What puts you off investing in real estate?

[blackcab]

In fairness, that could happen. It's not especially likely though.

 

It's the same situation as a property owner who grants a lease greater than three years and who doesn't register it on the chanote.

 

The property owner dies and the heirs do not honour the lease agreement. So off to Court everyone goes...

[EvenSteven]

An interesting topic that went astray.  The concern of the OP was about "investing in property in Thailand".  Investing in anything whether it is property or used toilet paper is a question of expected ROI from such an investment and lost opportunity costs.  After all, investing in property in Thailand is not the only place in the world to make money, and this is about money, nothing else.  What you invest and where you invest has to be compared to other investments minus the cost of renting, if you plan on using the property for your own use.

 

If past performance is any indication of the future, real estate in general, and real estate in Thailand particularly, does not compare very favourably to major world stock markets.  Financial planners, despite their conflict of interest, have long warned about using real estate as an investment vehicle.  I'm quite sure you can cherry pick some numbers, locations, and time frames to make your argument look good just as I can cherry pick some high flying stocks (Dell, MicroSoft, HomeDepot, for example), but over the long term, the stock markets have outperformed real estate markets.  So if you think doubling your property investment in 15 years is a good ROI, you're only fooling yourself.

Edited December 27, 2016 by EvenSteven

[trogers]

1 hour ago, EvenSteven said:

An interesting topic that went astray.  The concern of the OP was about "investing in property in Thailand".  Investing in anything whether it is property or used toilet paper is a question of expected ROI from such an investment and lost opportunity costs.  After all, investing in property in Thailand is not the only place in the world to make money, and this is about money, nothing else.  What you invest and where you invest has to be compared to other investments minus the cost of renting, if you plan on using the property for your own use.

 

If past performance is any indication of the future, real estate in general, and real estate in Thailand particularly, does not compare very favourably to major world stock markets.  Financial planners, despite their conflict of interest, have long warned about using real estate as an investment vehicle.  I'm quite sure you can cherry pick some numbers, locations, and time frames to make your argument look good just as I can cherry pick some high flying stocks (Dell, MicroSoft, HomeDepot, for example), but over the long term, the stock markets have outperformed real estate markets.  So if you think doubling your property investment in 15 years is a good ROI, you're only fooling yourself.

 

You forgot to consider the appetite for risk. How successful have major retirement funds been over the past three decades in the financial market? Why then are retirement ages being raised again and again in the developed world, because they couldn't pay out time and again?

[EvenSteven]

2 hours ago, trogers said:

 

You forgot to consider the appetite for risk. How successful have major retirement funds been over the past three decades in the financial market? Why then are retirement ages being raised again and again in the developed world, because they couldn't pay out time and again?

 

There are a thousand variables and everyone's case will be different.  But the common academic practice is to hold such variables constant to look at ROI.  Over the long term, the major world indices have far outpaced real estate investing per se.  You can easily research this with a search of the performance of any stock market and compare that with the ROI in residential real estate.

 

Why is there pressure in some countries to raise retirement age?  We're getting off topic and speculating here, but attributing it to the stock markets is erroneous.  Let me say that I would suggest that pressure to raise the retirement age has a lot more to do with politics than economics, given that actuarials of US and Canadian government pension plans have shown that funding is solvent for the next 75 years.  Whether that is the case in the EU, I don't know.  Where it is not, contribution rates usually increase.  Btw, some countries have actually reduced the age at which people can begin to collect benefits.  Does that have something to do with the markets?  Likewise, no.

Edited December 28, 2016 by EvenSteven

[trogers]

4 minutes ago, EvenSteven said:

 

There are a thousand variables and everyone's case will be different.  But the common academic practice is to hold such variables constant to look at ROI.  Over the long term, the major world indices have far outpaced real estate investing per se.  You can easily research this with a search of the performance of any stock market and compare that with the ROI in residential real estate.

