Money

[zarusoba 0]

My burning question is this members. How do people buy homes/condos with cash only? The houses/condos I like are between $75,000-$140,000. I'm saving as much money as I can monthly and have only $30,000 saved. The U.S. military pay is not that of the civilain sector. I want to retire from the military in 6 years and I see myself as only having about $80,000 saved up. So once again where does everyone get their money to buy a house/condo straight out? Do they get a mortage loan, have a great civilain job or what? If I found a nice place in the Pattaya area I would not have to worry about a house note and could live okay with my military retirement ... zarusoba!

[anabasis2000 0]

I can think of four options:

1. Inherit wealth (always a popular choice)
   
2. Work for more years and retire later
   
3. Make a higher income during the years you do work
   
4. Scrimp, save, and deny yourself luxuries now so you can retire sooner.
   

Personally, I'm working on the first three. No way I am giving up vacations to Thailand to make #4 happen. Though with both my parents still in good health, I'll also be waiting a while on #1 as well.

[upena 2]

my buddy bought a place last year...got a loan...just like anywhere else

[MrMango 665]

Maybe get a cheaper place - I had a nice Condo in Jomtiem for about $20,000, and I have read where BM have condos for $7,000 U.S.$

 

Remember the rule - Never invest in Foreign countries money that you cannot afford to walk away from.

[Gary 4,100]

It all depends on how you want to live. If you want to live in a shoebox $80,000 is plenty. If you like nicer things you simply have to work longer and save every dime you can. You are limited to a condo in Thailand anyways.

[zarusoba 0]

All of the board members are correct about my situation. I just see all of those nice houses over there and would love to have it. I will continue to save my money and figure it out in 6 years when in hit 20 years in the U.S. military. Thanks ... zarusoba!

[Owen` 2]

The BM's 4 methods listed above are a good top level description of how it can happen. Some elaboration might help.

 

First and foremost, don't denigrate your own $30K. That 30K probably puts your net worth in the top 50% of the US, and maybe higher age adjusted (don't know your age). People DO NOT save in the US. This will generate a train wreck, coming as the baby boomers reach retirement, discover that the pension norms of their parents no longer exist, that Social Security pensions are very low and . . . son-of-a-gun, they have no savings. A LOT of people will be living their final years in trailer parks. Everyone is using their parents as a role model of what they expect in retirement, and that's just not going to be true. Pensions are disappearing every year. Gov't pensions will start to erode soon and that will be that.

 

But in general your question is . . . how do you accumulate more money? There are lots of financial columnists around to answer this. Unfortunately for most BMs, the number one answer is to start early. Compound interest is an equation whose most powerful component is time. Given that answer being denied you, the other things you can do to improve is maximize the tax shelters of Roth IRA and I think the military has a TSP? US civilian employees have a TSP program that is equivalent to private industry's 401K.

 

The temptation to "juice your returns" is what it is. Anything beyond 5% nowadays has risk. You have to endure some risk to address inflation. So . . . most rational advisors recommend an asset mixture of risk profiles that might generate a reliable 6-7%, given a percentage of your money in zero risk instruments and a percentage of your money in non-zero risk instruments. Gary is getting 9% on some carefully selected vehicles, but I'm sure he doesn't have 100% of his net worth in those so his non 9% money averages down his total return to something less, which is exactly as it should be. I'm not gonna point anyone at anything. I just want to be sure BMs know that they juice at their own risk. It's real easy to turn that $30K of yours into $15K without breaking a sweat.

 

The old saying of Live Below Your Means is absolutely critical. This almost always translates into paying off your credit cards every single month. Credit card companies juice their returns at your expense. Don't let them.

 

Okay, I'm done. I will say that if your goal is a $100,000 condo paid for in cash and you're starting at $30K, then to accumulate 70K in 6 yrs is NOT 70K/6 ($11,000) for your yearly savings. At 6% return it is $8000/yr required, assuming the 100K condo doesn't go up in price over those 6 yrs.

