survey. would you buy a condo in pattaya

[KittenKong]

Based on this it would seem rent is approximately 6% to 10% of the cost of the condo. This falls in line with the vast

amount of literature out there that 'guarantee' a 7% or 8% return rate for 1/2/3 years when they sell condos to those who wish to buy & rent-out.

All your figures are based on asking prices for rent and sale. Few people would be daft enough to pay the asking price for either here, I think. Everything is highly negotiable.

Everything is of course negotiable. 'Highly' is debatable. You may be able to knock off 10% but not 50% off the price. Likewise you may be able to knock off not only on the sale price but the rental price. Provided the discount rate is equivalent, the maths would turn out to be the same anyways.

I have experienced discounts in excess of 50%. Whether you call that "high" or not is semantics.

My point is that all those figures are plucked straight out of thin air and so any calculation of return is equally suspect.

Also you dont take account of the cost of acquisition/sale, or the management fees that are usually hiding behind those glowing "guaranteed" rental returns.

[JayBird]

Based on this it would seem rent is approximately 6% to 10% of the cost of the condo. This falls in line with the vast

amount of literature out there that 'guarantee' a 7% or 8% return rate for 1/2/3 years when they sell condos to those who wish to buy & rent-out.

All your figures are based on asking prices for rent and sale. Few people would be daft enough to pay the asking price for either here, I think. Everything is highly negotiable.

Everything is of course negotiable. 'Highly' is debatable. You may be able to knock off 10% but not 50% off the price. Likewise you may be able to knock off not only on the sale price but the rental price. Provided the discount rate is equivalent, the maths would turn out to be the same anyways.

I have experienced discounts in excess of 50%. Whether you call that "high" or not is semantics.

My point is that all those figures are plucked straight out of thin air and so any calculation of return is equally suspect.

Also you dont take account of the cost of acquisition/sale, or the management fees that are usually hiding behind those glowing "guaranteed" rental returns.

Well, not plucked out of thin air, plucked out of advertised sites as they appear over the last 3-4 years of me monitoring condo prices.

There may be outliers that are discountable by 50%, but I specifically avoided the outliers and tried to stick with condos that are more than likely selling near their advertised price in the above examples.

(If you can get me a condo at The Base Pattaya for 50% off the advertised price, please PM and I'll give you a nice big signing bonus! Or that 6M Condo in VT6 for 3M, that would be great too! If we are talking Nirun Condo, no thank you )

I'm not considering rental returns at all, this is purely from a point of view of you living in your own condo so you don't pay rent. I just reference that guaranteed rental return as a possible metric to suggest my other numbers are valid plus or minus a few % points.

Regarding taxes: If the property price plummets as is normally the concern here, to 0, the income/withholding tax on it will be very low.

If we take my example of a property going from value of 2.9M to 1,711,000 over 5 years, the taxes would be:

1,711,000 * 0.35 = 598,850

598,850 / 5 = 119,770

Taxes = 5,000 + 1,977 = 6,977 / year (or 34,885)

If it held its value:

3,000,000 * 0.35 = 1,050,000

210,000 / year

5000 + 11,000 = 16,000 / year (80,000)

(I'm not a tax accountant, so please consult your tax accountant before taking my values are correct )

I did not wish to take into consideration tax implications as there are too many ways to avoid (or pay extra) taxes. I leave that up to the reader to factor in

It is also worth noting:

If you did buy a condo at 3M, and it kept its value (or increased at the rate of inflation over the next 5 years, which is feasible with a good property), and then sold it. You would have less total expenditures than if you rented. (Duh?)

If you rented with cash sitting in your bank account, eventually that cash will be gone... and you'll have no condo and no cash left in the bank.

It's valid to be concerned about buying if you really feel that it will suddenly be seized by the government or taken away for one reason or another and you have nothing. In that case, I hope that cash can be put to work so it doesn't run out (or you have a enough cash to see you out).

As I think asked earlier: I would really be interested in if there was any sizeable activity in Thailand where property owned by foreigners was seized. How much of a realistic threat is it? Are there reported cases?

Thank you.

[namatjira]

No tax payable on revenue until 150,000 baht per annum is reached, so, the first 150,000 is tax free and then there is a small percentage on totals above that figure.......it is minor

I DID BUY and...totally REGRET IT.

My Condo management wants to see records $$ of ANY Rentals to friends OR tenants when I do not use to show government tax people....time to sell.

Don't panic man.

Your in for the long haul, tell them what you like.

not there business .

[newnative]

Yes, let me know, too, if you come across any condos at The Base for 50% off. I find JayBird's figures to be conservative and none seems to be 'plucked straight out of thin air". He gave several examples for Centric Sea. Here's one for Centric I know is not plucked out of the air: 32 sqm, 1 bedroom, bought for 2.4MB, rented for 22,500 Baht a month. Seems to be in line with his figures.

[balo]

I would never pay over 15000 to rent a condo here , especially if it's only studio / 1 br size but thats just me. If you look around there's plenty of places between 7000 to 15000 . And the same units are for sale for around 1.5 to 2 million baht .