 

Why is there pressure in some countries to raise retirement age?  We're getting off topic and speculating here.  This is a separate issue and attributing it to the stock markets is erroneous.  Let me say that I would suggest that pressure to raise the retirement age has a lot more to do with politics than economics, given that actuarials of US and Canadian government pension plans have shown that funding is solvent for the next 75 years.  Whether that is the case in the EU, I don't know.  Where it is not, contribution rates usually increase.  Btw, some countries have actually reduced the age at which people can begin to collect benefits.  Does that have something to do with the markets?  Likewise, no.

 

I would dispute major world indices outpaced real estate by themselves, without interventions and bailouts using taxes...and that's political too.

 

Some here would have had to start gathering investment capital from zero after 2008. It's like betting on double or nothing...

 

My retirement fund is only getting me 3+% pa over the pass ten years, while my condos are giving me over 10% pa ROI from rents and capital appreciation since 2007.

 

 

[lkn]

22 minutes ago, EvenSteven said:

Over the long term, the major world indices have far outpaced real estate investing per se

 

I am not sure what “major world indices” you have looked at, and what real estate investing you compare with, which have been “far outpaced”. Maybe you could clarify?

 

That said, I do agree that in the long-term (like 10+ years) equities is generally a better investment, tending to give a 7-9% ROI where real estate is closer to 6-7%, but the latter has far less volatility, which is why I don’t understand your complete dismissal of real estate and complete faith in equities (which have had quite of lot volatility over the last decade) .

 

So maybe you could be a bit more specific about what you are basing your belief on, i.e. what indexes you compare and what investment timeframe you assume.

[EvenSteven]

Can't you do this yourself?  All it takes is a search engine.  Here is but one example of the US markets, and this graph grossly underestimates the comparison visually, given that the axis is exponential.

 

 

Again, there are countless variables (volatility, liquidity, preferred tax treatment on capital gains, the investor profile, etc), but for the sake of strictly looking at ROI, there is no comparison.  Btw, you do know that the very wealthy don't buy houses, fix them up, and spend their nights and weekends finding tenants to rent them?

 

 

 

Edited December 28, 2016 by EvenSteven

[trogers]

6 hours ago, EvenSteven said:

Can't you do this yourself?  All it takes is a search engine.  Here is but one example of the US markets, and this graph grossly underestimates the comparison visually, given that the axis is exponential.

 

 

Again, there are countless variables (volatility, liquidity, preferred tax treatment on capital gains, the investor profile, etc), but for the sake of strictly looking at ROI, there is no comparison.  Btw, you do know that the very wealthy don't buy houses, fix them up, and spend their nights and weekends finding tenants to rent them?

 

 

 

 

The very rich can throw away tens of millions at a casino.

 

I cannot afford the same with my only million.

[EvenSteven]

1 hour ago, trogers said:

 

The very rich can throw away tens of millions at a casino.

 

I cannot afford the same with my only million.

Net worth and security are two variables of many I did not consider, as I have tried to explain on more than one occasion.  But some people are better investors than others, and when I used the example of the very rich, my point was that they often made their money in other areas than real estate, with a few exceptions of course.  But there are better vehicles in which to park your money than real estate.  Maybe that is why you have less than you should have and others have more?

Edited December 29, 2016 by EvenSteven

[lkn]

Your graph is for U.S. housing, I think if you could find a similar graph for real estate in some of the major cities like N.Y.C. or London, you would find that real estate performs much better there (than the average U.S. market).
 

This is a predictable pattern because people are attracted to the cities, so real estate prices there go up faster than the rest of the country, in fact, real estate prices on the countryside has gone down in many places, so a graph of the entire U.S. is not comparable to a single major city in Asia.

 

I did not google any graphs myself, because my experience is that the free data on this is very limited.

 

As for your comments about the very wealthy, if your point was that they invest in equities then that is sort of irrelevant because they can diversify, take risk, and wait out most crises, so they can afford much more volatility than your typical expat. As for how they became very wealthy, that is often something you cannot reproduce, so it doesn’t really matter.

 

For investing in real estate, there are different vehicles, you can be (or invest in) a developer, many of them are publicly traded, so definitely many invest in that part. You can also hold real estate and rent it out, there are also publicly traded funds for this, so again, this is also a common investment vehicle.