[Emil 0]

I don't know about the other parts of the US, but anybody who bought a house in California 10 years ago or more and didn't take out 2nds on the home are sitting on around $200k or more of equity. If they sold those homes they would have plenty of funds available to purchase a nice condo in LOS, on top of that,hopefully they would be cutting their ties with California so that they wouldn't be giving any more $$$ to the Franchise Tax Board.

[OnMyWay 0]

When I sold homes in California as a Broker I can tell you that it wasn't unusual at all to have someone buying their 2nd home and using equity from the sale of thier first.

 

It's a rare situation that people in America can't sell their home and cash out with profits far exceeding that 75K-100K number. Of course, there are outlying areas that haven't appreciated as much as others. But, MOST people in the states have seen HUGE gains and are sitting on huge equity.

 

I had a 1 bedroom condo that was an investment for me in Long Beach, CA. Bought it in 2001 for $51,500 and sold it in 2005 for $284,300. That's just 1 property......there's a good population of people in a similar situation.

 

Cheers,

Mark

[BBB 3]

I think your setting your sites to high you can get a very nice 3 bedroom house for £40,000 and that is equal to a lot less than $80,000. I am not sure about the loan option as we have just bought a 2nd house and put our other house and 37 Rai of land up as collateral and the bank still would not give us a loan so went for a cheaper house and paid cash.

[jacko 8,766]

I can think of four options:

1. Inherit wealth (always a popular choice)
   
2. Work for more years and retire later
   
3. Make a higher income during the years you do work
   
4. Scrimp, save, and deny yourself luxuries now so you can retire sooner.
   

Personally, I'm working on the first three. No way I am giving up vacations to Thailand to make #4 happen. Though with both my parents still in good health, I'll also be waiting a while on #1 as well.

 

 

 

Or a combination of 2 , 3 and 4. I worked many years in the Middle East, not paying taxes.

[Owen` 2]

The overseas work thing provides not only tax sheltered income, but it also shields you from domestic TV and its professional advertising that extracts money from you for consumer non durables.

[iono 0]

Ahh, I was in the same boat, howevere retired and started contracting. I was in the market doing the safe thing, but have discovered real estate as a better pay off. Go find yourself a duplex near a military base, put some money down, get the loan and either play land lord or hire a company to manage it for you while you are deployed. Six years from now you can either sell or continue renting both sides or live on one side work some more and save your pennies. However, I got to say it is hard to walk away from the contracting world as the money rocks, pretty soon you want more and more toys, just enjoy your vacations for a while.

[Owen` 2]

Good morning, gentlemen. It's a little bit chilly outdoors here in the US of A at this hour and it's a work holiday so I have some time to type stuff that may help BMs with their thinking, and myself with mine.

 

Let's talk about risk and "the market" and real estate and inflation.

 

The guys who have never ever been in the stock market can have an inclination to remember talk of the Great Crash of 1987 and the Great Crash of 1929 and the Great Crash of 2000. They hear that stuff and lose all interest in the market.

 

Well, think for a moment about why anyone would be involved. Is everyone involved in stocks stupid? That's pretty much impossible. There are too many for all to be stupid.

 

Why, instead, isn't everyone in real estate? Why aren't they buying houses or condos low and selling them high, like everyone who is in real estate does? Why would anyone screw around the stock market and its crashes when you NEVER hear about real estate crashes. Maybe you hear about a bubble pop, but never ever crashes. Right?

 

So why?

 

Well, clearly if real estate was always guaranteed to give you an exceptional return and never have crashes then JP Morgan, Merril Lynch, Piper Jaffrey an all the other stock broker firms would invest solely in real estate, right? In fact, if real estate was always guaranteed to give you an exceptional return and never have crashes, Procter and Gamble and Walmart and Lockheed and Ford would never invest any internal money in their own businesses because that would not be in the best interests of their shareholders -- the shareholders best interests would be served by those companies being in real estate. You go where the returns are best with money and if its real estate, you go nowhere else, right?

