Owning vs Renting: the basic economics

[slipperylobster]

Another for myself

The exchange rate is much more favorable to the us dollar. Three years ago, it was 28. Now it is 36 per usd.

Instead of paying cash for a house (and interest for a further mortgage), 100,000 usd is now worth 3.6 million baht compared to 2.8 million...and I have done nothing but keep it in dollars. Not many people (US) would of made that much by putting it down on a home 3 years ago, paying interest on mortgage, and trying , hopelessly, to sell it 3 year later for a profit. My rent is just 5000 baht. I would of been pouring money into a newly built house. I have no family...and a live in girlfriend (been together six years). Even she can do the math and agree.

Just an example. Not applicable for those countries with weaker exchange rates.

[beachproperty]

Horses for courses..... someone once said that only a fool gets emotionally attached to his wealth. There is nothing in the equations above to take in the costs of maintaining a building. There's no leaking roofs on a good investment -- currently about 5% available in western markets with an acceptable credit rating.

"Currently about 5% available...." of which TAXES have to paid!

That's NET of taxes

Doubtful ....."Risk ...Reward"

[jpinx]

5% divis yes on some but look at the likes of TSCO and many more. I rented when single and was happy with the mobility and being wherever I wanted, somewhere to shower, make a coffee and sleep. When realizing I would be here long term I bought, its been a home for me and my kids, giving them stability and a home to live in. Luckily I bought and built at the right time and place and have seen a 400% increase in what it cost me, actually being approached to sell simply because its location in close proximity to the beach....and saving already about 70% of the cost to build in what I would paided in rent for a similar property.......flipside I know people that have bought and lost money and never really lived here. What suits some dosnt suit others but there is a large expat community that would love to buy but simply cant afford it hence the never buy comments.

I agree, which is why I opened with the "horses for courses" comment. The mathematics is simple enough -- given X million Baht, is it better to buy a house, pay the property taxes, insurances, and maintenance and hope for an increase in value, or invest it long term and find a nice place to live -- goodness knows there's enough of them,,,,, For the guys who can not afford to buy there is an additional cost of borrowing to take into account,,,,,

When you say "Better to by a house, pay the property tax, insurances, and maintenance"........I take with a "grain of salt" what you say ....Thailand has NO property tax (or at least where I live) and as for insurance, don't buy it . Obviously you know nothing about about buying property in Thailand.

I was generalising, but tax comes in many forms, like the "rent" of the land which your dream home stands on but you can never own. To own a house and not insure it against even the most basic of risks would be at the least foolhardy.

[jpinx]

Horses for courses..... someone once said that only a fool gets emotionally attached to his wealth. There is nothing in the equations above to take in the costs of maintaining a building. There's no leaking roofs on a good investment -- currently about 5% available in western markets with an acceptable credit rating.

"Currently about 5% available...." of which TAXES have to paid!

That's NET of taxes

Doubtful ....."Risk ...Reward"

It's a considerably better risk/reward ratio compared to sinking all the money into a house and then not insuring it, as another poster implies

[johnnybgood]

May I suggest the 10 year rule? It worked for me.

If you are definately going to live here for that time, do the simplified arithmetic.

Rent 10,000 per month x10 yrs = 1,200,000 or .....

build a little two bed bungalow with a walled garden, for that same price.

Make it free standing (not in a gated village) and you don't owe anybody anything.

Total privacy with kids, pets, laundry, your own water well, furniture, vegetables etc

no tax and of course electric at government price (half of what you may pay whilst renting).

.

It becomes you're asset. Sell it after 5 years for triple the price (as I did).

Use the equity to build an another small bungalow repatriate the original costs...now you're living free 'n' easy.

ps ....May only work if you choose a trusted Thai wife and you're confident enough to have

a simple life and don't need to show off with a (cough) mansion.

[beachproperty]

5% divis yes on some but look at the likes of TSCO and many more. I rented when single and was happy with the mobility and being wherever I wanted, somewhere to shower, make a coffee and sleep. When realizing I would be here long term I bought, its been a home for me and my kids, giving them stability and a home to live in. Luckily I bought and built at the right time and place and have seen a 400% increase in what it cost me, actually being approached to sell simply because its location in close proximity to the beach....and saving already about 70% of the cost to build in what I would paided in rent for a similar property.......flipside I know people that have bought and lost money and never really lived here. What suits some dosnt suit others but there is a large expat community that would love to buy but simply cant afford it hence the never buy comments.

