Funding real estate in Thailand (or other countries?)

[jmukh]

Hi all,

I somewhat naively assumed that most people were borrowing to buy real estate in Thailand or elsewhere, but I'm realizing that outside the US, this whole 30 year mortgage at 4-5% thing is unheard of

Which took care of my initial question, which was "Why isn't everyone and their uncle buying condos in Phuket for $200 a month?!"

So what are the common ways to wrangle this? My realtor suggested buying in the US, building up equity over ten years, and then borrowing against the equity to get that super low US monthly rate for a vacation property abroad (where you'd also be a cash buyer, making negotiations easier).

Everything I'm reading here suggests that buying in Thailand is extremely risky as an investment. What are other countries you guys have looked at? Which are better investments? And are there other funding mechanisms you're using other than equity / sales of property in your home country?

I'm likely to be happiest with hotels and AirBNBs for a while, just thinking about long-term planning. 

Here's a hypothetical: if you were laying a roadmap to getting something like this in 5 years (maybe 10), what are the most common ways to fund it? Pros and Cons? And lastly, should I ever believe the 5% returned guaranteed stuff? 

https://www.fazwaz.com/property-sales/1-bedroom-villa-for-sale-at-kamala-bay-ocean-view-cottages-in-kamala-phuket-u153053 

Thanks!

[Ivanow]

Those are a few questions, and each can warrant it's own, lenghtly thread (and were discussed in the past), but to give you outline:

 

Generally, you want to buy property in West (USA/Europe), rent it out and use proceeds from that rental to rent a place you live in in Thailand.

 

As you noted, mortgage rates here suck big balls (For houses, I've seen offers for 9% APR with 50% down-payment). Even if you find property that is "owner-financed", it often has those costs baked in into sales price (same with "rental guarantee" - if you ask developer, he will often quickly knock down 25% or more off sales price if you don't want/need rental contract). Don't forget to also take FX risk into account.

 

As for properties themselves, they don't appreciate in value at all - building standards are terrible, maintenance non-existent, and above all - there's huge glut of oversupply. You are taking also a huge liquidity risk - it's very, VERY difficult to sell, unless you're willing to go significantly below "market price".

 

See #1.

 

Generally, those 5% rental guarantees work... until they don't. Often the rental contract will be signed not with developer themselves, but with purpose-created "rental management" company, with paid-up capital of 10,000THB. They will fold at first sign of trouble, and leave owners with worthless piece of paper. Even if contract is with developer, or asset-heavy company, you need to remember that this is Thailand and you are foreigner - those people are well connected and you will find no recourse in court, were any problems to arrive.

[jmukh]

Thanks. I've done a lot more reading here (and elsewhere) over the last couple of days, and it's hard to find anyone positive about buying in Thailand other than expat websites selling you on the idea of moving abroad (retire in paradise!) or expats who are moving there to live in their purchased condo full-time, as a more-or-less permanent base.

The harder part of this equation for me is that if I buy in a desirable urban location in the west where I'd actually be able to live and work, it's going to take a decade for rental rates to rise to the point where there'd be a significant positive return over the monthly mortgage payment. This would work well for a long-term project, and it's something I'm researching for the general financial benefit of buying vs. renting anyway.