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Renting Vs. Owning in Thailand

The debate on whether or not you should rent or own a place in Thailand is always a hot topic amongst settled Expats. We can examine a pro’s and con’s list of each and then see which side of the scale has more weight, but I think it would be more prudent for me to start by saying, RENTING OVER BUYING ALL DAY LONG. Some readers may think I’m just stating the obvious, but if that were true why are there so many expats who have bought properties all over the country? Why are condos being built left and right, many of which market heavily to foreigners? Sometimes I don’t get it. There are a few instances I can think of where it would make sense to own, but mostly not.

Wouldn’t it be funny if I warned all of you: “Don’t buy a house in your girlfriends name; she’ll probably kick you out of it and live there with her Thai husband you didn’t know about?” I think more highly of the readers on this site than to go there with you. We all know better. My advice to total newbie’s has always been to never put anything under your girlfriend’s or wife’s name no matter what. Being married to the woman makes no difference, and if you have children with her it makes only a slight difference.

Bad reasons to buy a place in Thailand

1) You can afford to. From the time many of us started learning about personal finance we were all taught that you have to strive to own the place you live in. If someone has the money to own a place they like in Thailand it’s almost instinctual to want to buy.

Consensus- Not a good reason. Just because you have money doesn’t mean you have to spend it. Just because you rent in Thailand (or many other places for that matter) doesn’t mean you aren’t being diligent with your personal finances.

2) Security. If you own a home you never need to worry about finding a place to live. You never need to worry about rents going up to levels you can’t handle. You can rest easy because there isn’t anything major to worry about once your home is paid off.

Consensus- Not a good reason. While it’s good to think long term and to always plan ahead, it’s not a good idea to let fear of the unrealistic influence your financial decisions. It’s true that rents will go up over time; they’ll be higher in 20 years than they are now. But they’re not going to be unreasonably high. Last I checked Thai people live here too, and they drive the rental market in 95% of the country. Thai’s have to be able to afford the rents to keep the demand and supply in check. The worst case scenario in 20 years is that only the most popular cities become pricey. Thailand’s a big enough country to accommodate! Provided you aren’t twelve years old, there’s always going to be a great place in Thailand for you to live at a relatively affordable price. It may not be where you live now, but somewhere. Your grandchildren may not be so lucky, but you’ll be fine.

3) It sounds better. Some people want to be able to say, “I own a house in Thailand.” Renting to them shows a sign of ineptitude in life.

Consensus- It’s a truly ridiculous reason. This isn’t our country; there are strings attached to buying a property that are obviously concerning. If people’s judgments of you have an impact on your financial decisions it’s time to re-evaluate life.

4) Investment. Why line someone’s pocket while their property goes up in value year after year. By buying a property you can make money over time and avoid paying rent.

Consensus- Not a good reason. Rents in Thailand compared to value of properties are lower than in many other places in the world, especially on houses. If you buy a small house for 1.8 million baht and you rent it out for 10,000 Baht (reasonable example), it’ll take you 15 years worth of rent to equal the cost of the home (not including property maintenance). The renter gets the better deal there. For nice condos the rents are higher compared to the values, but the supply has far exceeded demand. There are so many vacant condos on the market, so it hardly seems like a good investment. If you’re buying purely for the sake of making an investment there are definitely better options.

Good Reasons not to buy

1) No financing options. Good luck trying to get a mortgage!

2) Laws don’t favor you. Forget putting it under someone’s name; and there’s been heat on the loophole that lets you buy under a token company.

3) Better rate of return on other investments.

4) The supply of nice condos dwarfs the demand, and yet prices on new construction/pre-construction are higher than they should be.

5) The upkeep on house is a pain in the ass as the years go by.

6) Selling a property in Thailand is an uphill battle.

The only time I don’t have a problem with someone buying a place is if they’re very wealthy. If you want to buy a piece of land where you can dock your boats or have a man-made lake, then by all means go for it! If you’re wealthy enough where the poor investment on a place in Thailand is acceptable and basically meaningless to you because you have so much, then I guess there’s nothing stopping you. If you want to buy a piece of land because you intend to make money on this land with a well thought out business plan to put a hotel or factory up, then that’s a whole different ball game. So there are some exceptions, but the average Joe is certainly better off renting.