So my calculations tell me that it's still cheap to rent in Pattaya , as long as you stay away from the so called luxurious condos. If your income is around 40k monthly you can still have a good lfe in Pattaya if your rent is around 10k , depending if you have a wife to support or not.

Edited April 7, 2016 by balo

[KittenKong]

Well, not plucked out of thin air, plucked out of advertised sites as they appear over the last 3-4 years of me monitoring condo prices.

As far as I'm concerned it is the advertised prices that are plucked out of thin air.

Regarding taxes: If the property price plummets as is normally the concern here, to 0, the income/withholding tax on it will be very low.

You dont appear to understand how property transfer taxes/fees work here. They will be charged on the declared or assessed value (whichever is the higher). Currently there is a reduction in place that is due to end around now and generally the total cost is around 6% or so, though it does vary according to how long the property has been owned.

I did not wish to take into consideration tax implications as there are too many ways to avoid (or pay extra) taxes. I leave that up to the reader to factor in

That's up to you. What I know is that all my investments earn me interest or dividends that are entirely free of all tax both here and in the country in which I invest. I pay no fees either, or other charges or expenses. The same cannot be said of an investment in property here. One thing that I have noticed over the last 40 years in Thailand is that every year the rules get stricter and better applied. I see no reason why this trend should not continue, albeit slowly.

It is also worth noting:

If you did buy a condo at 3M, and it kept its value (or increased at the rate of inflation over the next 5 years, which is feasible with a good property), and then sold it. You would have less total expenditures than if you rented. (Duh?)

If you rented with cash sitting in your bank account, eventually that cash will be gone... and you'll have no condo and no cash left in the bank.

Most people would invest money, rather than just deposit it with no interest.

The cost of renting depends on the price you pay. When I rented my condo the landlord was getting barely 3% return compared to the selling price, though I was getting 5% interest for the same money on deposit. And my landlord was paying the common fees etc.

The same money in shares would have produced about 3-4% dividends and variable capital growth (up to +50% over 6 years).

[JayBird]

KittenKong: It seems you are more taking the perspective of investing in a condo for the purpose of re-sale or renting (what I was referring to was purely from living in a condo you buy vs. living in a condo you rent, so the aspect of buy-to-let or whatnot was not a factor here). This is also why there would be different tax implications.

Additionally, yes, I am not a professional tax accountant well versed in Thai laws by any means. The reason I refer to paying no taxes is based on the perception that the value of the property would be reduced to 0. If it was reduced to 0, then the gov't itself would appraise the value as 0. If the gov't does not appraise it to 0, then I would expect you would get more than 0THB for selling the condo. Again, an extreme chosen for purpose of illustrating the example. I also provided an example where the value held, this could be more suitable for trying to determine ballpark-figures for taxes.

Getting 5% Interest nowadays is a bit of a challenge (especially if you want to factor in currency risk). With EU, USD, CHF and JPY all paying low (or negative) interest rates, it's hard to get 5%. Even if you were to invest in Gov't Bonds as a proxy you might be lucky to get 2-3%. You would have to push to corporate bonds or dividend payers to start getting more than that. Once you are in there you suffer additional risks (dividends could be cut, as well as currency risk).

One of the benefits of owning and living in the house, vs placing the money in a suitable investment, is that you get buffered against currency risks. If for example, you were owning US Equities that paid 3% dividends per year, that 3% could waver by 10-20% against the THB and would therefore be something you would have to buffer against.

Of course, the more sophisticated trader could incorporate additional hedging techniques, diversify across currencies, and hold multiple futures, currency and interest rate swaps to help guarantee future cash flows. But in case you do not wish to engage in all those activities (or just want to keep it simple), owning and living incorporates a lot of those benefits, versus investing and using the proceeds to pay rent.

(Plus, the really sophisticated investor would realize that buying a property to live in in a foreign currency is yet another way to diversify their portfolio.) If you had the funds, the resources, the knowledge, you could go so far as to have a portfolio that holds equities, bonds, currencies, and real estate in multiple countries, therefore allowing you to hedge bets across the globe. But not everyone can be a hedge fund manager, nor is this recommended for most.

But now, we're diverging to more sophisticated techniques of financial independence through portfolio management of investments versus a discussion on Own or Rent . Although an interesting topic, to switch back to Own vs. Rent I would have to state that one needs to look at their own situation, their own money management capabilities and compare that to the amount of money they would 'save' from simply buying a condo to live in.

Btw, in your example of 3% vs. 5%. This is the situation that reminded me of property prices in the bay area a while ago. The mortgage would be so high on a property that the amount I 'lost' on Rent was far less than the amount I would pay the bank in interest. In situations like this, it could make more sense to rent vs. buy. When the flip side occurs it can make more sense to buy vs. rent.

To extrapolate: If a 3M Condo in Pattaya was renting at 100,000 / mo, it would make sense to buy. If it was renting at 1,000 / mo, it would make sense to rent. So you have to see where the % falls and choose accordingly. This is kind of the situation you get when you look at properties like View Talay 6, where the rent can be *VERY* high (due to its extreme popularity with short-term-renters/tourists), versus properties further back that are not as common to renters (LK Properties, or the likes of Nirun/Karat9).