 

Lastly, as you allude to, you can find bargains and fix them up, then possibly rent them out. This is what you seem to talk about, and for an expat with plenty of time and a knack for renovation projects and/or finding good bargains, this is probably a fairly productive way to spend their time, because a fund manager has less domain knowledge than the expat on the street, and he would need to go through a company (taking a cut) for some of the things where the expat can use his own time (like overseeing the renovation, decorating the unit), hence the ROI for the expat would be higher than the fund doing the same thing (ignoring “lost salary” by the expat).

 

I assume for many people here, it would even be a “fun” project to keep them occupied, and I would say a much safer investment than putting their money in a stock index. If you look at the SET100 index, it is now almost at the same level as 5 years ago, though there have probably been some dividends. If you use another index, you have the currency fluctuations to worry about.

 

 

[trogers]

1 hour ago, EvenSteven said:

Net worth and security are two variables of many I did not consider, as I have tried to explain on more than one occasion.  But some people are better investors than others, and when I used the example of the very rich, my point was that they often made their money in other areas than real estate, with a few exceptions of course.  But there are better vehicles in which to park your money than real estate.  Maybe that is why you have less than you should have and others have more?

 

I cashed out before the sub-prime fiasco... and I would not be going back in there in my last couple of decades...??

[jpinx]

23 hours ago, trogers said:

 

I would dispute major world indices outpaced real estate by themselves, without interventions and bailouts using taxes...and that's political too.

 

Some here would have had to start gathering investment capital from zero after 2008. It's like betting on double or nothing...

 

My retirement fund is only getting me 3+% pa over the pass ten years, while my condos are giving me over 10% pa ROI from rents and capital appreciation since 2007.

 

 

That is the nub of the debate - some people are talking about increasing capitol, and some are talking about cash in their hands every month.  Everyone has their favourite horror story about either, but the reality is that it's pot-luck.  The best decisions to buy can go awry when someone builds a tannery next door.  Property investment depends of a good future - something that can not be guaranteed.  Nothing to do with Bangkok specifically, it can happen anywhere.  If you're looking for a reliable pension every month, term investments are probably the best compromise, but be prepared to look globally for decent rates. 

[blackcab]

I can tell you what land in the CBD and certain location in Sukhumvit sells for, which is the top end of the market (and not something many individuals buy for investment purposes).

 

Five years ago land sold at 1.2 million per square wah. Right now it's in the 1.8 - 1.9 million range. These are real sale prices.

 

This is land suitable to build a high rise building, so the plot size, location and road width are all suitable.

 

At 1.2 million the sales price of the condos was about 200,000 per square meter.

[trogers]

2 hours ago, jpinx said:

That is the nub of the debate - some people are talking about increasing capitol, and some are talking about cash in their hands every month.  Everyone has their favourite horror story about either, but the reality is that it's pot-luck.  The best decisions to buy can go awry when someone builds a tannery next door.  Property investment depends of a good future - something that can not be guaranteed.  Nothing to do with Bangkok specifically, it can happen anywhere.  If you're looking for a reliable pension every month, term investments are probably the best compromise, but be prepared to look globally for decent rates. 

 

Very unlikely to find an investor building a tannery on land with value of a million a sq. wah...

[EvenSteven]

On 12/28/2016 at 11:18 PM, blackcab said:

Five years ago land sold at 1.2 million per square wah. Right now it's in the 1.8 - 1.9 million range. These are real sale prices.

 

A 50% increase over five years sounds great, but while we are cherry picking, my HD stock increased over 300% during this same time period.  You can continue to invest in real estate, I'll continue to invest in stock.

[blackcab]

1 hour ago, EvenSteven said:

 

A 50% increase over five years sounds great, but while we are cherry picking, my HD stock increased over 300% during this same time period.  You can continue to invest in real estate, I'll continue to invest in stock.

 

I don't invest in Thai real estate, because I'm not Thai. I work in the Thai real estate sector though, which is why I happen to know those figures.