Flipping Houses

[Pinot]

On 4/24/2017 at 9:49 AM, Peterw42 said:

OP, I used to flip property in Australia, my whole life. 25 Plus condos, 6-8 houses, plus all the houses I lived in over the years. I would love to continue to do it here, given that the labor and goods are cheaper, but after lots of research I have found it to be a completely different market here, not much of a second hand market to any degree, not a big margin between old properties and renovated/new builds. Very easy to over Capitolize here and people will still want the new build. Even renovating for yield here doesn't seem to work as Thai people are happy to own property with no yield.

One thing I think you can do here is have a property portfolio for rental yield. Its not hard to find decent rental returns and the returns can be improved by some renovations.

And they don't care what they live in. A bed and a pappya tree outside is about it. They are content to live in what we call shotgun shacks in America. 

 

1 hour ago, realenglish1 said:

In general its a bad Idea Right now the housing market here in Thailand is way over inflated by the builders

 

Expect a housing correction and until and when it happens I would not flip anything other than pancakes 

In my neck of the woods, Phuket, the housing market is at a standstill. Flipping houses is impossible. 

[mstevens]

Most Thais generally don't like the idea of buying a second-hand property.  That alone could be a deal killer.

 

I think rather than flipping properties, you might consider tinkering with the formula and instead consider buying pieces of land, developing a house on it and selling it i.e. a new property marketed as such.  With a much wider potential audience as the property would be new, there is more likely to be money in that, I would have thought.

[giddyup]

I don't know where this thriving market of house buying is going on, certainly isn't in Pattaya. We have several new houses in our village that have been empty for over 5 years. A friend has been trying to sell his 2 year old house at well below what it cost him for over 12 months, with nary a nibble.

[Kabula]

With the world economy in serious trouble the last place you want to be is an owner of real estate in any country.

 

Hyperinflation, higher taxes, electric and water prices are coming and more and more job loses. 

 

If your our cash flow or tenants cash flow stops and if you can't pay all taxes and mortgage payment/s, you lose your savings. You lose even if you own the property free and clear.

 

If the property is damaged by civil unrest, military/police action, that is not covered by insurance. 

 

In view of poor zoning, a Hooters could be developed 6 feet from your current property with music blaring all day and half the night making the property a nightmare to sell.  A true example of what happened in Pattaya recently.  

 

Your neighbor could be your worst enemy,  especially if he is jealous. 

 

 Foreign countries always have a game plan to put the odds in their favor. 

 

 Spend your money now and enjoy it. 

 

 Stormy weather is ahead. 

 

 

[williamgeorgeallen]

lots of good advice here. hope you listen to it. i love buying fixing up and selling properties. i have done 10 of them in total in nz oz and thailand.  i have done very well in nz and oz but only broke even on the 2 in thailand. actually i consider that a success compared to many. dont waste your time. one house i had took many years to sell and i took a very poor price. i was just lucky i found a chump who paid me too much for the other one.

[dotpoom]

I made some money flipping a few condos and houses for about 12 years until about 2 years ago, now I find it almost impossible to sell anything (unless you're willing to give it away for half what you think it's worth).

[Peterw42]

12 minutes ago, Kabula said:

With the world economy in serious trouble the last place you want to be is an owner of real estate in any country.

 

Hyperinflation, higher taxes, electric and water prices are coming and more and more job loses. 

 

If your our cash flow or tenants cash flow stops and if you can't pay all taxes and mortgage payment/s, you lose your savings. You lose even if you own the property free and clear.

 

If the property is damaged by civil unrest, military/police action, that is not covered by insurance. 

 

In view of poor zoning, a Hooters could be developed 6 feet from your current property with music blaring all day and half the night making the property a nightmare to sell.  A true example of what happened in Pattaya recently.  

 

Your neighbor could be your worst enemy,  especially if he is jealous. 

 

 Foreign countries always have a game plan to put the odds in their favor. 

 

 Spend your money now and enjoy it. 

 

 Stormy weather is ahead. 

 

 

There are glass half full people and glass half empty people, I suspect you may be one of the later.

[Kabula]

2 minutes ago, Peterw42 said:

There are glass half full people and glass half empty people, I suspect you may be one of the later.

 And you're a troll and disrespectful in my opinion.

 

The ignorant, glass half-full people lost everything in all depressions, in 2008 and are currently watching their investments evaporate with the ongoing transfer of wealth.

 

Their little manipulated minds never asked questions and followed the herd over a cliff.

 

You need to wake up.  If you don't you will need a glass half full of change to get a meal in time.

 

 Living in Costa Rica I met a lot of people from Venezuela that had a glass half full opinion and now they're picking corn out of shit to eat. 

