do you reaally believe developers who promise 7-10% returns?

[sendintheclowns]

Prompted to post this, as I just read the main TV page, where there is another established developer promising 10% return on your investment. I am an experienced (40 years) investor, in Europe, Canada and Thailand. Those were self managed properties - meaning I worked at hiring subcontractors, etc. I made decent returns each year, on my investment properties. Capital gains, when selling. These advertisements are not referring to capital gains, as far as I can tell,  when you sell. They are offering a rental income return to you, starting in the first year you invest..

My question is this: do you believe that, these are realistic promises, bearing in mind that there will be deductions for the management fees charged by an established management company,  ? I am not so much asking for ''stories by brilliant investors'' . Just want to get a 'feel' for what the average bloke thinks of truth in advertising, in Thailand. Thanks. . 

[stevenl]

No, I don't believe these developers.

[trd]

The promised income has already been priced into the purchase price of the property. It's called marketing.

[Peterw42]

I woudnt believe the developer offers, If they offer 10% return for 3 years its built into the purchase price, you paid 30% more than its worth.

I do believe there are some very good rental returns available, you can buy a condo for say 1.2 million and rent it out for 10k a month, 10% return. It looks great on paper but you would need to consider occupancy levels, no capital gain in the near future etc

[eisfeld]

For me, it's a red flag. Any development that promotes something like this, immidiately is out of the question. The properties are usually overprized and they know that the guarantee means nothing because they would just disappear and not be held accountable. I see many condo projects with this kind of scheme and they sell condos with less than 50sqm for 5M THB and a monthly maintenence fee of 3-5k THB. Completely bonkers. That thing would have to rent out for about 45k THB per month on avg to make 10% ROI including the monthly fees. Everyone can decide for themselves if that's realistic or not.

 

It's pretty simple: Look at the overall market and the amount of unsold property. If the rentals were so sought after and really got such high rates, then there wouldn't be much left on the market. There's plenty of people with money to invest in these properties but they wont, they know better.

[sendintheclowns]

12 minutes ago, eisfeld said:

For me, it's a red flag. Any development that promotes something like this, immidiately is out of the question. The properties are usually overprized and they know that the guarantee means nothing because they would just disappear and not be held accountable. I see many condo projects with this kind of scheme and they sell condos with less than 50sqm for 5M THB and a monthly maintenence fee of 3-5k THB. Completely bonkers. That thing would have to rent out for about 45k THB per month on avg to make 10% ROI including the monthly fees. Everyone can decide for themselves if that's realistic or not.

 

It's pretty simple: Look at the overall market and the amount of unsold property. If the rentals were so sought after and really got such high rates, then there wouldn't be much left on the market. There's plenty of people with money to invest in these properties but they wont, they know better.

my own view is that, first the market here is unregulated. Property agents do not self regulate with a professiional body, with teeth, ditto the legal side. You might be able ot rely on one of the major developers like Supalai or Siri and so on. Because they have a reputation to protect, sort of.My experience,, when I did due diligence work for clients, was to see if the guaranteed rate of return was based on a financed deal where the mortgage rate had been bought down, so as to inflate the attractiveness of the investment. I can see the buy-down cost included in the selling price, but not something like was suggested at 30%. anyways, thanks for the comments. I will continue to be entertained by these huge billboards next time I drive through Phuket Island.

[jimmyyy]

ah no! 

[DrDave]

I don't believe them for one second.

I've even seen some adverts that claim a 7% NET return (net of management/CAM fees and utilities/electricity). Way too good to be true!

 

For sure, either the promised return is built into the sales price, or the developer has no intention of making good on the claim if the rental income doesn't support the overhead payments to owners.

 

The developer has to have a "plan B" to be invoked in the event that the rental market doesn't pan out as expected.

What happens if tourism in the area tanks during the guaranteed return period? What if there's a natural disaster, or maybe even another global financial crisis?  Unless the promised return has been built into the sales price (and those funds properly managed and accounted for over time), then there's no way the buyers will ever see their return.

 

I've always had a suspicion that these developers have no intention of making good on the returns over the entire guarantee period, even if the returns are built into the sales price. Maybe they'll honor it for the first couple of years, but it just seems to be too easy to do something like declare bankruptcy and sell the leases on to another company (possibly owned by the same people) who have no responsibility to honor the "guaranteed" return.

 

There are just way too many red flags with these types of developments. 

[madmitch]

I think the first five words of the OP heading is all that's needed here!