 

So this leads up to the answer. It is that the premise is wrong. RE is NOT guaranteed to give you an exceptional return and it DOES have crashes. The real estate industry has achieved something that the financial markets have not achieved and that is camouflage. Prices of house transactions are not listed in your daily newspaper in long columns of numbers showing the effects of trading. You can't look in a newspaper and find out what your condo will bring in TOMORROW if you sell it. There is no visibility into the performance of the real estate market so all its crashes can be called the popping of a bubble and the local real estate agent can wave his hand and say "oh, the market gets a little soft now and then but everyone knows you make money if you wait out that soft spell".

 

You can lose money in a popped bubble just like you can in a crash. There is NO QUESTION lots of BMs can and will post their personal experiences buying some property, maybe renting it out, or selling outright and making big money. The wonder of this board is no one has any reason to lie. They are telling the truth when they say that. People can make money in real estate. The difference between it and stocks is none are likely step forward and announce they bought a 4 plex for $350,000 eight years ago and that it spent those 8 years 50% vacant of renters because illegal immigrants moved into the neighborhood, then the furnace broke in year 3 and needed a $7000 repair, one of the renters had pets he was not supposed to have and they urinated on the carpets which cost $3000 and when one tried to sue him to get him to pay for it, he left town with no forwarding address and had no money anyway, the next door neighbors repaired junker cars in their front yard and dragged property values down and the roof started leaking when it rained hard and three independent inspections by the roofers said the leaks would go on even if patched because it was simply time for new shingles . . . to the tune of $10,000. The guy finally sold for $340,000, which is $10,000 less than he paid and that was pre-commission of 6%.

 

See? That's human nature. People don't like to talk about their failures and in real estate, with no industry-wide requirement for daily visibility, you never hear about this. Hell, even in the stock market with its full visibility . . . there is a famous quote from Barron's, a financial publication. The quote was published in November of 1987, one month after the crash of '87. It went like this: We have researched carefully what happened last month and we have concluded that there was no crash. We say this because we contacted money managers up and down Wall Street and asked them how they did. Without exception all of them said that they had sold all their stocks in June. We therefore conclude that since everyone on Wall Street had already sold in June, there could have been no one with any stock shares left to sell last month

and thus there was no crash.

 

Moral of the story: You can lose money in anything other than government bonds. They pay 5% pre tax and pre inflation. If you want more than that, there will be risk. Just because you don't hear of real estate losses doesn't mean they don't happen.

[zarusoba 0]

Now I'm not sure what to do with my house in the States. I pay a Real Estate company 10% of the rent so they are making $70 a month on me. My mortgage is only $563 and I pay $600 a month. The extra, if you want to call it extra $37 is going towards principle. So I make only $30 a month. I’ve been that there are great tax breaks for renting a house. I’m going to have a CPA do my taxes this year because of being stationed in Korea/Japan 2007. What do you all think?

Zarusoba!

[Owen` 2]

Now I'm not sure what to do with my house in the States. I pay a Real Estate company 10% of the rent so they are making $70 a month on me. My mortgage is only $563 and I pay $600 a month. The extra, if you want to call it extra $37 is going towards principle. So I make only $30 a month. I’ve been that there are great tax breaks for renting a house. I’m going to have a CPA do my taxes this year because of being stationed in Korea/Japan 2007. What do you all think?

 

If it's not an "interest only" mortgage, you're paying some portion of your $563 for principal. The $37 is additional principal. Most mortages would be like that, but the recent invention of interest only mortgages service only the interest and pay no principal. It is not likely you have that. It's more likely you are paying almost $100/mo total on your principal.

 

I'm not a real estate guru. Someone may want to weigh in here. And I am also sure these rules are different in the UK.

