you shouldn't even be here, renting or buying. Dead bodies don't live in houses.

[Srikcir]

How does an investor of financial instruments in the West insure against money printing by the government? ?

If you're talking about inflation, owning real estate is one of the best hedges against it. The home I bought in 1969 for $US9,900 would cost you $200,000 today. Back then the rental value was about $100 per month and today it would be more like $1,500. What if I had bought ten of them? Wouldn't I then want "money printing" and inflation?

The US doesn't "print money". It borrows it, thus the increase in national debt. It is internally illegal for the US to print money for spending. The only western area I know of that prints money for spending is the Eurozone and it is rotten to the core.

Cheers.

The two QE by the Feds is not money printing?

Yes and no.

Yes that money was created as opposed from being generated from taxes.

But No because the money created is actually borrowed money from sales of Treasury bonds to third parties, kind of like taking out a home improvement loan using the equity value in your home.

[CrummyJuggler]

I am a landlord in my country and a renter here. Don't tell me that a rented house is not a home. That is so arrogant. For thousands of reasons the majority of people are renters. Children do not know the difference. Your wife could care less. Its only the western mind that is unhappy renting.

I have had one tenant 10 years on a 15 year mortgage. Do you think I am stupid to raise rent 50% on them? Of course not. We both know they are buying my house for me, but it is their home.

[Laza 45]

I have to admit that I didn't read your whole post.. owning or renting for me isn't about economics.. If you look at it from a purely economic view.. renting is the only option.. no long term commitment.. unlikely that you will make a capitol gain from buying.. your gf will no doubt get it in the end anyway,, so why buy?? I bought a small house and built on because I see it as a long term investment for my younger gf.. I like to 'own' my own place.. I like my garden.. I like to be able to do whatever I want with the place and it is nice not to pay rent every month to someone who will put the rent up if I paint the walls... I made a decision early on that if everything goes tits up I can walk away with no regrets and not have a mind f*** about it.. all I would recommend is don't invest everything you have.. keep a reserve in case you have to move on.. enjoy your life here.. stress less.. jai yen...

[bazza40]

How does an investor of financial instruments in the West insure against money printing by the government? ?

By buying gold as a hedge, about 10% of capital.

[ChrisKC]

The OP has written his article on the basis of a generalisation, which is all he can do short of years and years of actual experience.

I would like to offer some determining factors that will influence a decision to buy or to rent depending on individual requirements and circumstances.

Age of person

Farang alone or with Thai partner

number of occupants now and potentially,

Location in Thailand

urban or rural

new or older accommodation

condition of accommodation

how big

with land or not

condition of immediate surroundings

neighbours and dogs

local amenities and utilities,

Costs

Other factors that might be important but not mentioned above

Local or acquired knowledge. This I consider the most important! Two examples: (I have more from personal experience)

Don't do research with Agents - do with local people and offer to reward them. My girlfriend's sister in Isaan bought a beautiful house with 4 rai for B900,000 last year. Why this price? because the Owners had to sell quickly to repay a huge gambling debt.

I have an English friend in Chiang Mai Province who is selling a piece of land with three houses on it. I know all about it because I lived in all three for a year. He wants B600,000. I even made a video of it.

It's really easy to find somewhere to rent for B5000 per month. Why not have two? One in the City, one near the sea.

And so it goes on!!

[jacksam]

I'm not even going to bother reading the rest of the posts. Read first several. Some people in denial about economic sense of purchase here in los. The OP is correct. Makes ZERO sense. My opinion is backed up with expertise. Won't bother here as these threads are in the main mostly rubbish. DO NOT BUY IN THAILAND.

RENT RENT RENT

[bazza40]

The posts here seem to be missing the point in relation to age. In the 20 - 40 year age bracket, in any country, it makes very good sense economically to own or borrow to own property. Inflation will look after you.

If you are over 70, in Australia on the Old Age Pension, if you don't own your own roof over your head, you will be living in poverty.