I agree, which is why I opened with the "horses for courses" comment. The mathematics is simple enough -- given X million Baht, is it better to buy a house, pay the property taxes, insurances, and maintenance and hope for an increase in value, or invest it long term and find a nice place to live -- goodness knows there's enough of them,,,,, For the guys who can not afford to buy there is an additional cost of borrowing to take into account,,,,,

When you say "Better to by a house, pay the property tax, insurances, and maintenance"........I take with a "grain of salt" what you say ....Thailand has NO property tax (or at least where I live) and as for insurance, don't buy it . Obviously you know nothing about about buying property in Thailand.

I was generalising, but tax comes in many forms, like the "rent" of the land which your dream home stands on but you can never own. To own a house and not insure it against even the most basic of risks would be at the least foolhardy.

Insurance is a bet that some catastrophe is going to happen. Here in Thailand, in the unlikely event that one does occur, cost of rebuild is cheap....hence, no insurance

[jpinx]

Insurance is a bet that some catastrophe is going to happen. Here in Thailand, in the unlikely event that one does occur, cost of rebuild is cheap....hence, no insurance

Sounds like the discussion about health insurance

[trogers]

Another for myself

The exchange rate is much more favorable to the us dollar. Three years ago, it was 28. Now it is 36 per usd.

Instead of paying cash for a house (and interest for a further mortgage), 100,000 usd is now worth 3.6 million baht compared to 2.8 million...and I have done nothing but keep it in dollars. Not many people (US) would of made that much by putting it down on a home 3 years ago, paying interest on mortgage, and trying , hopelessly, to sell it 3 year later for a profit. My rent is just 5000 baht. I would of been pouring money into a newly built house. I have no family...and a live in girlfriend (been together six years). Even she can do the math and agree.

Just an example. Not applicable for those countries with weaker exchange rates.

The reverse can also hold, depending on the period of time in consideration. It used to be 50+Bt to the dollar before slowing climbing to 28Bt and now falling to 36Bt.

[scubascuba3]

Another for myself

The exchange rate is much more favorable to the us dollar. Three years ago, it was 28. Now it is 36 per usd.

Instead of paying cash for a house (and interest for a further mortgage), 100,000 usd is now worth 3.6 million baht compared to 2.8 million...and I have done nothing but keep it in dollars. Not many people (US) would of made that much by putting it down on a home 3 years ago, paying interest on mortgage, and trying , hopelessly, to sell it 3 year later for a profit. My rent is just 5000 baht. I would of been pouring money into a newly built house. I have no family...and a live in girlfriend (been together six years). Even she can do the math and agree.

Just an example. Not applicable for those countries with weaker exchange rates.

That 2.8m baht property worth 100k USD 3 years ago is now worth 78k USD if you owned it, using your example

[manfredtillmann]

What you are describing is stated by economists as "opportunity cost". Many fail to calculate what it costs to lose other opportunities with that money.

BTW I agree with you.

Everything I own is in my home country where I'm truly allowed to own the land and where rent/value ratios are much higher. I have a lot higher feeling of security by owning any rental in my home country. I also have a right to be in my home country with no worries about some junta deciding it isn't going to do visa extensions of stay anymore.

You won't get agreement on this here, at least not from everyone. Some are going to tell you how much money they've made with real estate in Thailand but again they neglect opportunity cost and they never had any real security in their ownership. They got lucky. There is no true rule of law in Thailand.

I believe that if someone must own real estate he should do so in his home country and then turn it over to a commercial rental agency to manage it for him.

Let the war begin...

Cheers.

no war from my side, you are SO right. no farang ever controls his/her property investments in T. just having a second party holding 51% puts you in a bad position.

i finance my T living from income of rental properties in oz. in fact, just one week's rent of my 'low cost rentals' finances all of my monthly expenses for rent, food, drink, fuel etc.

a good long term investment minimises risk and puts control as close to you as possible. no farang investment in T qualifies for that.