[GiantFan]

Do they guarantee the maintenance fees? Usually climbs after the first year or two.

I saw another condo complex on Patong beach road with a 10 year buyback.  Never seen this before.  

[Anthony5]

3 hours ago, trd said:

The promised income has already been priced into the purchase price of the property. It's called marketing.

 

But that doesn't really matter.

 

In Pattaya there is a devloper, who also advertises on this forum, who promises 10% for 10 years. So whatever the purchase price is, it will be completely recovered after 10 years...........................may be

[MoonUnit]

6 minutes ago, Anthony5 said:

 

But that doesn't really matter.

 

In Pattaya there is a devloper, who also advertises on this forum, who promises 10% for 10 years. So whatever the purchase price is, it will be completely recovered after 10 years...........................may be

 

I think Peterw42 covered that with 'occupancy levels' which pretty much sums it up.  0 * 0 = you guessed it.

[trd]

 
But that doesn't really matter.
 
In Pattaya there is a devloper, who also advertises on this forum, who promises 10% for 10 years. So whatever the purchase price is, it will be completely recovered after 10 years...........................may be

What could possibly go wrong?

[LivinginKata]

59 minutes ago, Anthony5 said:

 

But that doesn't really matter.

 

In Pattaya there is a devloper, who also advertises on this forum, who promises 10% for 10 years. So whatever the purchase price is, it will be completely recovered after 10 years...........................may be

 

Clearly it's just a headline sales pitch to sell condos. Any potential buyer must look into the monthly on-costs, occupancy rate, the reputation of the management company.

 

I would tell folks to look much longer than a a 10 year payback, maybe much longer, maybe never. 

 

[NamKangMan]

4 hours ago, Peterw42 said:

I woudnt believe the developer offers, If they offer 10% return for 3 years its built into the purchase price, you paid 30% more than its worth.

I do believe there are some very good rental returns available, you can buy a condo for say 1.2 million and rent it out for 10k a month, 10% return. It looks great on paper but you would need to consider occupancy levels, no capital gain in the near future etc

 

 

"you would need to consider occupancy levels, no capital gain in the near future etc" - and there are many more "etc" to consider. 

 

Repairs and maintenance would be considerable over the 10 years, as the construction materials and methods here are substandard. 

 

Management fees, insurance, cleaning fees, taxes, fixtures, fittings and furnishings, damage by tenants - just to name a few more. 

 

Where do all these "etc" leave your "10% return?"

 

After all these outgoings, the property owner then has to consider the planning laws here.  What is a desirable location / property to live in today, possibly with a view, may not demand as much rent in the future because the view has gone, and so has the nearby greenery and fresh air, and replaced by concrete, dust and noise.

 

Then, there is Bangkok to consider.  A serious "visa crackdown" and there goes a lot of your perspective tenant market.  As you say, "occupancy levels" should be a concern, and this can be seen by the over development here, which is also pushing rents down. 

 

All of this makes it difficult to achieve a 10% return over 10 years.

[NamKangMan]

1 hour ago, MoonUnit said:

 

I think Peterw42 covered that with 'occupancy levels' which pretty much sums it up.  0 * 0 = you guessed it.

 

 

"0 * 0 = you guessed it." - ahhhh, = -1. 

 

No tenant equals no income.  No income equals no return.

 

However, there are associated costs when owning a property, and they still have to be paid, tenant or no tenant, so, the owner goes from a profit to a loss. 

[Peterw42]

10 minutes ago, NamKangMan said:

 

 

"you would need to consider occupancy levels, no capital gain in the near future etc" - and there are many more "etc" to consider. 

 

Repairs and maintenance would be considerable over the 10 years, as the construction materials and methods here are substandard. 

 

Management fees, insurance, cleaning fees, taxes, fixtures, fittings and furnishings, damage by tenants - just to name a few more. 

 

Where do all these "etc" leave your "10% return?"

 

After all these outgoings, the property owner then has to consider the planning laws here.  What is a desirable location / property to live in today, possibly with a view, may not demand as much rent in the future because the view has gone, and so has the nearby greenery and fresh air, and replaced by concrete, dust and noise.

 

Then, there is Bangkok to consider.  A serious "visa crackdown" and there goes a lot of your perspective tenant market.  As you say, "occupancy levels" should be a concern, and this can be seen by the over development here, which is also pushing rents down. 

 

All of this makes it difficult to achieve a 10% return over 10 years.

 

Yes, I agree. 10% would be a gross figure and theoretical. Thats what I said it looks good on paper. 

