What Is To Become Of Leasehold Residential Properties?

[KittenKong]

1 hour ago, trogers said:

Leaseholds are called apartments.

 

All condos are freehold with title deeds.

 

Nah.

 

http://www.phuketsilkproperties.com/legal-info/69-choosing-between-a-leasehold-or-freehold-condominium

[inThailand]

6 hours ago, trogers said:

Leaseholds are called apartments.

 

All condos are freehold with title deeds.

Yes an important distinction!

 

Ownership of a condo is either foreigner or Thai freehold. 

[trogers]

6 hours ago, KittenKong said:

 

Nah.

 

http://www.phuketsilkproperties.com/legal-info/69-choosing-between-a-leasehold-or-freehold-condominium

When there is a claim that you can lease for a 2nd term of 30-year, you know it is all a bull...

 

You are just paying a condo owner to lease his condo for 30 years. No different to a tenant wanting to lease mine for 3 years.

 

I am the condo owner holding the freehold rights.

[KittenKong]

1 hour ago, trogers said:

You are just paying a condo owner to lease his condo for 30 years. No different to a tenant wanting to lease mine for 3 years.

That's what all leaseholds are. But to say that because of that they dont exist is daft. They do exist and are widely sold here.

[trogers]

10 minutes ago, KittenKong said:

That's what all leaseholds are. But to say that because of that they dont exist is daft. They do exist and are widely sold here.

They are different and can affect the pockets of a 30-year leaseholder.

 

Leasehold apartments have only one freehold land owner and all the units are held by leaseholders facing the same rights and responsibilities regarding the use, upkeep and upgrading of the building.

 

30-year leasing tenants of a condo face the rules and regulations and any extra cost and expenses as determined by the co-owners of the other units. Or in quite a few buildings, non payment of common fees and poor maintenance of the property.

[inThailand]

So back to the original post...

 

What is the value of taking over a lease (sublease) with say 15 years left on a property?

[trogers]

14 minutes ago, inThailand said:

So back to the original post...

 

What is the value of taking over a lease (sublease) with say 15 years left on a property?

In my mind, it's the total present value of the sum of monthly rent (less common fees) of an equivalent condo unit.

[KittenKong]

1 hour ago, trogers said:

They are different and can affect the pockets of a 30-year leaseholder.

 

Leasehold apartments have only one freehold land owner and all the units are held by leaseholders facing the same rights and responsibilities regarding the use, upkeep and upgrading of the building.

 

30-year leasing tenants of a condo face the rules and regulations and any extra cost and expenses as determined by the co-owners of the other units. Or in quite a few buildings, non payment of common fees and poor maintenance of the property.

 

That would depend on the exact wording of their lease agreement. And either way it makes no difference to your original incorrect statement.

 

Leasehold condos do exist here and are widely sold (or advertised at least) and they are NOT apartments. Personally I would not want one but that is not relevant to whether they exist or not.

[KittenKong]

1 hour ago, inThailand said:

What is the value of taking over a lease (sublease) with say 15 years left on a property?

 

You are paying 15 years rent upfront and so you should be able to stay in the unit for 15 years. But you will forego the ability to move out quickly without (significant) penalty that you would have if you were renting monthly.

 

You will lose any interest that you might have earned on that money but you will fix your rental for the entire period (not necessarily a good thing given that rental prices seem to be dropping or static in many areas).

 

If you buy leasehold you may also be taking on the cost of common fees and special assessments, which you would not normally be liable for as a monthly tenant.

So I would say that leasehold compared to freehold has many downsides and few (if any) upsides. I see no real advantage in leasehold condos here unless the price is very low indeed or the unit is in some way unique and highly desirable. But often the leasehold price for a 30 year lease seems to be very close to the freehold price for a similar unit, which I think is just plain daft.

[inThailand]

2 hours ago, trogers said:

In my mind, it's the total present value of the sum of monthly rent (less common fees) of an equivalent condo unit.

I concur! Since there is no resale proceeds at the end of the lease, it's only worth an equivalent rental or less. Because your basically prepaying 15 years of rent and probably assuming all maintenance and the condo fees which would mostly likely rise over time, a discount is in order. But how much?

[trogers]

1 hour ago, KittenKong said:

 

You are paying 15 years rent upfront and so you should be able to stay in the unit for 15 years. But you will forego the ability to move out quickly without (significant) penalty that you would have if you were renting monthly.

 

You will lose any interest that you might have earned on that money but you will fix your rental for the entire period (not necessarily a good thing given that rental prices seem to be dropping or static in many areas).

 

If you buy leasehold you may also be taking on the cost of common fees and special assessments, which you would not normally be liable for as a monthly tenant.