 

 Do you even know what a derivative is? 

[Lannathaijohn]

I would agree with Saladin's comments.

 

My experience in property ownership and renting in Chiang Mai, whilst not answering your question directly , may give you some insight.

 

1. Some 20 years ago, my wife and I started to buy properties in Chiang Mai and then let them out furnished. We eventually owned 5 town houses, 1 shop and 5 detached houses.

2. The rental market was good, showing net annual rental income of around 6% until around 8 years ago when rents dropped due to the ever increasing supply of new houses coming onto the market.

3. Around five years ago we decided to sell the properties and expected to complete this in 1 - 2 years and also make a capital return on the investment.

4. Well , it has taken 5 years to sell all the properties ( the last one is being transferred this month) - it has taken this length of time to find interested buyers 

5. All buyers were Thai and there  was a mixture of those buying for their own residence and a few for renting out.

6. Most of them arranged for a bank loan in the region of 50- 70% of the price 

7. All properties were refurbished to a good standard prior to advertising through estate agents

8. The sales prices were on average  only 20% higher than the original purchase price -    This is an insignificant capital gain over a period of 10-20 years

9. The reason for not achieving higher resale prices was due to the extremely limited market for resale properties. 

 

I would point out that this is my actual experience in Chiang Mai only and also only with houses - although It is just as bad, if not worse, with condominiums where there are hundreds of vacant properties. Why the over supply? Cheap loans for developers in the last few years with numerous new construction companies entering the housing market.

To the OP - I realise my business  is not exactly what you have in mind but the underlying issues may still be relevant to you. 

 

 

[Don Mega]

On 24/04/2017 at 0:17 PM, digibum said:

 

Have you done any flips?  

How many have you done in Thailand ?

[Destiny1990]

Probably the landoffice is the one making the money on your flipping.

[NiwPix]

First, I have no first hand experience in house flipping, but it did cross my mind and this thread caught my attention.

My very first reason I dont flip houses yet or looked into it in more detail is because I don't have the cash saved up yet. Lets say I did have the cash and am interested in it, these are the things that I know and / or worry me ( btw, I am just going through financing my first house with my thai wife in a new development ).

1. There is a business tax. I am not sure if they have this in the US as well: 3.3% of the appraised valuation of the property if selling within a 5 year period. This applies to both individuals and companies.

2. Banks tend to finance 80-90% of THEIR appraisal value....not how much you will buy it for.

3. I am not to sure flipping in developing/growing areas is a good idea, but this can be due to me not having experience with flipping homes. I live in Ubon Ratchathani which is growing very fast in my opinion. There are new developments EVERYWHERE. New ones about to get started. Yet I see so many old AND new houses completely empty as well as several housing blocks...even in good condition. I wonder why they don't sell and what it takes to sell them.

4. If I would have the time and especially patience, I would buy a piece of land somewhere in a decent location and build a house. It will definitely come cheaper ( probably about a third cheaper ) than buying a newly built house and I could get better quality and customization at the same time.

 

Suggestion: Sounds like you come to Thailand from time to time. Before you make the final move, why not give it a try on one property next time you're here and see how it goes. If you make money, great. If you loose money, it most likely will not be much or you have a house to live in if you do end up in thailand :)

[tomwct]

Not a good idea for several reasons. First, do not bring the wife's family in on any business. They will take it over and you will

have no say in it's operations and/or any profits from the rentals. As far as dealing in real estate in Thailand, it's a different world

than the US. Most Thais will not buy a second hand home. When a Thai puts a house up for sale they will ask 150% of what's it's worth.

My neighbors house is worth 2.3 million as is. My wife called and they want 4.0 Million. Ridiculous, so you'll be buying most

of your homes at bank auctions and you need to know what the house is worth and resale values in the area. So, my advice,

do not start a business in Thailand. I have lived here for 15 years and I'm also from the states. Keep your money in the states.

[Stevemercer]

Land in good locations will appreciate in Thailand. This is the biggest consideration in buying property in Thailand. Location, location, location. Thais with any money will generally buy the biggest and showiest house they possibly can. It's a matter of face. However, houses themselves rarely appreciate. I think in Thailand you have to separate the 2 commodities, land and housing.

 

People will inevitably overcapitalize on their houses. They expect to hand them down to their families and not as an investment. Once you are outside the big cities there is a paucity of buyers. For example, I live in a town 30 km from Khon Kaen. We brought 5 Rai for 1 million Baht and built a house for 2 million Baht. From recent valuations, the land is now worth close to 3 million Baht and the house under 1 million Baht. Few Thai families in the town could afford that price. A developer might pick up the land for subdivision, but will have no interest in the house.

