Making the case for NOT buying a Condo

[neil324 0]

neil324,

 

Actually, what I said was that one of my "assumptions" was to be able to invest my cash with a 7% average annual return but I wasn't suggesting that I knew of any risk free "interest bearing" options that would currently get me the 7%.

 

Here in the states our interest rates are just a bit higher then the rates in the UK. The Fed rate is sitting at 5% and no one (including the Fed) seems to have a clear idea of where they will go from here... It seems that the Fed is concerned about inflation here in the states because of oil and other commodities and the low unemployment rate (currently at 4.6%) and many think that the Fed would like to increase the short term rate once or twice more before stopping. But the bond market is making it hard on them with the 10 year note at or just below 5%. There is a real concern that we could end up with an inverted yield curve (long rates below the short rates) that would spook the markets. In the past, an inverted yield curve has been an indicator of a recession...

 

My assumption was simply that I feel that over the long term I could average 7% on my capital.

 

And the 15% tax rate is something I could work towards while in retirement. Right now I pay a much higher rate on my income. But once retired there will be ways to use different pools of monies to keep the rate at or below 15%.

 

 

 

 

.

ok m8 im not jealous anymore, thought the 7% was just a straight bank rate with no risks

[wannabeexpat 0]

http://www.thaivisa.com/condominium_thailand.0.html

A good article on the pitfalls of buying.

[bob2005 0]

neil324: Anybody like to give an opinion on where in the Uk interest rates will be in 5yrs time, the rates have been low for the last 10 yrs

 

It's said the Gilts market is the most accurate reflection of 'expert' opinion on future interest rates. I get the Thursday gilts from http://news.ft.com/markets/gilts (Friday is not as clear). Rates between now and maturity in 2011 are 4.71%. But they move around a lot and it seems nobody knows (there are no crystal balls).

[Dungheap 243]

My two satangs worth:

 

Many pundits, myself included, think the Thai property market is now entering another bubble and will pop in the next few years.

 

If you buy a condo with ocean views in a good location, I can't see you losing much, but if it's just another condo in the back of Chomtien or toward Sukhumvit Rd., there's still plenty of room for expansion. There's so many condos up for rent in Pattaya. Can't see you making much on your investment but your money would be all tied up. Keep your cash for a rainy day.

 

Currencies tend to go in waves and I can't see the baht remaining this strong to the USD for too much longer.

[Owen` 2]

I like returning to this thread every once in a while to see what new input there is for how to deal with housing.

 

Everybody knows the pros and cons. jackcorbett provided a good look at some issues that are non monetary that are important for the decision. FYI Alan Greenspan (for the Brits, he's the recently replaced (after about 30 yrs) chairman of the Federal Reserve board -- sort of the Chancellor of the Exchequer??) is, to some extent, supportive of those kinds of issues. One of his recent bits of commentary said things . . . like housing doesn't have the kinds of bubbles that stocks have. No one has to live in their stocks. Stocks can be dumped in frantic selling much more readily than real estate that is lived in. So Greenspan makes a case for living in real estate having a subtle effect on the monetary issues.

 

This, of course, goes right out the window when it is rental property, but if there are plenty of owners actually living in their Pattaya area condos, any collapse in price will be slowed.

 

As for what reliable return you can get on some temporary cash . . . www.bankrate.com. (Or the UK equiv.)

 

A tidbit of possible value:

 

When evaluating an interest rate or overall rate of return, the computation is:

 

Real Rate of Return = (Quoted Rate X (1.0 - Composite Marginal Tax Rate)) - Inflation Rate

 

Composite means combination of federal and state (local for the UK) income tax rate. BMs are likely to be about 25% + 5% for a marginal tax rate of 30%. Call inflation 3%.

 

So if the bank quotes themselves paying 5.1% on your money, your Real Rate of Return is

 

RRoR = .051 X (1 - 0.3) - .03

or

 

0.0057 . . . which is, my friends, 0.57%. Sorry, but that's the way it is. Don't shoot the messenger.

Edited June 6, 2006 by Owen`

[dacah 0]

Torranova....you have given the definative advice...

[ellobo 0]

Being a potential condo buyer in a year or so, I am finding this thread very interesting.

 

One thing that I am noticing is that most everyone advising against owner ship are non-owners and most everyone favoring ownership are owners.

 

Are there any owners out there that have had a bad experience with ownership?

 

ellobo

[Gary 4,119]

Being a potential condo buyer in a year or so, I am finding this thread very interesting.

 

One thing that I am noticing is that most everyone advising against owner ship are non-owners and most everyone favoring ownership are owners.

 

Are there any owners out there that have had a bad experience with ownership?

 

ellobo

I have one already. It is not one of the super upscale units but it is a very nice one bedroom corner unit of 60 square meters in a good location. Since this thread began I have been checking prices. I was quite surprised that my unit has doubled in price in the past two and a half years. I bought it for a security blanket and had no intention of selling it. I am glad that it has appreciated but the botton line is that I don't care. It is not for sale so what does the price matter? I always have a place to go and that is why I bought it. I don't have to worry about how much my rent will increase.

[Khun004 0]

The economics of buying vs. renting are fascinating.

Good arguments on both sides.

But, I have a different approach

I want to sleep very soundly every night, so I keep this in mind:

 

The rule of law is not strong in this region of the world.

And the social fabric is not durable.

So I only buy things here that I can carry with me if I need to leave in a hurry.

Or things I am willing to, and can afford to, leave behind.