So I would say that leasehold compared to freehold has many downsides and few (if any) upsides. I see no real advantage in leasehold condos here unless the price is very low indeed or the unit is in some way unique and highly desirable. But often the leasehold price for a 30 year lease seems to be very close to the freehold price for a similar unit, which I think is just plain daft.

The difference in price between a 30-year leasehold and a condo is not often to be very close. Happened here almost a decade after the financial crisis because of the lack of new property developments.

 

Let's see if it would happen again at that development at Wireless road.

[impulse]

1 hour ago, KittenKong said:

So I would say that leasehold compared to freehold has many downsides and few (if any) upsides. I see no real advantage in leasehold condos here unless the price is very low indeed or the unit is in some way unique and highly desirable.

 
I guess my question would be what happens to a freehold right if the building is to be torn down for redevelopment (or because it's so dilapidated after 30 years)?

 

Lots can happen in 30 years, including onerous real estate taxes, inability to afford to stay current on visa's, wear and tear on the building itself, BKK going under water, or thousands of things out of our control.

 

I'm not so sure that there is much real present value in having rights that exceed 30 years.  Other than the touchy-feely "I own it", and that's pretty intangible.  Though a lot of people seem willing to pay for it.  Whatever "it" turns out to be when the time comes.

 

[trogers]

4 minutes ago, inThailand said:

I concur! Since there is no resale proceeds at the end of the lease, it's only worth an equivalent rental or less. Because your basically prepaying 15 years of rent and probably assuming all maintenance and the condo fees which would mostly likely rise over time, a discount is in order. But how much?

That's why I deducted common fees from my calculations to arrive at the property value.

 

Property maintenance would be charged and paid separately.

[inThailand]

The big downside I see to renting an apt over a condo is basically the owners/lessor will have clauses that give him a lot of leeway in the mgmt. For example, he may just not paint the building and it's highly unlikely you could consider this a breach of the lease. Long term rental of an apt here is a crap shoot imo and clearly worth less than an equivalent condo.

[trogers]

3 minutes ago, impulse said:

 
I guess my question would be what happens to a freehold right if the building is to be torn down for redevelopment (or because it's so dilapidated after 30 years)?

 

Lots can happen in 30 years, including onerous real estate taxes, inability to afford to stay current on visa's, wear and tear on the building itself, BKK going under water, or thousands of things out of our control.

 

I'm not so sure that there is much real present value in having rights that exceed 30 years.  Other than the touchy-feely "I own it", and that's pretty intangible.  Though a lot of people seem willing to pay for it.  Whatever "it" turns out to be when the time comes.

 

The original owners of the condo units which I bought would have told you they did nicely, buying at 10k per sqm and selling to me at 50k per sqm after 27 years.

[impulse]

4 minutes ago, trogers said:

The original owners of the condo units which I bought would have told you they did nicely, buying at 10k per sqm and selling to me at 50k per sqm after 27 years.

 

Maybe the exception that proves the rule?  One example doesn't define a huge market.  I can find a dozen guys who lost their shirts.  But those wouldn't be a valid sampling, either.  Just anecdotes.

 

[trogers]

Just now, impulse said:

 

Maybe the exception that proves the rule?  One example doesn't define a huge market.  I can find a dozen guys who lost their shirts.  But those wouldn't be a valid sampling, either.  Just anecdotes.

 

They lost their shirts due to location and a drastic oversupply of the type of property.

 

Location governs the land value, and the supply and demand conditions determine rental value.

[inThailand]

Back home you can upgrade your property and for every dollar spent wisely will return 2 or 3 dollars when you sell. I have rarely seen this here. In fact most properties sell for less than what then the previous owner paid. Appreciating properties seem rare. Buying raw land seems to be a better and a less risky investment.

[trogers]

9 minutes ago, inThailand said:

Back home you can upgrade your property and for every dollar spent wisely will return 2 or 3 dollars when you sell. I have rarely seen this here. In fact most properties sell for less than what then the previous owner paid. Appreciating properties seem rare. Buying raw land seems to be a better and a less risky investment.

That's why owning land here is limited to only Thais...

 

You can do so at home though.

[impulse]

17 minutes ago, trogers said:

They lost their shirts due to location and a drastic oversupply of the type of property.

 

Location governs the land value, and the supply and demand conditions determine rental value.

 

Hindsight is a wonderful thing when forecasting which properties remained desirable, and which became overbuilt in the past 30 years.  And being the one who called "heads" looks like a real smart move after the coin lands on heads. 