 

The economics of 'flipping' will make the margins very slippery in Thailand. Plus, you will need a good Thai partner, who understands the market, to negotiate the various Thai requirements.

 

Another potential difficulty is the lack of an established and comprehensive real estate network. Most sales are word of mouth. If you see a property advertised on the internet it is almost certainly aimed at the farang market or well over-priced.

 

The only 'sure' way to make money in Thailand is through lending money. Again, you need a good Thai partner to put up the contacts, expertise and connections, but the returns on your cash will average 10% per month.

[BernieOnTour]

On 4/23/2017 at 7:45 PM, digibum said:

One of the reasons I suggested this solution was that it would hand them a business that would be difficult for them to screw up (since we would be making most of the big picture decisions) and in addition to giving them some cash every month it would also be an excuse to decline any future "business" investments since they already had a business.  :-)

Be sure - they will manage to screw up this one also !

[BernieOnTour]

1 hour ago, Stevemercer said:

The only 'sure' way to make money in Thailand is through lending money. Again, you need a good Thai partner to put up the contacts, expertise and connections, but the returns on your cash will average 10% per month.

... like to play with those big, bad guys, don't you ? 

 

[cyberfarang]

On 24/04/2017 at 10:29 AM, digibum said:

 

I would be paying cash for flips like I do in the US.  You can't get a mortgage on a flip in the US either.  The house, in the condition it's in when I buy it, would not pass inspection.  When I'm done, sure, the person I sell it to can get a mortgage on it but not pre-rennovation.  

 

I have no desire to deal with Thai banks and Thai mortgages thus why I have no desire to own and rent them out.  I just don't think you can get a high enough cash on cash return renting without leveraging the properties (at least it's tough in most major markets in the US) and since I can't/won't take a mortgage with a Thai bank, I've ruled that out as an investment possibility.  

 

And the purchases would be in my wife's name.  Given that all of the work would be done by contractors and she knows enough about flipping to give direction, I don't see any issues in terms of work permit for me.  Literally, I've done flips where my total involvement has been wiring funds, calling the contractor and meeting him at the property and checking up on him from time to time to make sure we're on schedule.  It's not like the TV shows where you're ripping down walls and putting on a new roof yourself (though some people do that, more power to them).  If I had to do roofing it would take me 10x longer than a professional and cost me 5x as much.  I don't have a craftman's bone in my body :-)

 

I've head the same about ghosts and such but I simply can't believe that every house in Thailand has only one owner and once that owner wants to sell their home the new owner burns it to the ground and builds a new one.  There are Thai real estate sites, in Thai, with existing homes.  Somebody is buying them.  

Dealing with Thai banks and Thai mortgage companies would mean having to expose your business activities in Thailand.

 

Making purchases by you of land and property in Thailand in your Thai wife`s name does not make it legal. Buying in a Thai wife`s name is not a loophole in the law. But guess you probably know that already.

 

Why not have a go at it anyway, you might get away with it providing no one catches on to your property speculating business.

[bazza73]

3 hours ago, mstevens said:

Most Thais generally don't like the idea of buying a second-hand property.  That alone could be a deal killer.

 

I think rather than flipping properties, you might consider tinkering with the formula and instead consider buying pieces of land, developing a house on it and selling it i.e. a new property marketed as such.  With a much wider potential audience as the property would be new, there is more likely to be money in that, I would have thought.

The OP, I would hope, would be aware the land would have to be in his wife's name and not his. I do know of several people who have made good money with that formula. Thai building costs are incredibly cheap by Western standards. My son is renovating his ensuite in Australia, and a new toilet and washbasin set him back $600. An identical one here at Homepro was $88 on a special deal. And many builders are using Burmese labour at 200 baht a day. They don't muck around. A 250 sqm house would take no more than two months. The money for the builder is in fast turnover.

Having said that, there are a number of people on TV who have claimed to have made money by flipping property in Thailand. Problem is, there's no way of verifying their claims, and the profits could have been made under ideal market conditions. Which I don't think is now.

[bazza73]

5 hours ago, elgordo38 said:

This part scares me because after I am gone my g/f will have a nice chunk of money and I am afraid her family would "guilt" her out of most of it. 

Likewise, my G/F will get a goodly sum when I go. However, I feel sorry for anyone who tries to "guilt"  her out of it. She's had a tough life - abusive husband, airhead daughter. It's a pity I won't be around to see it. She's like a pit bull when it comes to money.

