Buy/Lease

[overherebc]

Is there a generally accepted, call it local rule of thumb, way to relate the cost of a 30 year lease to the sale value of the house?

eg value 4,000,000

     lease  1,000,000/2,000,000? or is there an accepted or practised % value.

I know the best answer is as much as you can get? 

Thanks for any answers.

[alfieconn]

Most people seem to put the 30 year lease price as the same as the sale price  i which could never understand people paying (thats if they do)

 

Anyway iv'e asked before but never got an answer, there must be some sort of calculation using interest rates but christ know's what it is !

[taninthai]

As far as I have seen the lease is 100% of what they would sell house for which is always mostly overpriced anyway

[overherebc]

18 minutes ago, taninthai said:

As far as I have seen the lease is 100% of what they would sell house for which is always mostly overpriced anyway

 

Wife and self talking about it agree that for our place, local value everyone tells is 4, we reckon is just over 3, a 30 year lease would be 2.

[taninthai]

Up to you really if my place was to go on the market it means it's for sale to either a Thai outright or ferang on 30 year lease or however he wants to own it,,,the price is gonna be the same.......I don't think many take a 30 year lease with the intention of giving it up after the 30 years.....most are done with them thinking they get another 30 years...

But in answer to your question there is no set rule and the lease is normally the same as purchase price from what I have seen.

[alfieconn]

1 hour ago, taninthai said:

Up to you really if my place was to go on the market it means it's for sale to either a Thai outright or ferang on 30 year lease or however he wants to own it,,,the price is gonna be the same.......I don't think many take a 30 year lease with the intention of giving it up after the 30 years.....most are done with them thinking they get another 30 years...

But in answer to your question there is no set rule and the lease is normally the same as purchase price from what I have seen.

 

With all due respect it's not there decision !

[SOUTHERNSTAR]

The way to calculate it for a detached house, is to subtract the land value from the total property value and that would be your lease amount. The reason is that the people leasing the property can ruin the house/ burn it down but the land will always be there. In the case of vacant land it depends on the location and usage. If its a condo or commercial property (without land) the lease amount and the purchase price will be close to each other.  

[alfieconn]

5 minutes ago, SOUTHERNSTAR said:

The way to calculate it for a detached house, is to subtract the land value from the total property value and that would be your lease amount. The reason is that the people leasing the property can ruin the house/ burn it down but the land will always be there. In the case of vacant land it depends on the location and usage. If its a condo or commercial property (without land) the lease amount and the purchase price will be close to each other.  

 

No no, when you lease you are basically leasing the land and house.

[chiang mai]

There's lots of different types of lease formulae, a full payout lease, an operating lease, a capital cost lease, each one applies different rules to the costing of the lease and is usually based on its expected lifespan. Thai property leases are typically based on the expected (today) sales value of the asset be it land, house, or both.

[SOUTHERNSTAR]

14 minutes ago, alfieconn said:

 

No no, when you lease you are basically leasing the land and house.

Yes I know that but the land can't be broken or destroyed but the house can. You thus only bring the value of the house/fixed improvements into the lease calculation. The other reason to leave the land out of the calculation is that land appreciate in value and houses as a rule don't.

[alfieconn]

4 minutes ago, chiang mai said:

There's lots of different types of lease formulae, a full payout lease, an operating lease, a capital cost lease, each one applies different rules to the costing of the lease and is usually based on its expected lifespan. Thai property leases are typically based on the expected (today) sales value of the asset be it land, house, or both.

 

When you say "based" are you saying that there is a calculation based on the sale price or that the lease and sale price are the same ?

 

[stgrhe]

When one looks at the prices on new developments one would notice that the price for the property, land plus house (for Thais that is), is the same as 30 years lease on land plus house. I have never understood people that committ themselvs for such an investment. Common sense tells me that the price for leased land plus a house, should be considerably cheaper that compared to if the land is bought as freehold.

 

Furthermore, in many of those developments, particualry if the developer is a Westerner, the land isn't subdivided into separate plots. This means that anyone who has a leasehold right actually doesn't have the lease on "his piece of land", but a share of the common.

 

These factors should affect the value of a property with leasehold rights. If we take OP's example of a combined price of 4 million baht at lease half of the valuse shoud be accounted for the land. Over 30 years the calculated value of the lease right should be decresed with 1/30 per year of usage. Also, in Thailand the value of the dwellings are mostly depreciation as Thais prefer to buy new, and when buying existing property, demolish the house and build a new one.

[alfieconn]

9 minutes ago, stgrhe said:

When one looks at the prices on new developments one would notice that the price for the property, land plus house (for Thais that is), is the same as 30 years lease on land plus house. I have never understood people that committ themselvs for such an investment. Common sense tells me that the price for leased land plus a house, should be considerably cheaper that compared to if the land is bought as freehold.