[beachproperty]

IF you are going to live in Thailand more then 10 years and

IF you have a family you want to give stability to and

IF you have the money to buy

Then buying property or building a house is the way to go....WHY?

Renting at 10,000 bath/month would cost you 1,200,000 Baht.....AND at the end of 10 years you have nothing to show for that money spent

But if you spend 1,200,000 baht for a House or condo......you have the house/condo at the end of the 10 years ....NO taxes, Maintenance (Minimal if new), and no worries about landlord, rent increases etc

Renting you take the short view .....saving a few dollars

So if your single/ girlfriend, are 50 or younger, living on a teachers salary, and NO money....... RENTING may be the way to go

BUT for me, retired, over 60, family of 4, lived here over 12 yrs, buying was a "No Brainer" (plus I didn't put more than 10% of my wealth in the house....rest is in America!)

[jpinx]

IF you are going to live in Thailand more then 10 years and

IF you have a family you want to give stability to and

IF you have the money to buy

Then buying property or building a house is the way to go....WHY?

Renting at 10,000 bath/month would cost you 1,200,000 Baht.....AND at the end of 10 years you have nothing to show for that money spent

But if you spend 1,200,000 baht for a House or condo......you have the house/condo at the end of the 10 years ....NO taxes, Maintenance (Minimal if new), and no worries about landlord, rent increases etc

Renting you take the short view .....saving a few dollars

So if your single/ girlfriend, are 50 or younger, living on a teachers salary, and NO money....... RENTING may be the way to go

BUT for me, retired, over 60, family of 4, lived here over 12 yrs, buying was a "No Brainer" (plus I didn't put more than 10% of my wealth in the house....rest is in America!)

This is rubbish . At the end of 10 years of 1,200,000Baht invested at 5% net of taxes you will have -- I'll let you work it out

...........but we all do things the way we want. I'm not saying your choices are wrong - only your arithmetic

[beachproperty]

IF you are going to live in Thailand more then 10 years and

IF you have a family you want to give stability to and

IF you have the money to buy

Then buying property or building a house is the way to go....WHY?

Renting at 10,000 bath/month would cost you 1,200,000 Baht.....AND at the end of 10 years you have nothing to show for that money spent

But if you spend 1,200,000 baht for a House or condo......you have the house/condo at the end of the 10 years ....NO taxes, Maintenance (Minimal if new), and no worries about landlord, rent increases etc

Renting you take the short view .....saving a few dollars

So if your single/ girlfriend, are 50 or younger, living on a teachers salary, and NO money....... RENTING may be the way to go

BUT for me, retired, over 60, family of 4, lived here over 12 yrs, buying was a "No Brainer" (plus I didn't put more than 10% of my wealth in the house....rest is in America!)

This is rubbish . At the end of 10 years of 1,200,000Baht invested at 5% net of taxes you will have -- I'll let you work it out

...........but we all do things the way we want. I'm not saying your choices are wrong - only your arithmetic

Ahhhhh....you are forgetting .....you must live somewhere.....5% during the first month is only 5,000 baht AND it diminishes exponentially after that....especially if your rent is 10,000.

So, who's arithmetic is wrong

[jpinx]

assuming you have 1,200,000 and you buy a house - what do you eat?

assuming you have 1,200,000 and you get 5% net - where is the problem

We can kick this around all week, but I said much earlier that it's horses for courses and what suits one person might be totally wrong for someone else....

[MaeJoMTB]

no war from my side, you are SO right. no farang ever controls his/her property investments in T. just having a second party holding 51% puts you in a bad position.

I've never managed to hold onto property anywhere in the world.

Some woman always managed to take it from me.

Usually with the help of a lawyer and a judge.

At least with a rented property, getting chucked out with an exclusion order, didn't cost me so much.

I guess all you guys getting to keep your stuff must be gay or solitary.

[slipperylobster]

hah.

equation does not wash. you don't own. you cannot buy or sell. only your wife can. that is unacceptable.

[sirineou]

assuming you have 1,200,000 and you buy a house - what do you eat?

assuming you have 1,200,000 and you get 5% net - where is the problem

We can kick this around all week, but I said much earlier that it's horses for courses and what suits one person might be totally wrong for someone else....