[elgordo38]

7 minutes ago, bazza73 said:

Likewise, my G/F will get a goodly sum when I go. However, I feel sorry for anyone who tries to "guilt"  her out of it. She's had a tough life - abusive husband, airhead daughter. It's a pity I won't be around to see it. She's like a pit bull when it comes to money.

Good on you mine is a work in progress. She is a bit of a softy deep down and that scares me and makes me feel good at the same time. Mixed bag. To bad the pit bull part does not come in short or pill form I would slip it in her food. 

[cyberfarang]

25 minutes ago, bazza73 said:

The OP, I would hope, would be aware the land would have to be in his wife's name and not his. I do know of several people who have made good money with that formula. Thai building costs are incredibly cheap by Western standards. My son is renovating his ensuite in Australia, and a new toilet and washbasin set him back $600. An identical one here at Homepro was $88 on a special deal. And many builders are using Burmese labour at 200 baht a day. They don't muck around. A 250 sqm house would take no more than two months. The money for the builder is in fast turnover.

Having said that, there are a number of people on TV who have claimed to have made money by flipping property in Thailand. Problem is, there's no way of verifying their claims, and the profits could have been made under ideal market conditions. Which I don't think is now.

Of course the OP is aware he has to conduct his flipping business in Thailand under his Thai wife`s name. This means he evades declaring his earnings here to the tax office, he will not be sharing a directorship with a majority of Thai share holders and not registering his company earnings and profits with Company Office.

 

The same as many like him, they just ply in the money, pull the strings and pocket the undeclared income. Being a foreign property speculator in Thailand comes at high risk and is treading on shaky ground.

[bazza73]

28 minutes ago, elgordo38 said:

Good on you mine is a work in progress. She is a bit of a softy deep down and that scares me and makes me feel good at the same time. Mixed bag. To bad the pit bull part does not come in short or pill form I would slip it in her food. 

4 feet 11 inches and 40 kg. Good things come in small packages. Alas, I'm 6 feet and 95 Kg. I must be baaad.

[digibum]

12 hours ago, Peterw42 said:

Its not uncommon for the banks to have a dedicated representative at the new housing estate or condo block. Or a display set up in the foyer of the bank. Go into the bank and inquire about a loan to buy a 10 yo renovated House and the bank guy will nod and give you brochures for the new build estate down the road, that the bank is invested in.

I think the OP is missing your point, the banks control the money and they prefer to lend on new property, and that diminishes any 2nd hand market. Thai people will buy based on which new estate is throwing in a new iphone.

I don't think I'm missing the point.  This isn't some new phenomena that only happens in Thailand.  The gap is certainly something that is different than in the US (or many other countries) but I've looked at real estate in many countries and you always see much more favorable terms on brand new developments.  Why?  Because chances are the bank arranging the financing is the same bank that made the construction loan to the developer.  They have an incentive to mitigate the risk across multiple home owners than having the developer sit on unsold properties generating no income.  

 

But, again, have friends who have purchased homes in the secondary market, pre-owned, with 10% - 30% down.  So, there's certainly some gap between that at the 50% being thrown around in this thread.  

  

[digibum]

6 hours ago, realenglish1 said:

In general its a bad Idea Right now the housing market here in Thailand is way over inflated by the builders

 

Expect a housing correction and until and when it happens I would not flip anything other than pancakes 

 

Personally, I've thought the Thai real estate market to have been overvalued for 15+ years now.  :-)  

 

And flipping is exactly what I do in markets that I feel may be a bit frothy.  In general, I don't like holding real estate.  I want to be in and out in 3 or 4 months max.  

Edited April 25, 2017 by digibum

[digibum]

6 hours ago, elgordo38 said:

This part scares me because after I am gone my g/f will have a nice chunk of money and I am afraid her family would "guilt" her out of most of it. 

 

This one concerns me as well.  I'm thinking about setting up some financial structures whereby money would get released over time so that she's not in a position where she has some lump sum distribution of money and she suddenly has all of the hyenas coming out of every bush.  

 

That said, over the years my wife has become increasingly savvy to just how manipulative her friends and family can be.  She used to think I was some sort of fortune teller when I would predict with scary accuracy when they were trying to set her up and exactly how they would go about it.  She's since figured out that I can't see the future, but I can see the hearts of manipulators.  

 

She's getting where she shuts that stuff down a lot faster now.  And because any loans or giving of money is from her money she's felt that sting enough that the lessons are taking hold.  

 

Really though, her family are not bad people.  They're just incredibly stupid when it comes to supporting themselves.  They have poor-people thinking when it comes to handling money.  It's so obvious and you can see what's going to happen a mile away.  