 

Furthermore, in many of those developments, particualry if the developer is a Westerner, the land isn't subdivided into separate plots. This means that anyone who has a leasehold right actually doesn't have the lease on "his piece of land", but a share of the common.

 

These factors should affect the value of a property with leasehold rights. If we take OP's example of a combined price of 4 million baht at lease half of the valuse shoud be accounted for the land. Over 30 years the calculated value of the lease right should be decresed with 1/30 per year of usage. Also, in Thailand the value of the dwellings are mostly depreciation as Thais prefer to buy new, and when buying existing property, demolish the house and build a new one.

 

So what should the lease be on a house and land value of 4m be then ?

[timewilltell]

Be aware that I had a registered 30 year lease on a house in Phuket (registered on the back of the Chanote).  The lease was fraudulently cancelled at the land office and bought moments later for about 30% of value.  Court in effect decided lease confers no ownership and is a rental contract between the owner and the renter.  The fact it was sold at 30% of value to a money lender is no proof of them receiving stolen goods as money lenders need to buy at knock down prices to make it attractive (apparently illegal 36% interest per year is not attractive enough.) and in any case nothing was stolen as I was not considered the owner.  No order was made against the owner to pay me back the 26 years rent remaining either but even if that were the case the owner no longer had any money having given it all to the money lender.  You have to prove everything and they can defend with they did not know, they paid cash, they asked the land office if it was okay etc. etc.  I could go on but suffice to say leases are totally unsafe here unless you are dealing with a multinational company who would have neither the will nor the avoidance measures of a regular Thai person.

 

So apart from showing how the courts see leases - i.e. akin to a motor bike rental and certainly not conferring any rights as owner, one should take on board the fact that there is no security in the event of fraud or other such deception other than possibly trying to get the money back from the owner which of course is most unlikely in the event they have surreptitiously managed to sell the asset on to a third party.  Therefore leases are worth very little and are unsafe here in Thailand.  Remember Thais are opportunist and there are many willing to help carry out such frauds for small sums of money (think how much it costs to hire a killer here and compare with a small fraud) and it is very hard to satisfy the court with the type of evidence you are likely to be able to get your hands on.  The fraudster even gave evidence of the knowledge and collusion of the others to which the court decided that no criminal would give such evidence even though they had already served the prison sentence for their own involvement. 

 

Whatever you do, do not think that a property lease here is anything like a lease in a developed country and remember property fraud is very tempting due to the large (for a Thai) sums of money involved resulting in it being a huge scam in Thailand.

[timewilltell]

29 minutes ago, alfieconn said:

 

So what should the lease be on a house and land value of 4m be then ?

 

I don't think there is a rule of thumb.  Leases devalue substantially more towards the end of their life.  You might work out what a property would rent for per year, multiply by 30 and apply a reduction of somewhere between 50 and 65% to compensate for risk, devaluing asset, money paid in advance and the fact that you will be liable for all repairs during the term unlike possibly in a rental contract.

[Cinderella Man]

Quote

Is there a generally accepted, call it local rule of thumb, way to relate the cost of a 30 year lease to the sale value of the house?
eg value 4,000,000
     lease  1,000,000/2,000,000? or is there an accepted or practised % value.

 

Let's see... when you 30 you spend 4 million for an investment property. Rent it for 2 million for 30 years.

 

Congratulation, when you 60 you just recovered 50% of your original investment (minus opportunity cost) ... not difficult to understand why sale price = 30 years lease

[overherebc]

Depends on circumstances.

Lets say we both worked for MN projects and each got an allowance for accom' etc. Different projects. Allowances paid 90% of the house.

Already had another house paid for etc.

The property in fact didn't really cost us anything, apart from making the garden nice and building a decent garage and a bit of update inside.

Obviously it would be silly to walk away and leave it although we could.

Obviously it would be nice to get 'valuation' for a 30 year lease but???

At the end of the day with no kids why not get the best reasonable lease cash sum and do what we want to do and let the lawyers fight when we're gone.

[heybuz]

i am presently going through this exercise in thai civil court the lawyers value the lease as half the property value, now  there are other facts that make this action a little different but it seems it is not much different than a divorce settlement, ie 50/50.[ps i am not hopefull but an investment of 50,000  maybe to get 1m baht is not to bad in my opinion, have also given power of attorney to a thai national so my ugly falang head doesn't have to appear in court]

[alfieconn]

13 hours ago, Cinderella Man said:

 

Let's see... when you 30 you spend 4 million for an investment property. Rent it for 2 million for 30 years.