In Thailand on the same pension, an over 70 can live quite well, and rent cheaply. Whatever the property is, it will be about one quarter of the rent cost in Australia for a similar property.

Inflation does not look after you once you are in your 70's, because you don't have time on your side like a 30 year old. So for old farts like me, renting in Thailand makes much better sense economically.

[jacksam]

Interesting above post. An English mate trying to sell a gold mine for 900k ......!chicken feed and still can't give it away. Brilliant investment

[MaeJoMTB]

The posts here seem to be missing the point in relation to age. In the 20 - 40 year age bracket, in any country, it makes very good sense economically to own or borrow to own property. Inflation will look after you.

Quite a lot of property in Florida selling for less than 25 years ago.

Even more in Detroit you can't give away today.

Birmingham in the UK, entire rows of houses that were valued 50 years ago that are worthless now.

Downtown Beirut, really nice place 30 (or so) years back, property prices were soaring.

Cambodia, nice place to live until .......... the 1970s.

France, 2 different friends of mine sold their rural houses for half the price they paid 20 years back.

Spain, you can't give them away.

Germany, all those people with the new Syrian neighbors, bet they've made decent profits over the last 30 years.

The list is endless.

Not to mention all of us that were divorced,

Oh yeah, that $500,000 house she took from us was well worth buying.

(Let's hear it from all those guys that only lost half their money........ bargain!)

[jpinx]

Interesting above post. An English mate trying to sell a gold mine for 900k ......!chicken feed and still can't give it away. Brilliant investment

No land for farang, -- so the only things for sale are the buildings?

[jacksam]

The posts here seem to be missing the point in relation to age. In the 20 - 40 year age bracket, in any country, it makes very good sense economically to own or borrow to own property. Inflation will look after you.

If you are over 70, in Australia on the Old Age Pension, if you don't own your own roof over your head, you will be living in poverty.

In Thailand on the same pension, an over 70 can live quite well, and rent cheaply. Whatever the property is, it will be about one quarter of the rent cost in Australia for a similar property.

Inflation does not look after you once you are in your 70's, because you don't have time on your side like a 30 year old. So for old farts like me, renting in Thailand makes much better sense economically.

Again crazy. At 21 I purchased my first house in good area Melbourne Australia . Cost 30k aud. That was 40 years ago. My salary at time was little under 17k . First year out of university. Same job now would be maybe 60k at best. Same house 700k . In the main most young people are best off to rent and put money into shares.

Good thing about buying real estate is that it's forced sayings.

[bazza40]

The two QE by the Feds is not money printing?

Yes and no.

Yes that money was created as opposed from being generated from taxes.

But No because the money created is actually borrowed money from sales of Treasury bonds to third parties, kind of like taking out a home improvement loan using the equity value in your home.

No,it's a con job by America on the rest of the world. Without reserve currency status, the American dollar would be in the toilet.

What's America's debt? $17 trillion or $60 trillion, depending on which sector you take into account?

The USA has a ruinously expensive defence budget. It's in a pissing match with the Saudis over oil, propping up a deeply indebted shale oil industry and hoping the Saudis will blink first. It has perhaps the dodgiest jobs data in the western world, an hour a month sees you counted as employed.

And how many Americans are on food stamps?

I feel 2016 is going to get very interesting.

[1FinickyOne]

I think that for most people, it is a much better deal to rent in Thailand - both for financial and personal reasons… and the OP did a fair job of proving it out in financial terms - - yes, there are always going to be variables as far as financials - no matter which way you go… a long term renter in the same place might have been better off buying - - however, a purchaser might be trapped by horrible neighbors who were not there when he moved in and has an easier option to leave...

I think a farang has to be over hte top careful when buying here and might be taking more risk than at home...

However, probably the most important thing might be the personal enjoyment in having your own home - your example assumes someone spending all of their money on a home. What if someone is only spending a small % and then has the a much larger % invested in interest bearing assets? Then it makes more sense. Also, there is a joy in being able to own and customize your own place that may not be available in a rental...