 

The rental tax breaks:

 

1) Depreciation: Because the property is renting, it is a business asset. Use of a business asset ages it. This ageing is presumed to reduce its value and that reduction is called depreciation. Typical accounting maneuver would be to take the purchase price and divide that by 10 or 15 yrs. So if you bought for $100,000, that is $10,000 in depreciation per year. That depreciation is a business expense. If you have renters and they pay their rent, that rent would look like taxable income. But because you have that $10,000 of business expense to deduct from that rental income, the rental income can

be largely tax sheltered.

 

2) Recapture: You must keep track of the accumulation of depreciation of all the years you own the property. If you bought the place for $100,000 and held it 4 yrs, depreciating it $40,000, then your "cost basis" is $60K. If you get a purchase offer of $120,000 and sell it for that much, you have taxable capital gains of (120K - 60K = ) 60K. That 60K gain is taxable. There are various maneuvers you can try at that point to avoid this 60K of taxable capital gains, but in general the depreciation tax break is recaptured by the government when you sell, if you sell above your cost basis.

 

2) Insurance, maintenance, real estate mgt company, etc: These are business expenses because you are in the business of property renting. You can view them in two ways. Either you can reduce rental income (beyond the depreciation reduction) further with these expenses each year, or my suggestion is to view them in a different way -- namely that the price of the expense (insurance premium, maintenance cost, mgt company cost) is subsidized by the government so you get essentially a 25% discount. After you claim it on your taxes, that will be the overall effect. The $70 mgt company fee is really $70 X 0.75 = $52.50.

 

3) Exotic and aggressive claims: If your computer is used primarily to manage your rental property, it is a business expense and can be deducted from rental income. Drives to the property to deal with landscaping . . . the gasoline is a tax deductible expense. Anything you do related to the business is deductible. Ads in the paper looking for renters, getting copies of lease agreements signed, all that stuff are costs that cost 75% of what you think they cost.

 

Enough of this . . . off to the store.

Edited September 4, 2006 by Owen`

[torrenova 644]

I'll say that most people have equity from investments and more commonly from the sale of property in the west. This could be the marital home or any other asset.

 

I would buy somewhere in your country and then you have somewhere to live when / if you leave the military. You should be able to rent it out as you have a large network of acquaintances which will give you some income to save and hopefully you will gain from capital appreciation.

[JohnnyK 28]

As usual, Owen's comments are very worthwhile reading and thinking about.

I've done well in RE having sold 3 homes at real good profits.

BUT, I am a baby boomer born 1947 and at the edge of the wedge that propelled the housing booms of the past 25 years so my success was due to me choosing a good year to be born in. My wife and I scrupulously avoided debt. You don't have to have everything you see, life isn't about stuff. I was always amused at that Toyota 4WD ad showing wage slaves throwing their ties out the window as they headed off to "freedom" in their new 4WD. Hahaha! The ad didn't tell people that such "freedom" meant another $35K of debt. But some people also never figure out that the best way out of a hole is to stop digging.

 

HOWEVER, back to RE. Most of the BB generation now have homes and many are paid off. The next generation, GenX, are the ones who couldn't get the decent jobs because they were fewer in number than the BBs who were hanging on to the good jobs.

So, part of the problem is that there isn't a huge cohort behind us and many who have bought or are buying are only able to do so because of near-record low interest rates and that party may be coming to an end.

 

One RE sector that some feel still has potential is in vacation or retirement homes outside big congested cities. Smaller cities need no longer be hick towns because of mass communications and marketing. Because they offer a nice quality of life these areas will become more attractive to retirees and there may be some good bargains. My wife's aunt made out real well in Columbus, OH for instance and if I were in the US I would think about college towns.

[BenMajor 0]

I think your setting your sites to high...