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About ParadiseCity

M. Schwartz is an expert in all things Thailand. Having seen and done it all, there is nobody more equipped to teach about a successful ex-pat transition to Thailand. He wrote the cult classic guide book for men in Thailand called, How to Get the Most Bang for Your Buck in Thailand

15 Responses to Renting Vs. Owning in Thailand

  1. Farang ngong nguay October 12, 2012 at 7:13 am #

    Great post. I find that the majority of the posters that try to “shame” people into buying are either estate agents or foreigners that have invested in condos.

    One reason that many people give to buy is that interest rates are low. The majority of people seem to buy with regards to “payment” rather than “price”. When interest rates rise, payments go up. Consequently, the price will have nowhere to go but down. There is a saying in the financial world that smart money buys cheap assets when money is expensive (high interest rates) and dumb money buys overpriced assets with cheap money (low interest rates). You can always refinance into a lower rate but you can’t renegotiate the price you pay.

  2. MagicMax October 12, 2012 at 7:17 am #

    Tend to totally agree with this article except that I didn’t mind buying my girlfriend a bike (in her name but second hand) so she would stop nagging me to take her places.

  3. CoCo Channel October 12, 2012 at 11:22 pm #

    the ownership rules can and will change , and probably not in our favor !

    And just because a Real Estate agent sold it to you does not make it legal, in fact I am not sure if anything is legal in Thailand if the other guy has more money or connections than you do.

    If you “invest” any kind of money in Thailand be able to walk away from it if the rules change or the political shit hits the fan !

    CoCo

  4. american October 13, 2012 at 2:56 am #

    yet another excellent article. Many in the west go by the 8year rule, which is, that if it takes more than 8 years of rent to buy the place, it is not a good investment. This is an average and expensive places like Paris and NY (city) are exceptions of course. And Thailand is no Paris.

    A lot of friends are influence by “it sounds better” and they all have iPhones and iPads (not to pick on that company but you get my point).

    If you can afford to by a Lambo or Ferrari (in thailand) then why not buy some crazy place, but never think of it as an investment.

    A friend who has sold real estate in Pattaya for the better part of the last decade has told me quite a bit. 1) many of the condo places are being build for 15-25k per sq meter and the asking prices (and there is rarely any significant discount) are 60-80k sqmtr. 400%+ really? In the west, 30-50% is doing well. But they have to pay for the fact that 90% of the thai side of the condo will never be sold (EVER). and 20-50% of the farang side won’t be sold. This also causes problems when your building gets older, less people will live there (leave, die, move on the the newest iPhone… I mean cool condo complex), then less shops downstairs, then more tourists, then higher building support costs, then cheaper rents, then more weirdness with neighbors. etc.

    Buying a condo here is just like buying a bar/restaurant/etc. Do it if this money is just throw away hobby money. Don’t if you think you are some sort of investor. (caveat, if you have 5+million US in Thailand and have been here for 10 years and have the hookups, big ones, then maybe, but then why are you even reading this article?)

  5. Chris October 13, 2012 at 7:14 am #

    Personally I don’t like the idea of buying property anywhere it’s a lot of hassle and maintenance, investment, not really. As for living in a place, unless the building is sitting on a block of land surrounded by nothing I wouldn’t buy it. I like the idea of knowing if I don’t like my neighbors I can move. This isn’t just for Thailand but anywhere really.

  6. Martin October 17, 2012 at 3:33 am #

    There is something I don’t quite understand.

    Paying rent = pay every months for nothing
    Buying the place = pay every months just like with paying rent and you get to eventually keep the place

    Your investment in each case is the same. So unless you have a way better investment at hand, whats the big downside to buying your place in Thailand?

    BTW you can easily get loans for the cheaper houses or condos from your home country. They won’t even look at you twice when you apply for a “car loan” over 2 or 3 million baht.

    • Chris October 17, 2012 at 8:37 am #

      It’s unlikely you’d get a load for an investment or property in Thailand so you’d have to pay in full. At some point your going to sell the property if it’s a house very difficult if it’s an apartment well you’ll have to be lucky to be in the right complex at the time and Thai’s only want to buy new, farang also prefer something new so yeah that’s difficult. There are many downsides lets see if anyone can comment on that.

