Thailand - Should I buy the building that we are currently renting for our business?

I’ve bought and sold many IP’s in NSW over the last 20 yrs but now live in Asia and run a successful small business with my wife. We have only been open a year but now incredibly busy and probably in the top 3 businesses (for our occupation) in our small city.


I seek opinions on this forum as to whether or not my wife and I should buy our currently rented building- or buy the building just down from us which is a similar size and structure. The owner just down from us is asking for 15million baht but everyone knows its common that the real price is 30% less than the listing price. Another one of our neighbours also thinks its worth 10mill. There are no real estate agents in our city. Everyone puts their own sign up. We would have to pay 1.8mill tax at the land office on settlement.


We currently rent our building at a really cheap price of 15,000 baht a month and signed a 10 yr registered lease at the land office. We have 9 yrs to go. I managed to negotiate this cheap rent as the building was run down but actually all it needed was small renovations and painting. Our building is in a great location only a block from a popular shopping centre with adequate parking. Our business has a turnover of 1.2mill a month with 25% expenses on average.


From what I’ve learnt about Thai property, the value is the land not the building. Most Thais prefer to buy new buildings and are generally too tight to spend money renovating. The single shop next to us has just been renovated and tenants are moving in soon apparently. The lady selling for 15mill (just down from us) obviously now see’s it as a good time to sell but her building needs renovations as well.


I recently showed our financials to the bank and he estimated that he could lend us between 10mill to 15million baht over a 30 yr loan term at 5.8% variable. He said 10mill loan over 30 yrs would be around 58,000 a month.


I have considerable money back in oz but the exchange rate is unfavourable now and I don’t want to send it over here. I prefer to pay back a loan for this reason. It’s good for my wife to learn to work hard and pay things back slowly. Its what I had to do…


If we have 9 years left on a lease for 15k baht a month, it's 15,000 x 12 x 9 = 1,620,000 baht. 58k baht a month x 12 x 9 is 6,264,000 baht. Obviously I think I need to ask myself is it worth 4.5 million baht to after 9 years having a house that still costs 58k baht a month for 21 years – plus 10-year old maintenance – and what would an estimated sales price be by that time?


If we don’t buy we face higher rent after the contract period finishes in 9 yrs which could be a problem, but in our case we could have a backup of 4.5 million, and obviously we can afford to pay 58k baht a month, so a higher monthly rent for a new lease term don't seem that scary.


If I think about the long term…. If our rent doubles for the next 10-year term, and again double for a third 10-year term, we would in principle pay (15k x 12 x 10) + (30k x 12 x 10) + (60k x 12 x 10) 1,800k + 3,600k + 7,200k = 12,600,000 baht. But actually I speculate that the owner knows that our current rent is incredibly cheap in hindsight. They are also customers of ours and live close by and they see how successful our business is.


We did look at many other buildings in our area, before taking this one, and the rental asking price was 50k to 75k a month. At the end of this 9 yrs I think the landlord will jump to the 50,000 baht – 75,000 baht range for sure.


The big question is what is this old building worth and what is the land value worth in 30 yrs time. I don’t know if this is correct but will this old building (built 50 yrs ago) be worth 23million in 30 yrs time or will I be alive to find out.


Personally I think we should buy it for peace of mind and setting up my wife and child for the future. If something happens to me then they have this building and are set up for life. If we have to move to a new building it’s a major pain in the butt because we run a medical clinic.


Or we start looking around at other newer options and buy something a different building. Perhaps rent it out for 7 yrs and evict them and move into that one. However, renting is a headache over here as its largely unregulated.


Please offer me your opinion on this if you have time

thanks

 

I lived next door in Laos for many years and the no matter how you did the numbers....corruption always made things really difficult...or even killed the deal. Even for "no-brainer" businesses.

Weather it was the concrete company using cheap concrete or the police who decided you need to pay protection, or even the power company who sees you're a foreigner and charges you accordingly....something always made things hard.

Thailand is not as bad as Laos but it's not far off.

I'd give it another year or so before I made a decision. Just in case something nefarious rears its head.

 

I'd never BUY anything in Asia.

 

No

 

Rent do not buy

 

Are you a thai citizen? non-citizens cannot own land with a very minor exception.

I had a friend who set up a company to hold a hotel. The shares of the company were transferred to another person illegally and they took control of the company and sold the land

 

I would not buy anything of significant value in a country where there is the possibility of corruption or an unreliable legal system

 

Im not a thai citizen and thus the building would have to be in my wifes name or daughters name.

Ive heard a few horror stories myself. One British guy in phuket was in the news about the wife transferring to a family members name and then selling it. This situation was all over social media bc he put this house in company structure for the sole purpose of preventing her from getting it. He had kids with this women and evidently she was bitter. IMHO if one has genuine wife and kids then one should financially support them as best as possible.

I will not be coming back to oz to live and my wife is really solid. For yrs she has proven herself in many ways.

The closer we get to the 9 yr end of contact term the more critical things become.

I see most comments are saying dont do it. But no-one is seeing it from my perspective that I live over here and want my 2 girls to be financially secure/ stable. The fact that Im not using oz money to fund/ repay this and that its only coming from the business makes it viable. The corruption issue is something for me to be aware of but we would obviously use an attorney and have evidence of everything at the land office (I would take a video as well)

 

that rules Australia out!

 

that is different. if your wife can qualify for finance why not.

 

I would certainly entertain the thought of securing the property depending on your type of business.

I worked in south east Asia for 10 years ... Viet Nam, Cambodia, Laos, Myanmar ... but not Thailand.

I have seen numerous examples where landlords have seen their tenants build a successful business, then terminate the lease and re-start an almost identical business themselves from the same premises.

 

AU is 13th on the list Corruption Perceptions Index - Wikipedia ... certainly not great and more of a reason to implement ICACs at every level of government.

 

So the oil refinery i purchased in somalia isnt a secure investment ?

 

That's a great business
Just need a few dozen guys with speedboats and guns.
Then the oil magically appears at your oil refinery complete with a tanker.

 

I think it hinges on trust and care of one's family. Thais treat family a big thing. In your case, you have a Thai wife, 2 kids, a stable marriage, planning to stay for long, buy it. It's not just an investment decision but a stability factor. May I ask what town is that? Given there's no real estate agents, must be a very small town.

 

You're correct thais treat their family well. Im low down on the pecking order with our street dog. But I consider myself lucky to have met her and now basically dont have to work anymore in a 'real job'.

I fear that the landlord will substantially increase the rent to recover lost money. It is for this reason that I think we should buy the building.

Last night we looked at some land on a new location 5min away- right on the river and has nice views. Its another option to consider buying this and building in 7 yrs time. Move over in in 8 to 9 yrs

 

Whereabouts in Thailand is the property?

 

Then try to negotiate a New lease now .
If what you fear is true ...no new lease or massive increase then negotiate to buy , relocate or buy elsewhere

 

Offer 5m or less.
Who would want to buy a property that's got a 9 year lease at 1.8% yield?