 

Her friends are a different bunch.  Several of them are straight up con-artists.  Like my wife said to me, "Now I know why farangs think all Thais are after their money.  They are!"  She's lost probably 50% of her friends that she had when she moved to the US.  Most because once they found out she was making enough money on her own to buy cars and other nice stuff they came around trying to get their share.  

 

Business ideas, lending money, one even asked if my wife would finance the house she wanted to buy because, get this, her and her husband don't have jobs and the bank wouldn't give them any money.  So, you have no way to pay me back and you want me to lend you the money to buy a house?   

 

I think she really saw her friends for what they really are the first time we travelled back to Thailand to visit after moving to the US.  They all asked her, "buy me this" and "buy me that" and they all promised to give her the money once she got to Thailand.  Perfume, clothes, shoes, makeup, blah, blah, blah.  My wife spent something like $2,500 buying all this stuff for them.  Oh, and they all came to greet her the first few nights we were in town so they could collect their orders.  But when she asked for the money, well, they didn't have it today but they would have it tomorrow.  And then they would disappear and not answer the phones for the rest of our stay.  I think my wife collected lime $300 of the $2500 she was owed.  

 

Scumbags.  

 

But like I said, she's learning.  It takes awhile sometimes.  I've had to deal with many nights of her breaking down in tears when she finally realized that her friends had taken her for a mark but she's finally seeing them for what they are and she's getting smarter about not allowing them to prey on her.  

 

 

[digibum]

5 hours ago, topt said:

OP the other issue you may want to consider is the sourcing of contractors who will do the work. You may find it difficult finding contractors that you would consider competent enough especially if you are trying to flip to a tight budget. More than enough posts have been written on this plus I have experienced it personally even when using a Thai speaker on my side who was fully engaged in the process.

 

Good point.  Same problem here in the US.  Very hard to find good contractors.  First lesson you learn very quickly is never to pay for work upfront.  That's the surest way to never see your contractor again.  LOL  

[digibum]

1 hour ago, cyberfarang said:

Of course the OP is aware he has to conduct his flipping business in Thailand under his Thai wife`s name. This means he evades declaring his earnings here to the tax office, he will not be sharing a directorship with a majority of Thai share holders and not registering his company earnings and profits with Company Office.

 

The same as many like him, they just ply in the money, pull the strings and pocket the undeclared income. Being a foreign property speculator in Thailand comes at high risk and is treading on shaky ground.

 

Why would you assume any of that.  Do we know each other?  Do you have some insight into my soul?  

 

My thinking was to set up a Thai company, 49% owned by me, 51% owned by my wife.  We would pay taxes like anybody is supposed to.  Either that or put the entire company in her name and have a US company loan the Thai company money which had to be paid back after the disposition of the asset.  Not sure yet.  Would need to discuss with my lawyer in the US and a lawyer in Thailand to figure out what's the best structure.  

 

Haha, if there's anybody who is likely to try to not pay taxes or to do something under the table, look at my wife.  You should hear her cursing when she gets her paycheck (F'ing government's taking all my money) or she finds out how much I have to set aside after closing a deal for taxes.  :-)  

 

 

[digibum]

5 hours ago, williamgeorgeallen said:

lots of good advice here. hope you listen to it. i love buying fixing up and selling properties. i have done 10 of them in total in nz oz and thailand.  i have done very well in nz and oz but only broke even on the 2 in thailand. actually i consider that a success compared to many. dont waste your time. one house i had took many years to sell and i took a very poor price. i was just lucky i found a chump who paid me too much for the other one.

 

Thanks.  Sounds like the market is topping out a bit.  

 

[digibum]

5 hours ago, dotpoom said:

I made some money flipping a few condos and houses for about 12 years until about 2 years ago, now I find it almost impossible to sell anything (unless you're willing to give it away for half what you think it's worth).

'So would you go back into the market if something changed?  What would the change have to be?  

 

[digibum]

4 hours ago, Kabula said:

 And you're a troll and disrespectful in my opinion.

 

The ignorant, glass half-full people lost everything in all depressions, in 2008 and are currently watching their investments evaporate with the ongoing transfer of wealth.

 

Their little manipulated minds never asked questions and followed the herd over a cliff.

 

You need to wake up.  If you don't you will need a glass half full of change to get a meal in time.

 

 Living in Costa Rica I met a lot of people from Venezuela that had a glass half full opinion and now they're picking corn out of shit to eat. 

 

 Do you even know what a derivative is? 

 

And yet there are those who bought real estate like crazy in 2009, 2010, 2011, 2012 who have nearly doubled the their investments.  

 

I know what a derivative is.  I probably have known what they are long before you even heard the term as I used to be a securities broker.  I still remember when Lewis Ranieri's mortgage backed securities were somewhat new.