I agree, different personalities , in different situations require different approaches,

One can not change his/hers personality but one can, to a certain degree, change his/hers situation.

So, are you an Ant or a Grasshopper? we all know the fable.

Agreed, Owning a home presents certain challenges, but with in these challenge, there are opportunities.

First, if forces upon you a certain degree of financial discipline.

Yes like the Grasshopper you have more freedom to move, and less danger of loss, but also true is that winter is coming.

Yes,There are dangers to owning in Thailand, but those dangers can be mitigated, by proper planing. Chose your wife wisely, and you need not worry. Choose the amount you want to invest wisely and even a loss wont matter.Choose the location or the type, and you inoculate your self from many of the pit falls present in Thailand,

Recently, I did not, I threw caution to the wind, purchased a property

with out due diligence, and now they are building a Cement factory behind it, which makes the property worthless. Fortunately I chose the amount I wanted to invest wisely, and I can laugh it off.

If one follows the rules I described above, I recommencement to every young person to enter, the PROPERTY LADDER, if you do it wisely and carefully you will never look back.

[WorkingTourist]

A 5% annual return over the next 10 years is a rather optimistic scenario so it would only be fair to compare this opportunity cost with a similarly optimistic property appreciation model.

Furthermore, for those who have enough money to buy property, they might already have a large sum invested and are interested in diversification rather than putting all their eggs in a single basket.

[WorkingTourist]

How does an investor in property in Thailand ensure against developers building until they go bust?

By buying from the secondary market. Not only would this insure against uncompleted buildings, but also the nature of the community already occupying the project.

If we are talking about property as investment then ensure you are in a good location, as that is a big part of what you pay for, and a thousand new builds in Pattaya is not going to make your location any less desirable.

[sirineou]

A 5% annual return over the next 10 years is a rather optimistic scenario so it would only be fair to compare this opportunity cost with a similarly optimistic property appreciation model.

Furthermore, for those who have enough money to buy property, they might already have a large sum invested and are interested in diversification rather than putting all their eggs in a single basket.

Of course one needs to get some eggs first,

but Not putting all your eggs in one basket is always a good idea, especially for a butterfinger such as me .

A varied diet is also a good idea, eggs are high in cholesterol, too many of then are not good for your heart.

Also some times eggs are difficult to sell, one needs to have food easily converted to snacks for those times when you need something quick to eat.

Had enough with the food analogies?

[jpinx]

A 5% annual return over the next 10 years is a rather optimistic scenario so it would only be fair to compare this opportunity cost with a similarly optimistic property appreciation model.

Furthermore, for those who have enough money to buy property, they might already have a large sum invested and are interested in diversification rather than putting all their eggs in a single basket.

Actually not optimistic. You can get over 6% fixed term 5 years if you look carefully, with credit ratings too.

[hhgz]

"I daresay this reappears with monotonous regularity..."

In deed it does, but it gives TVers a chance to rant about the hatred towards owning a home. Thanks.

[beachproperty]

A 5% annual return over the next 10 years is a rather optimistic scenario so it would only be fair to compare this opportunity cost with a similarly optimistic property appreciation model.

Furthermore, for those who have enough money to buy property, they might already have a large sum invested and are interested in diversification rather than putting all their eggs in a single basket.

Actually not optimistic. You can get over 6% fixed term 5 years if you look carefully, with credit ratings too.

pulling at straws now are we.....Moodys ccc

[jpinx]

A 5% annual return over the next 10 years is a rather optimistic scenario so it would only be fair to compare this opportunity cost with a similarly optimistic property appreciation model.

Furthermore, for those who have enough money to buy property, they might already have a large sum invested and are interested in diversification rather than putting all their eggs in a single basket.

Actually not optimistic. You can get over 6% fixed term 5 years if you look carefully, with credit ratings too.

pulling at straws now are we.....Moodys ccc

Standard and Poor's actually

I am not advocating any specific course of action, just making sure that both sides of the discussion are presented equally. If you have enough money to pay for the house outright, and enough other money to actually live on -- good luck to you - but that's like comparing apples and pears.....