 

Congratulation, when you 60 you just recovered 50% of your original investment (minus opportunity cost) ... not difficult to understand why sale price = 30 years lease

 

Sorry you have lost me !! are you saying the 4m for an investment property is on a 30 year lease ? if not what has the above got to do with a 30 year lease ?

 

[overherebc]

7 hours ago, alfieconn said:

 

Sorry you have lost me !! are you saying the 4m for an investment property is on a 30 year lease ? if not what has the above got to do with a 30 year lease ?

 

 

Probably a non english speaker, but have to admit confuses me as well.

[alfieconn]

3 minutes ago, overherebc said:

 

Probably a non english speaker, but have to admit confuses me as well.

 

It's amazing how many weird and wonderful answers you can get when all you did was ask a simple question !

[overherebc]

17 minutes ago, alfieconn said:

 

It's amazing how many weird and wonderful answers you can get when all you did was ask a simple question !

 

Generally because a lot of people can't think that a question being asked is a simple request for information and requires a simple answer, eg, is it true that 2+2=4?

Their immediate assumption is that you need their self perceived knowledge and that generally springs to the front on the back of 4 Leos and 6 Changs.

[taninthai]

3 hours ago, overherebc said:

 

Probably a non english speaker, but have to admit confuses me as well.

He is saying it'a a crap deal for the owner.....you are looking at leases the wrong way ,,,,they are more seen as a path to ownership here .....why would you give a 30 year lease for 2 million on a 4 million property.....you could make 2 million renting it out over 5-6 years..

You got your answer several times 30 year leases are the same as the sale price.

[William C F Pierce]

What type of lease are you talking about? I know of at least 3. #1 a straight forward 30 year lease  #2 a usfruct which is binding until you die (a virtual freehold) #3 a superficies which can be for 30 years and can be left in will to ever you choose for the remainder of the lease. Leases are mainly on the land. If you purchase leased land with the right to build on the land. At the end of the 30 years you have at least 1 year to sell the house before losing it. Of course you can buy a renewable lease in blocks of 30 years up to a maximum of 90 years. If a Thai buys it they will not get a lease as they will own it freehold. Generally speaking a lease means you never own the land, but can own the property situated on it. It will depend on whether you have a decent lawer to set up all your contract details. I personally would consider using a big international Thai law firm like Siam Legal for reliability. It will pay you to research the info on the websites of real estate agents.

[Cinderella Man]

On 20/12/2016 at 11:13 PM, taninthai said:

He is saying it'a a crap deal for the owner.....you are looking at leases the wrong way ,,,,they are more seen as a path to ownership here .....why would you give a 30 year lease for 2 million on a 4 million property.....you could make 2 million renting it out over 5-6 years..

You got your answer several times 30 year leases are the same as the sale price.

 

Bingo.

[overherebc]

17 hours ago, Cinderella Man said:

 

Bingo.

 

So why wouldn't we still, or neice or nephew own the property after we leased it to someone who moved out after the 30 years.

Are you trying to say it is compulsory to sell it at the end. I don't think it is.

Wouldn't make sense to someone coming to Thailand who has no intention of buying in his girlfriends/wifes name. He has a permanent or almost permanent place at a rate better than renting for the same length of time. Renting would have a three or four month notice period by the owner.

[alfieconn]

On 12/20/2016 at 11:13 PM, taninthai said:

He is saying it'a a crap deal for the owner.....you are looking at leases the wrong way ,,,,they are more seen as a path to ownership here .....why would you give a 30 year lease for 2 million on a 4 million property.....you could make 2 million renting it out over 5-6 years..

You got your answer several times 30 year leases are the same as the sale price.

 

No you are, the Op wasn't asking about way's of owning a property ! suggest you read what he posted again.

[taninthai]

2 minutes ago, alfieconn said:

 

No you are, the Op wasn't asking about way's of owning a property ! suggest you read what he posted again.

2 minutes ago, alfieconn said:

 

No you are, the Op wasn't asking about way's of owning a property ! suggest you read what he posted again.

I suggest you read the actual post I was quoting or you make yourself look a little stupid?

 

[alfieconn]

11 minutes ago, taninthai said:

I suggest you read the actual post I was quoting or you make yourself look a little stupid?

 

 

Where in the post you quoted did it mention the reasons why people would take out a 30 year lease ?

 

On another point what did you mean when you said  ? .I don't think many take a 30 year lease with the intention of giving it up after the 30 years

[alfieconn]

On 12/19/2016 at 9:36 PM, Cinderella Man said:

 

Let's see... when you 30 you spend 4 million for an investment property. Rent it for 2 million for 30 years.

 

Congratulation, when you 60 you just recovered 50% of your original investment (minus opportunity cost) ... not difficult to understand why sale price = 30 years lease

 

Yeah looks like a good deal, a loss of 2m baht over 30 years !