[NamKangMan]

4 minutes ago, Peterw42 said:

 

Yes, I agree. 10% would be a gross figure and theoretical. Thats what I said it looks good on paper. 

 

 

Yes, toilet paper. 

[madmax2]

The only way they can give you the % return they promise is if its included in the selling price of the unit

So basically you have prepaid your own rental return for the agreed period of time as long as the developer does not disappear of the face of the earth which regularly happens once they have sold all or most of the units

Still the developers know their are always more mugs coming along and just start another project

under a different name and rip them of to 

[Psimbo]

No- I rent off people who fell for it!

[sendintheclowns]

16 hours ago, Anthony5 said:

 

But that doesn't really matter.

 

In Pattaya there is a devloper, who also advertises on this forum, who promises 10% for 10 years. So whatever the purchase price is, it will be completely recovered after 10 years...........................may be

I have re-edited to avoid being (deleted).

So, the consensus appears to be that one should not trust everything you read. In particular advertisements by developers offering what appears to be very generous deals. Caveat Emptor (Buyer Beware) 

[JetsetBkk]

On Tuesday, November 22, 2016 at 0:04 PM, sendintheclowns said:

I have re-edited to avoid being (deleted).

So, the consensus appears to be that one should not trust everything you read. In particular advertisements by developers offering what appears to be very generous deals. Caveat Emptor (Buyer Beware) 

 

So I guess this one is out of the question then:

 

[NamKangMan]

2 hours ago, JetsetBkk said:

 

So I guess this one is out of the question then:

 

 

 

Yes. 

 

See the words "Thai" and "Guarantee" - that definitely means it's out of the question. 

[Patong2]

Definitely unbelievable

and offered to naïve ""investors"" to induce the purchase of generally overpriced properties.

 

The legal costs of enforcing a guarantee like this against a company (if it has not been dissolved) are generally far higher than the amount claimed and the likelihood of winning and enforcing the court order is low. And that is in a western legal regime, a thai legal system could be even more difficult

[DrDave]

One need not look any further than the Ace Condo mess to see an example of how the Thai legal system is either completely inept, or turns a blind eye toward breach of contract between developers and buyers. In that case, deposits and payments were made to the developer, and the condos were never completed. Those buyers have not, and probably will not ever, see their money returned.

And that's just one of many examples.

[Pinot]

The property market in Phuket is a disaster. It's just a huge bubble that continues to grow by the day. Buy a condo and immediately own an asset you can't get rid of. It's like driving a new car off a dealer's lot. It's now a used car. Buying is always a bad financial decision. 

 

I think the only thing propping up the condo market at this point is Chinese money trying to get out of China. 

 

Please, if there are any property owners who have actually earned their 7% let us know. I've never heard of it happening. As in NEVER!

 

The developers continue to build although I'm starting to see places not being finished and work stopping in a few cases as these developers run out of money. 

 

My advice (see below) is to never buy property in Thailand. Screw the developers. Thousands of more condos are hitting the market this year driving down all the condo owners property values as well as adding to the immense environmental issues facing Phuket. 

 

10 Reasons I'll Never Buy A Condo In Phuket

[SaintLouisBlues]

5 minutes ago, Pinot said:

Please, if there are any property owners who have actually earned their 7% let us know. I've never heard of it happening. As in NEVER!

You're tempting fate with that comment. The last time I saw such a comment, up bobbed someone to proclaim what a genius he himself was in the property market because he lets his condo out via AirBNB

[SaintLouisBlues]

On 11/21/2016 at 11:43 PM, Anthony5 said:

In Pattaya there is a devloper, who also advertises on this forum, who promises 10% for 10 years. So whatever the purchase price is, it will be completely recovered after 10 years...........................may be

Most members will be dead within 10 years won't they?

[Pinot]

Just now, SaintLouisBlues said:

You're tempting fate with that comment. The last time I saw such a comment, up bobbed someone to proclaim what a genius he himself was in the property market because he lets his condo out via AirBNB

 

I know it's happening and the hotels are trying to stop it. It is illegal to rent a place for less than a month, but not enforced. 

 

But how long can you do that for? A few months in high season? That still makes buying a condo a terrible investment. 

[Pinot]

1 minute ago, SaintLouisBlues said:

Most members will be dead within 10 years won't they?

 

The developer who promised you that will be long gone. Going through the courts is complete waste of time. 

 

I don't want to name names because they'll sue me, but it's just not going to happen. It's all marketing bullshit, as suggested above.