Starting with the same amount of money and having both courses of action available, it becomes a personal choice

[mcfish]

Life is short and there has to be winners and losers. Losers will be forced to keep packing bags at the whim of a land lord and to terrified to hang a painting in case the nail ends up making the security deposit null and void, oh yes there are a thousand horror stories , just google lost security deposits..

Winners control their turf, that just the way it is. How many truly wealthy people rent? answer = 0

enough said

[trogers]

no war from my side, you are SO right. no farang ever controls his/her property investments in T. just having a second party holding 51% puts you in a bad position.

I've never managed to hold onto property anywhere in the world.

Some woman always managed to take it from me.

Usually with the help of a lawyer and a judge.

At least with a rented property, getting chucked out with an exclusion order, didn't cost me so much.

I guess all you guys getting to keep your stuff must be gay or solitary.

Not necessarily! We can use the library instead of buying at the bookstore... ? catch my drift?

[jpinx]

Life is short and there has to be winners and losers. Losers will be forced to keep packing bags at the whim of a land lord and to terrified to hang a painting in case the nail ends up making the security deposit null and void, oh yes there are a thousand horror stories , just google lost security deposits..

Winners control their turf, that just the way it is. How many truly wealthy people rent? answer = 0

enough said

Nothing wrong with renting if you vet the place before signing. Same due diligence as you would do for buying a place, with the addition of interviewing the landlord/lady

Controlling your turf is exactly what you can NOT do in Thailand -- you don't own it

[sirineou]

Life is short and there has to be winners and losers. Losers will be forced to keep packing bags at the whim of a land lord and to terrified to hang a painting in case the nail ends up making the security deposit null and void, oh yes there are a thousand horror stories , just google lost security deposits..

Winners control their turf, that just the way it is. How many truly wealthy people rent? answer = 0

enough said

Nothing wrong with renting if you vet the place before signing. Same due diligence as you would do for buying a place, with the addition of interviewing the landlord/lady

I must say, this has for the most part being a fair and well balanced thread with good point made from both sides

Though I stand in the Own side, clearly there are situations where renting makes sense.

This is clearly NOT a one shoe fits all situation.

[mcfish]

Then there is the furniture aspect. Your going to end up on some crappy hard as concrete bed and usually cheap Thai made furniture. Again your at the control of your land lords tastes and NOT yours..who wants to go through life like that? Sure you can buy your stuff but that drops rental availability by 70% since most condos are furnished..and then you have to relocate when your landlord ups the rent by 50%

[WorkingTourist]

Owner receives rent, which he then uses to buy/rent a house to live in himself. Theory holds no water, unless the rent received is higher than the mortagage payments (double..so he can pay the mortgage for the second house he must live in). Now he has maintenance on two homes, that he is responsible for.

Of course the landlord will charge more in rent than their own expenses. I rented out a condo for the last 8 years and charged about twice my own expenses, and in this period, the appreciation of the condo has been 8-9% p.a. (so add that to my profit).

Though it didn’t happen in Thailand, but I’m sure Thai landlords are not running charities either.

Getting what you wanted in a home may be a reason to shell out two million or more...but not worth it for me. My cash stays in the bank. Homes are overpriced and over rated. You basically get a ceiling, four walls, and a floor...in each room. What you put in there, and how you decorate....is what makes a home. I did make 100,000 dollars in hawaii, selling a home (profit), but lost on two others.

In another post you gave your rent as 5,000 baht/month, and here you’re mentioning two million baht for “buying a home”, so I think we’re looking at different markets and different definitions of “a home”. At your price range, I wouldn’t really argue for or against buying.

When I mentioned the ability to make changes to property, what I am talking about is things like ceiling fans on the balconies, head showers in the bathrooms, custom built closets, speakers with hidden wiring throughout the place, or just a hook in the kitchen to hang your towels.

All of the above to increase the comfort of living there which isn’t possible to do when you rent, but also not possible when on a budget, so as someone else said, the discussion is really between the ‘haves’ and ‘have nots’.

I also think some of us gets more demanding with experience. The first place I stayed was a small room I rented and I was happy there, the last place I bought, I bought it early in the construction phase so that I could get changes done, but the next place, I’ll probably want to build from scratch!