      • ParadiseCity October 17, 2012 at 10:14 am #

        It’s pretty easy to find a better investment; that’s the main point.

    • Farang ngong nguay October 17, 2012 at 9:22 am #

      1. Renting isn’t paying every month for “nothing”. You are paying for shelter. Shelter is a consumable.

      2. A loan is “renting” money from the bank.

      3. I can’t find “expat” loans available in the U.S. but I do see them in the UK. The majority of the LTV’s appear to range from 60-75% and the interest rates start at about 4.2% for a 2 year fixed rate later changing to a 4% variable rate. I certainly wouldn’t want the interest rate risk as there is a good chance of rates being much higher in a few years whereas the mortgage lasts for 30 years. I think that if you wanted to safely run the numbers, you should assume a 6-7% interest rate at a minimum.

      4. Have you seen the state of most 20-30 year old condos/apartment buildings here in Thailand?

      5. There will be a 10% fee to sell.

      6. Exchange rate risk (Baht is near all time highs)

      7. What do you do if you get bad neighbors moving in next door? With a rental, I can move on short notice.

      8. What if the Thai government decides to levy a property tax on foreign owners?

      9. Tons and TONS of condos that go unsold/unrented. Supply…meet demand.

  7. Martin October 17, 2012 at 9:10 am #

    true but still, its not like you really have a choice. Paying rent is not a choice. It’s basically a forced investment. You pay for nothing or you pay for your property (assuming the monthly payments are the same). A less than perfect investment is still better than simply burning your money by just paying rent. Without a loan of course its a bit pointless. There is ways to get loans for a few million baht though. Simple consumer loans from any western country would do. Of course getting a real mortgage is not really an option.

  8. Dude October 19, 2012 at 2:22 pm #

    @Martin

    If this was a discussion about rent versus buying in the states, I might agree with you. I have a paid for house in the states that I collect rent on. However, the problems with buying a house in Thailand(and many other foreign countries) are multiple:
    1. The laws about the right of foreigners to own property are always subject to change.
    2. Your right to continue living in the country you have bought your property is not guaranteed.
    3. The time it takes to recoup your investment is too long for anyone who might decide to pick up and move in the future.

    For me, this is why I will be a renter. I will collect the rental income for my paid off house in the states and use that income to pay my rent in the foreign country. Because what I charge for rent is more than 3 times what I pay for rent, that rental income also pays for food and utilities.

    Now I do have one caveat to this choice. If I was to get married, then I would probably buy a property so that my wife would have a place to live if something happened to me.

  9. Brad October 24, 2012 at 8:30 pm #

    The problem with selling an old house in Thailand – as my Thai wife explains – is not the proceedure of selling but rather the fact that Thai’s don’t like to buy a house where somebody has died. They believe that the spirit of the deceased can hang around and haunt them… So a house that’s just, say, 5 years old in a new-ish estate shouldn’t be a big problem so much as an old family house where a grandparents, etc. has passed away.

  10. jim June 1, 2013 at 5:49 am #

    As a house owner [wife] rural and probably going to buy another house in Ubon in the near future, again wife and it will be on a mortgage. This is for the kids to attend a better school when they get older.
    This has nothing to do with me, it’s just securing the wife and kids future. If I popped my clog’s, they have the option to remain here or return to OZ and they wife would rather remain here than go back to get a job killing chickens in a factory.

    If I were living the good life somewhere, it would be rent, rent and rent, no question.
    Except for condos an alien has no legal right to own or control the use of land in Thailand. You remain in your house at the pleasure or inactivity of the Thai Government. No need to change laws they are already there. Jim

  11. Thuda August 27, 2013 at 8:40 pm #

    G’day I have just started to do some research on living in Thailand, as an old salt I’m in the mind of buying a nice boat and living on board so I can cruise, live on the pick, and sometimes in marinas.
    I think it’s better than owning or renting and if I don’t like the neighbors or the place I’m at I can move just by turning the key
    Whats your opinion, and where can I find info on marina pricing etc.
    Regards. Thunda.

    • Chris September 2, 2013 at 5:26 pm #

      i live in Chiang Mai not much info i can get from here if/when i do i’ll be sure to post it.

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