My two cents: live below your means and you will be happier for it. Even if you stretch and get a Big Bad Pad, you can end up House Rich but Cash Poor. Seriously, like the social security time bomb that people say will screw baby-boomers (like me), can you be 100% certain your military penion will always be there for you? The way oil and the economy and penions are going here these days, I wouldn't bet my life on anything from the government. I wonder how much it costs a year to live comfortable in Pattaya these days? Maybe save some of that hard-earned and hard-saved cash for some emergency backup, not to mention furniture, travel, mongering...I am 20 years away from civilian retirement, but I practice what I preach back here in the States. Bought a home half the size I could afford...no mortgage, sizeable money left over to pay for nice things, upkeep, travel. My friends have bigger homes, but I have less worries, less bills, and I can afford to go to LOS to play... Edited September 5, 2006 by BenMajor

[roderick17 0]

Greetings All

 

Based on my current estimate, I will have approximately $7,500 USD a month to live on in Pattaya. Is this enough to live like a King in LOS. I know the Thais already have one monarch, but i'd like to live a regal lifestyle for a few years - before I wander across to the other side .

 

Roderick

[thegrogmonster 101]

Greetings All

 

Based on my current estimate, I will have approximately $7,500 USD a month to live on in Pattaya. Is this enough to live like a King in LOS. I know the Thais already have one monarch, but i'd like to live a regal lifestyle for a few years - before I wander across to the other side .

 

Roderick

 

 

Roderick,

 

You will defintely be living like a king on that sort of money.

 

Spending that sort of money every month I believe you will end up going across to the other side sooner than you hope

[AZZZEY68 0]

We all expect so much lets all just live the dream....you need 500 uk pounds income a month rent not buy....

[Skate 9]

Funny how it happens. I bought a house when I was in my 20's. Never had any money. Then one day the light bulb went off. Didn't have a pot to pee in. But my house had money tied up in it. It was like a savings program for the average guy. In my 30's, single again, broke, paying child support, and how do I get out of this mess. Real estate seemed to be the answer. There were several schools of thought. Buy a house every year and at the end of 5 years start pulling out money out of the first house to live on and keep buying. The second was buy 10-20 houses and in 10 years sell half and pay off the best ones for your retirement income. Then there was the guys on the TV trouting how to buy zero down. I decide there had to be a way and I bought a little condo with little money down, then started flipping houses and the profit rolled into a small multi that cash flowed. My idea was just make the payments. It has not been easy and I have a pro screen my renters. Never ever thought I'd see real cash flow or my rents climb 200 more a month. But it can happen to the average guy wanting to get ahead. I'm at the sell/pay off point and I can taste it. The day I can say good bye to my JOB (Just Over Broke) I'll be a very happy camper.

 

This is just another avenue to think about when chasing your dreams.

Edited September 17, 2006 by Skate

[whitespider 1]

Lots of sound advice but I think the answer to your actual question is that many who buy in Thailand have sold in their home country. I bought my house in the UK for around £100k and sold for well over £300k. Alternatively I could have raised a 2nd mortgage to cover purchase in Thailand.

 

Whther to keep the house in your home country (and rent it out) or sell it is really a matter of personal choice depending on your likelihood to return.

 

I am married and my kids are (effectively) Thai - I have no intention to ever return to the UK full time but I DO retain a half share (with my sister) of a house there just incase.

 

In addition average household income in the UK is now £26k (around $45k) so with good long term planning it is possible to save for purchase abroad. I think the majority of people who move to LOS plan for quite a long time although there are obviously a lot of impulse buyers too.

 

Finally, as another poster pointed out, there is often inherited money. If we assume (for the sake of the argument) that the average purchaser is 45+ then there is likley to be inherited wealth from grandparents/parents which is often surplus to living requirements.

Edited September 17, 2006 by whitespider

[zarusoba 0]

Everyone has been very helpfull. I will continue to plan for my future long term stay in Thailand, Pattaya. I will always remember this famous quote "The best laid scehmes of Mice and Men will always go amiss."

 

So plan "B" is still a work in progress. More to come. Thanks once again ... zarusoba!