I know of no strict formula as personal preferences come into play but a good job in putting down some of the basics by the OP…

[ChrisKC]

Interesting above post. An English mate trying to sell a gold mine for 900k ......!chicken feed and still can't give it away. Brilliant investment

No land for farang, -- so the only things for sale are the buildings?

I have written them as examples without including all the relevant information about circumstances which is not appropriate in the general forum. In any event, how do you know he can't "give it away"? It's not with an agent and I was the last tenant three months ago and he has decided to sell. If you knew his circumstances you would understand how it IS possible to sell the buildings AND the land. Which incidentally, is B600,000, not B900,000

[Caspersfriend]

"You pays your money and you takes your chance"

Do Your Own Research and then cross your fingers.

Even those on here who say they only spend what they can afford to lose, don't want to lose; and maybe feel they need to live their life with a risk aversion strategy.

If it feels right it often is, your gut instinct often being your best advisor.

[SOUTHERNSTAR]

How does an investor of financial instruments in the West insure against money printing by the government? ?

If you're talking about inflation, owning real estate is one of the best hedges against it. The home I bought in 1969 for $US9,900 would cost you $200,000 today. Back then the rental value was about $100 per month and today it would be more like $1,500. What if I had bought ten of them? Wouldn't I then want "money printing" and inflation?

The US doesn't "print money". It borrows it, thus the increase in national debt. It is internally illegal for the US to print money for spending. The only western area I know of that prints money for spending is the Eurozone and it is rotten to the core.

Cheers.

How do you hedge against the property market bubble exploding like in 2008 ? But I think you are a little confused the "money printing" in the US have no correlation with the National debt. National debt as you coined it consist of public debt, company debt and private debt. In the US private debt has decreased but public/government debt and company/corporate debt has increased since 2008. The government debt increased due to budget deficits (difference between income and expenditure) not because of QE. What happens is that the treasury issues bonds, these bonds are bought by other countries, companies etc at auctions, any excess bonds are bought by the Fed to maintain a balance between supply and demand. If you look at the Feds balance sheet you will SEE how much it increased due to QE. The lending rate is also pegged at near zero to increase the ability of financial institutions to borrow to increase their liquidity.

[trogers]

The posts here seem to be missing the point in relation to age. In the 20 - 40 year age bracket, in any country, it makes very good sense economically to own or borrow to own property. Inflation will look after you.

If you are over 70, in Australia on the Old Age Pension, if you don't own your own roof over your head, you will be living in poverty.

In Thailand on the same pension, an over 70 can live quite well, and rent cheaply. Whatever the property is, it will be about one quarter of the rent cost in Australia for a similar property.

Inflation does not look after you once you are in your 70's, because you don't have time on your side like a 30 year old. So for old farts like me, renting in Thailand makes much better sense economically.

Make sense when you are cashing out due to age.

But for those with capital after age 50? I chose to be a landlord after witnessing the 3 major financial crisis - Tomyum kung, Internet bubble and the sub-prime.

So for now, I live on rents and would progressively cash out from 65 onwards.

[trogers]

The posts here seem to be missing the point in relation to age. In the 20 - 40 year age bracket, in any country, it makes very good sense economically to own or borrow to own property. Inflation will look after you.

If you are over 70, in Australia on the Old Age Pension, if you don't own your own roof over your head, you will be living in poverty.

In Thailand on the same pension, an over 70 can live quite well, and rent cheaply. Whatever the property is, it will be about one quarter of the rent cost in Australia for a similar property.

Inflation does not look after you once you are in your 70's, because you don't have time on your side like a 30 year old. So for old farts like me, renting in Thailand makes much better sense economically.

Make sense when you are cashing out due to age.

But for those with capital after age 50? I chose to be a landlord after witnessing the 3 major financial crisis - Tomyum kung, Internet bubble and the sub-prime.