This of course does not take into consideration how much personal value you put into 'owning' your own condo (you may place value on being able to have a kitchen/bathroom customized to your needs, or just want to stick the proverbial nail into the wall).

[KittenKong]

KittenKong: It seems you are more taking the perspective of investing in a condo for the purpose of re-sale or renting (what I was referring to was purely from living in a condo you buy vs. living in a condo you rent, so the aspect of buy-to-let or whatnot was not a factor here). This is also why there would be different tax implications.

Additionally, yes, I am not a professional tax accountant well versed in Thai laws by any means. The reason I refer to paying no taxes is based on the perception that the value of the property would be reduced to 0. If it was reduced to 0, then the gov't itself would appraise the value as 0. If the gov't does not appraise it to 0, then I would expect you would get more than 0THB for selling the condo. Again, an extreme chosen for purpose of illustrating the example. I also provided an example where the value held, this could be more suitable for trying to determine ballpark-figures for taxes.

You dont understand how property transfer tax works here. I suggest that you read up on it.

[newnative]

In my opinion, JayBird doesn't need to read up on the property transfer tax because it's not a big deal--certainly not if you are buying a condo to live in for a number of years. He's comparing renting to buying, What's important to me in the equation is the bottom line and monthly expenses. What I like about owning a condo here is: 1. the very low condo maintenance fees compared to USA. In USA, I once owned one condo, a studio, that had monthly condo fees of $700 a month. Yes, that included water, aircon, and heat in winter but, still, a lot to pay each month on my small salary. I paid it (with gritted teeth) because I wanted to own a condo on a lake and look at water. Now I live in a condo on an ocean and look at water for a lot less. 2. No real estate property taxes--about $175 a month where I was living in USA. 3. No monthly home owners association fees, about $45 a month. 4. No mortgage here so no monthly mortgage interest to pay and no monthly mortgage insurance fee. It all adds up and I'm happy not paying them but still being able to own a condo here that I can do with as I may. The property transfer tax doesn't really enter my mind at all. I don't wake up every morning thinking somewhere down the road I'm going to be paying a property transfer fee. Ditto for thinking about possibly paying a 5% realtor fee. Personal situations, of course, vary but, generally, if you are here short term, I would say rent. If you are here long-term and like having your own space, owning can make sense.

[KittenKong]

In my opinion, JayBird doesn't need to read up on the property transfer tax because it's not a big deal--certainly not if you are buying a condo to live in for a number of years. He's comparing renting to buying,

It still forms part of the calculation and he chose to do a specific one with figures: no one forced him.

If you are going to produce a meaningful set of figures then you have to take account of everything. Otherwise you may as well say "renting/buying just seems better value to me" and leave the figures out completely, which is an equally valid position to take.

[JayBird]

In my opinion, JayBird doesn't need to read up on the property transfer tax because it's not a big deal--certainly not if you are buying a condo to live in for a number of years. He's comparing renting to buying,

It still forms part of the calculation and he chose to do a specific one with figures: no one forced him.

If you are going to produce a meaningful set of figures then you have to take account of everything. Otherwise you may as well say "renting/buying just seems better value to me" and leave the figures out completely, which is an equally valid position to take.

The goal was to give a back-of-the-napkin style quick jot down to show relative comparison between owning and renting. The goal was not to do an in-depth analysis sufficient to blindly base a transaction upon. The two are different.

I appreciate your insight and the fact that you understand tax laws and how condos are bought and sold in Thailand is great. But the weight of tax and transfer implications would be minimal to an individual who wishes to own and live in (again if you are a property developer/flipper this would obviously be very different). (IN fact, if you plan to live in and die in as part of a retirement strategy, you really don't care about taxes)

Note: A quick glance on my example suggests that if the taxes paid and the depreciation combined is no greater than 10% compounded yearly over a 5 year period you would still break even. Put another way, if the condo held its price for 5 years taxes would have to be nearly 40% of the price of the condo (plus stamp duty, transfer fee, etc,). I do not believe taxes are quite that high.

Additionally, as should be well understood, a full in-depth analysis is too specific to an individual's needs. Something as simple as selling two condos in one year would greatly effect how much tax you pay. As is whether or not you form it under a business or under individual sales. Again, for more tax related issues please consult a tax advisor

If on the other hand tax implications are very significant to someone who plans to buy & live in the condo over a 5-10 year period, then it might be worth considering. But at present I do not see the tax implications being that sizable (normally tax implications are not a significant consideration when one is purchasing a house/condo to live in... in any country).

[bow]

Bergen??? Sounds like a place you would want to escape from not to. And you'd have to have a condo in a warm climate--like Thailand--to get away from the severe cold. Sort of defeats the purpose...

Bergen is the most rainy city in Scandinavia, it is not cold, but it rains and rains and rains ................

(It's got something to do with a warm sea current. You google it.)

[manarak]

poll questions are not well thought out.

would I ?

well, pretty much since I already bought a condo.

would I buy another?

yes, if the object is nice and the price is right.

note:

from the newer projects I saw, not a single one met both of the above criteria.