It seems like yesterday since I wrote here an article Jumping into the Thai real estate market head first, yet long and rather eventful 6 months has passed since than. And so I thought it could be interesting to see what progress has been made on this latest of our real estate investing adventures.

Firstly I need to report, that due to other family and business related commitments we have not had as much time as we would like to have in order to proceed with this investment on somehow faster schedule. In other words, our in May 2007 purchased “diamond in rough” was left sitting untouched until up to late November.

Connecting the services
As the house was sitting idle for quite some time even before our purchase, all the necessary utilities were long disconnected. Hence for our little renovation to proceed first thing we had to tackle local bureaucracy and get the services reconnected.

To our surprise this proved not as hard as we anticipated, but still has taken about 2 weeks in time and about 6,000 baht (US$200.-) in funds. The fees were somehow higher due to a need for a brand new “water meter” system installation.

Tenderly loving and caring
With all the utilities connected up we employed a trustable and well known local handyman to oversee the entire renovation. Even though the property was in an “unliveable” state, all that was needed to get it upto scratch was just a few light works such as general cleaning, a change of one internal door and complete painting of all windows, doors, ceiling together with the walls both inside and outside. All this was for a pricely sum of 23,300.- baht (US$800) finished in matter of 3 days.

Again I must say that once the price and scope of work was agreed, the locals certainly do not tend to muck around with their business. They jumped at the task at hand as soon as possible and, with some minor supervision, finished the work in good quality within a very short period of time. I am not sure if the thought of a quick cash payout or anything else affected the work attitude or if it is just a regular occurrence here, but both the overall renovation result and the speed with which it was achieved exceeded our expectations.

The important numbers updated:
• Exact purchase and transfer cost 163,000.- baht (US$ 5,500.-)
• Utilities 6,000.- baht (US$200.-)
• Renovation cost 23,300.- baht (US$800)
• Yearly cost of ownership estimate (repairs, taxes, fees) 4,000.- baht (US$ 135.-)

Making money from the rent
The next step is now again a crucial one – finding a tenant. This may prove somehow more difficult than we are used to since smallish Thai towns such as the one we live in here do not really have any real estate agent we could employ for this. If I understand it correctly, the normal way of advertising a property for sale or rent involves in most cases one simple FOR LEASE / RENT sign in front of it.

Of course we are trying to do a little better than that and have already posted number of leaflets around the most frequented areas of the town. To date this only resulted to 3 inquiries and nothing more.

As it stands we are looking for 2,500 baht in monthly rent (US$ 85,-) which would mean quite satisfactory 15.3% gross yearly return on overall investment (30,000.- baht in yearly rent / 196,300 baht of total purchase and renovation cost), however should we not have any luck at that price within next month or so, we are thinking to go as low as 2,000.- baht per month. This would decrease our return to about 12.2% per annum.

In my opinion still well worth the hassle considering the term deposits here in Thailand pay around 2.5% p.a. and the best term deposit rates worldwide seem to sit somewhere around 8% (should anyone need any pointers look at New Zealand).

Dreaming up the future
Hence overall I must report: so far so good. We are pretty much meeting or exceeding the budget together with all the other expectations and currently we are only left to overcome one last important hurdle – finding a suitable tenant. If that can be done at the rental levels I indicated above, than really the sky is the limit here as similar property investments are by no means rare here in Thailand countryside.

So wish us luck and make sure to visit here soon for another installment of our Thai real estate investing adventure!

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This entry was posted on Tuesday, January 8th, 2008 at 10:15 pm and is filed under Real Estate. You can follow any responses to this entry through the RSS feed. You can leave a response, or trackback from your own site.