So for now, I live on rents and would progressively cash out from 65 onwards.

[bazza40]

The posts here seem to be missing the point in relation to age. In the 20 - 40 year age bracket, in any country, it makes very good sense economically to own or borrow to own property. Inflation will look after you.

If you are over 70, in Australia on the Old Age Pension, if you don't own your own roof over your head, you will be living in poverty.

In Thailand on the same pension, an over 70 can live quite well, and rent cheaply. Whatever the property is, it will be about one quarter of the rent cost in Australia for a similar property.

Inflation does not look after you once you are in your 70's, because you don't have time on your side like a 30 year old. So for old farts like me, renting in Thailand makes much better sense economically.

Make sense when you are cashing out due to age.

But for those with capital after age 50? I chose to be a landlord after witnessing the 3 major financial crisis - Tomyum kung, Internet bubble and the sub-prime.

So for now, I live on rents and would progressively cash out from 65 onwards.

Sounds like a good plan to me.

[huawei]

When the dollar was at 45 and prices were just coming out of recession lows...the opportunity was there and I took it. Having rented for 5/6 years previously. The rent or buy conundrum is about timing...I see no economic sense to buy at this moment but I did in 2001 and 2002. Sometimes it's a judgement call on what you have learnt from the past.

[ghworker2010]

Life is short and there has to be winners and losers. Losers will be forced to keep packing bags at the whim of a land lord and to terrified to hang a painting in case the nail ends up making the security deposit null and void, oh yes there are a thousand horror stories , just google lost security deposits..

Winners control their turf, that just the way it is. How many truly wealthy people rent? answer = 0

enough said

losers (who purchase rather than rent) will also be up to sh&t when the next door neighbour starts playing music until 1am each night or gets a rooster - or barking dogs every night. Hard to sell a house. Easy to move from a rental...

[trogers]

How does an investor of financial instruments in the West insure against money printing by the government? ?

By buying gold as a hedge, about 10% of capital.

This has its own problems. Gold have its bubble. Paper gold faces the same risk as the financial market.

Physical gold has to be hung from my body constantly...?

[bazza40]

How does an investor of financial instruments in the West insure against money printing by the government? ?

By buying gold as a hedge, about 10% of capital.

This has its own problems. Gold have its bubble. Paper gold faces the same risk as the financial market.

Physical gold has to be hung from my body constantly...?

Only if you're into bling.....

[bazza40]

Interesting above post. An English mate trying to sell a gold mine for 900k ......!chicken feed and still can't give it away. Brilliant investment

I have a harbour bridge in Australia if he's interested in a swap....

[Nowisee]

8 pages of replies is more than my ADD can handle.

Bottom line for me.

I like the flexibility of moving, I don't care what it costs me.

[huawei]

8 pages of replies is more than my ADD can handle.

Bottom line for me.

I like the flexibility of moving, I don't care what it costs me.

And therein lies the answer we all have different needs it's not always about the most efficient way of utilising funds. Great answer.

[Craig krup]

No,it's a con job by America on the rest of the world. Without reserve currency status, the American dollar would be in the toilet.

What do people think "reserve currency" means? It's not the case that the dollar is imposed on the world and therefore the US has an advantage. It's the case that central banks, international organizations, commercial banks and others like to hold dollars and settle trades in dollars. Nobody forces anyone to do this. The dollar is acceptable precisely because people think it will retain its value and be acceptable. It's true that oil is traded in dollars, but there's nothing stopping any trader receiving their dollars and instantly turning them into pounds, baht, whatever. This, of course, would put downward pressure on the dollar. The markets are deep and liquid and the transaction costs are miniscule. People looking for some big conspiracy theory as to why the dollar is acceptable are kidding themselves. People just think that 1) you can repatriate a buck in the US and buy something worthwhile, and 2) the US authorities will manage their currency to ensure that this remains the case.

If people didn't think this there isn't a power in the world that could stop them selling the dollar and settling transactions in something other than dollars.