 

Not so easy to look ahead.  Especially in a market like Thailand where anyone making money becomes the model to be copied by everyone who doesn't have a better idea.  And properties that were exclusive because they're on the MRT or BTS start looking long in the tooth when an extension of the line grants easy access to newer and zoomier and better designed projects, just 2 minutes further out.  Or the Russian stampede peters out and condo projects at the beach lose steam.

 

I can almost promise you that the vast majority of foreigners see no additional value beyond their first 30 years.  Just for a start, there are more Thai ex-wives living in their properties than there are foreigners who paid for them.  And a lot of guys will sell for just about any price as their visa loopholes slam shut on them.

 

I'm sincerely glad it's worked out for you.  I am.  But that doesn't mean it works out for most.  Even some pretty smart guys are back home licking their wounds...

 

[trogers]

13 minutes ago, impulse said:

 

Hindsight is a wonderful thing when forecasting which properties remained desirable, and which became overbuilt in the past 30 years.  And being the one who called "heads" looks like a real smart move after the coin lands on heads. 

 

Not so easy to look ahead.  Especially in a market like Thailand where anyone making money becomes the model to be copied by everyone who doesn't have a better idea.  And properties that were exclusive because they're on the MRT or BTS start looking long in the tooth when an extension of the line grants easy access to newer and zoomier and better designed projects, just 2 minutes further out.  Or the Russian stampede peters out and condo projects at the beach lose steam.

 

I can almost promise you that the vast majority of foreigners see no additional value beyond their first 30 years.  Just for a start, there are more Thai ex-wives living in their properties than there are foreigners who paid for them.  And a lot of guys will sell for just about any price as their visa loopholes slam shut on them.

 

I'm sincerely glad it's worked out for you.  I am.  But that doesn't mean it works out for most.  Even some pretty smart guys are back home licking their wounds...

 

Yes, most know not what they do. And still happening now to Asians with money.

 

That's why developers are on road shows.

 

I was in the construction and development business here in Thailand for over two decades before retiring and investing.

[trogers]

3 hours ago, KittenKong said:

 

That would depend on the exact wording of their lease agreement. And either way it makes no difference to your original incorrect statement.

 

Leasehold condos do exist here and are widely sold (or advertised at least) and they are NOT apartments. Personally I would not want one but that is not relevant to whether they exist or not.

Advertising don't bring them into existence. Know of any condo units being let out on 30-year lease?

[KittenKong]

2 hours ago, trogers said:

Advertising don't bring them into existence. Know of any condo units being let out on 30-year lease?

 

What are you talking about? If they are advertised so extensively then it's a fair bet that they exist, otherwise what would be the point of advertising them? There are many properties on 30-year leases in Phuket and I even know someone who bought one. More fool him.

 

[trogers]

3 minutes ago, KittenKong said:

 

What are you talking about? If they are advertised so extensively then it's a fair bet that they exist, otherwise what would be the point of advertising them? There are many properties on 30-year leases in Phuket and I even know someone who bought one. More fool him.

 

I know of villas in Phuket being held on 30+30+30 years leases starting since the 90s... Even in Sheraton Grand Laguna.

 

I was offered back then, but declined. Would never put money on a property without my name on the title deed.

[Destiny1990]

I think its safe to say that soon as the lease period has expired the property will be back into Thai hands.Thats what will become of the residential lease.

[Senechal]

10 hours ago, trogers said:

The original owners of the condo units which I bought would have told you they did nicely, buying at 10k per sqm and selling to me at 50k per sqm after 27 years.

 

Every investment report includes the same words for a good reason: "Past performance is not an indicator of future returns."

 

 

[trogers]

20 minutes ago, Senechal said:

 

Every investment report includes the same words for a good reason: "Past performance is not an indicator of future returns."

 

 

He bought for 10k per sqm 37 years ago, I bought it from him at 50k per sqm 10 years ago, and new projects on the same street are presently selling at 260k per sqm.

 

Seems the graph line is still inclining pretty straight up...

[Destiny1990]

2 hours ago, trogers said:

He bought for 10k per sqm 37 years ago, I bought it from him at 50k per sqm 10 years ago, and new projects on the same street are presently selling at 260k per sqm.

 

Seems the graph line is still inclining pretty straight up...

U talking freehold ? because leaseholds with couple years left are unsellable.

[Senechal]

3 hours ago, trogers said:

He bought for 10k per sqm 37 years ago, I bought it from him at 50k per sqm 10 years ago, and new projects on the same street are presently selling at 260k per sqm.

 

Seems the graph line is still inclining pretty straight up...

Yep. You nailed the "past performance" part of the analysis. That's a great model for buying at the top.

[trogers]

5 hours ago, Destiny1990 said:

U talking freehold ? because leaseholds with couple years left are unsellable.

Freehold.