 

I rent a serviced apartment.

.

[bane718 0]

I see the topic is making the case for NOT buying a condo... But...

 

Since being here in Thailand for close to 8 years (on and off), I think I have adapted to a more Asian way of thinking. One where family wealth is important, not just for yourself, but even for your future blood generations. Where I see many farrangs planning their dollars to last until they pass, I will take great pride in passing on any real estate to my kids when I pass away. If I was just a renter all my life, then there might be little to pass on.

 

I'm a born and raised New Yorker. My single mother is still renting in NYC, because when she first came there 30 years ago rent was cheap. So she continued renting, thanks to rent control laws. However those laws are changing, thanks to Bush and mayor Bloomberg. Now things are so far out of range there is no way she (or I) can buy anything there in a somewhat decent area or size. One of her artist friends, just down the street there, bought her Tribeca loft for $16,000 about 25-30 years ago as an empty shell for living. Now it is worth $2 - 4 million, with rents minimum of $7500/m. Obviously, I cannot compare the 2 markets at all, because Pattaya is so far off from being New York City, but I have already seen the pitfalls of renting, and the gains of owning.

 

That is the reason why I feel good owning my condo. I don't want to be left in 30 years with just rental stubs. I should point out that I am 30 years old, so I am probably biased toward owning, since I expect I'll be around quite a while more.

 

I must say that a big plus to owning a condo in Thailand, compared to US, is that the monthly maintenence fee is so low here.

bangkapiboy,

 

I'm a native new yorker too and I'm also looking to buy property in Pattaya. Maybe you can help me out buy answering a few questions...

 

Do you live in Pattaya or just vacate there every year? And if you're not there all year long do you rent the place out? Has the property value increased since you purchased it?

 

I really want to move there but see very few job opportunities if I were to make the move. So my plan is to buy a decent single room condo and rent it through the year when I'm not there, while hoping that the value of it will increase. What do you think?

[bane718 0]

Location, location and last but not least location is way more then 75% of making money in the real estate rental business.

Any recommendations on a good location to buy a condo?

[BigDUSA 71]

Any recommendations on a good location to buy a condo?

Get as close to the beach as your budget will allow. If you get a one room condo, I'm willing to rent it for 5K per month. I'm willing to sign a one year lease and pay you up front. Of course, I'll want one month free if I do that.

[bigjon 0]

Difficult one this.

 

I have been living in Pattaya for 3 to 6 month periods for the last 6 years and go over this one every time I pay my rent.

 

For me if I were to buy a property in Pattaya I would be looking in the 5 /7 million baht area.

 

Allthough still undecided whether to continue paying rent, or buy just to give you an example of my case, if I bought 2 years ago say for 6,000,000 million baht outlay I would have no rent to pay around 25,000 baht per month.

 

The £85,000 tied up in a property I have invested in shares has returned me a profit of £62,000 in 2 years up to April 2006

 

So for me Rental is the way to go.

[bane718 0]

Get as close to the beach as your budget will allow. If you get a one room condo, I'm willing to rent it for 5K per month. I'm willing to sign a one year lease and pay you up front. Of course, I'll want one month free if I do that.

Thanks for the advice BigD! Would rent you a place if I were planning on investing, but it won't be anytime soon! My time will come though

[bangkapiboy 5]

bangkapiboy,

 

I'm a native new yorker too and I'm also looking to buy property in Pattaya. Maybe you can help me out buy answering a few questions...

 

Do you live in Pattaya or just vacate there every year? And if you're not there all year long do you rent the place out? Has the property value increased since you purchased it?

 

I really want to move there but see very few job opportunities if I were to make the move. So my plan is to buy a decent single room condo and rent it through the year when I'm not there, while hoping that the value of it will increase. What do you think?

Hi fellow New Yorker!

 

Actually, it appears my condos in View Talay 1 have increased in value since I bought them 2 years ago; realistically about 50%. Renting your condo out while you are not there is an option that you can consider. I rent my condos out. You can see my web site link in my signature.

 

If you are looking at it as an investment, of course you need to be experienced in the Pattaya condominium market. So, patience might help you with that investment. If you are looking at it purely as an investment, you may also even consider condos in Eastern Europe -- but Pattaya is more fun.

[bane718 0]

Hi fellow New Yorker!

 

Actually, it appears my condos in View Talay 1 have increased in value since I bought them 2 years ago; realistically about 50%. Renting your condo out while you are not there is an option that you can consider. I rent my condos out. You can see my web site link in my signature.

 

If you are looking at it as an investment, of course you need to be experienced in the Pattaya condominium market. So, patience might help you with that investment. If you are looking at it purely as an investment, you may also even consider condos in Eastern Europe -- but Pattaya is more fun.

Thanks for sharing your experience. Not to sound pessimistic, but considering that I visit LOS once a year would make it difficult for me to gain much experience. How long did it take you before you felt comfortable in the market? At this point any info. helps. I'd like to avoid any trouble if I were to make a commitment in buying a condo, although I'm aware that mistakes or mishaps are bound to happen.

[bangkapiboy 5]

Bane,

 

Mistakes and mishaps aren't bound to happen, I think. Mistakes can be costly. Just prepare yourself. I'm not really sure how long it took me to be comfortable in the Pattaya market. Before buying in Pattaya I already had experience buying my Bangkok condo. You really just need to look at the complexes that would be available in your budget, first deciding if you want fully furnished turn-key, or empty shell style units (where you do it all up yourself).