Neil McDonough

Myths and misconceptions regarding real estate in Bangkok and Thailand.

Some of the untruths that get banded about concerning Thai real estate


As this is the time of the year when many new teachers arrive in Thailand I hope it may be useful to address the many myths, urban legends, misconceptions, Chinese whispers and outright lies that people hear before coming to the country and even in their first few months here concerning real estate.

Many of the myths and urban legends addressed in this article will be ones that we have actually heard from our clients or from other sources within the industry. Also I would like to state from the outset before the barrage of comments and criticisms come in about this article; many of the points covered and claims made by me refer to the general situation and not specifics. So although there are possible exceptions to any rule, it is unlikely the average newbie to Bangkok or Thailand will have to ever encounter them. However I do accept that I'm sure a small percentage of readers of Ajarn.com can claim to contradict most of what I say, using the tiny percentage of exceptions to prove their point.

Myth 1: Thai landlords are immoral, unscrupulous cheats that will always retain your two months deposit.

This is not true at all, and providing you use a reliable and registered real estate agent like my own company EasyHomes to broker a deal for you with a fair and reliable lease agreement, then there should not be an issue.

Most contracts will allow 45 days for the two months deposit to be repaid, which allows the landlord/landlady time to collect and check all the bills and check any damage to the property or the furniture within.

In our experience of dealing with hundreds of foreign clients each year, in our six year history I can only recall two incidents where there was a dispute of any magnitude. In both cases all sides backed down once legal proceedings where mentioned and a fair compromise was achieved.

So although I will not say it is impossible, the chances are much less than 1% that you'll have a problem if a reputable and recognized real estate agent is involved, as they will not just source a suitable property for you, but also a suitable professional landlord with whom they will have weight with.

Myth 2: I can rent a huge property for a few hundred dollars a month right near a BTS or MRT station.

I'm sorry this is just not true, in Bangkok you really get what you pay for: if you want new; modern attractive; and within walking distance of a BTS or MRT station for about US$500/month then you are not going to live in a huge palace.

Unfortunately many new expats come to Bangkok with unrealistic expectations and ideas. Perhaps they've heard a story from a friend who lived in Bangkok 15 years ago, or a friend who lives there now but has not clarified exactly which part of Bangkok he lives.

It is worth remembering that Bangkok is enormous, and you can travel distances of 30-40Km and still be in ‘Bangkok'. Just looking a few facts and figures on Bangkok and compare them to London (Europe's largest city) and New York the most populous city in the USA. The figures are very compatible and give an idea of the enormity of Bangkok.

• Size SqKm: London 1 572; Bangkok 1 568; NYC 1 214
• Population: London 7.8m; Bangkok 9.1m; NYC 8.2m

Now using this as relevance you can see all three cities are comparable in both size and population. There is a good chance you have visited or lived in London or NYC before, so you will know how massive, busy and varied these cities can be. This I hope gives you an idea of what you're up against when someone says ‘I live in Bangkok" - It literally could mean hundreds of scenarios.

I have never been to NYC, but I know from visiting London on a fair few occasions the contrast from one district to the next. It is possible to live relatively cheaply in some parts of London, but is it where you'd choose to live if you had the option?, or is it even safe? I'm pretty sure NYC is similar in this respect, certainly Queens, Bronx and Manhattan all offer very different living environments and subsequently living costs, as do Kensington, Dagenham and Hackney in London.

So you can see how ‘living in Bangkok' can be portrayed by one person to another or even then misinterpreted by one person to another.

Myth 3: There are thousands of properties on the market so finding one that suits me and negotiating a big discount should be easy because the owners will be desperate for a tenant.

This is a very common misconception. Firstly as with ‘Myth 2' although there are thousands of properties on the market, most would not be appealing to the average expat. Let's face it you had a certain standard of living back where you have come from and you are coming to Thailand for a new challenge and hopefully to raise your living standards, why settle for a property that is lower than the standards you are used to at home?

Secondly, Thais buy properties quite differently than we do in the West. In the West (as we clearly now know) we borrow large amounts of money from banks that often we struggle to pay back or cannot pay back - sub-prime mortgage crisis anyone? - Therefore if we in the West purchase a buy-to-let property, we are very keen to rent it out to repay the mortgage. However Thais predominantly buy all properties in cash, that's it, 100% cash down. They have no mortgage, so they have no mortgage payback fears. They are then in a much stronger position to negotiate the contracts and pick and choose their tenants. The last thing they want is to rent a property to a tenant who causes more problems and damage than they are worth. So many Thai landlords will happily allow a property to sit empty for years - I know this seems illogical to us, but it is not to them.

If they have no mortgage repayments and interest payments to worry about, then why not just sit back and let the property appreciate in value. And perhaps one day it may be useful for one of their family members. Also what else are they going to do with the money? They can't invest in foreign countries and markets easily as they are unable to take large sums out of the country. They don't want to leave it in the bank with a tiny 1-2% return. And they generally don't want to place it on the SET which is very unpredictable. So buying a well located property in Bangkok is a logical investment.

Myth 4: If I rent an older property I'll save money and I could do it up, a bit like a traditional ‘loft space' in NYC or London.

Thai structures are not like those in the West, or more precisely older Thai buildings are not like those in the West. There are not great looking warehouses made of solid brick that could be converted into trendy expensive yuppie flats or condos like those in London or NYC. There are not beautiful but dilapidated houses that just need a bit of care and attention like in urban areas of London and NYC. Until about 40 years ago almost all structures were made from wood and so concrete and brick structures are hardly blessed with the architectural beauty of an old Victorian or Georgian building.

Instead older Thai structures are generally cheaply built, unattractive square blocks built 30-40 years ago that literally just served a purpose. In addition, little to no maintenance work has been performed on them since they were first erected, so don't expect to find beautifully maintained quaint traditional housing in Bangkok - it does not exist.

Basically Thailand did used to build well designed architecturally attractive houses 50 or so years ago out of wood - mainly teak - and these are the ones you see on brochures and tourist websites attracting you to Thailand, however the thought and effort that went into these designs was literally thrown out of the window once concrete arrived in the Kingdom.

Only now are architects starting to use concrete to build structures with a bit of style and thought. Now modern condos and offices have a degree of modern style and chic about them.

Also it's worth considering that Thailand like most tropical countries has a good degree of large unattractive insects and other vermin. And an older poorly maintained structure is far more likely to attract these creatures.

Myth 5: If I lived on the outskirts of town I could save money on rent and enjoy the best of both worlds, the big city and the clean rural air.

Put quite simply if you live on the outskirts of the city you will be confined there on a day to day basis. Given the poor inadequate roadways, metro systems and traffic jams it is simply not practical to commute from the outskirts of Bangkok to the city center five days a week.

For a start you could easily spend four hours commuting a day, and believe me this would not be a pleasant scenic commute, more one of traveling not much more than walking pace through a city full of cars, buses and trucks.

Then there is the cost, for what you may save on rent, you'll spend and more on travel. The whole operation would be self-destroying.

And another parameter to think of is, how will you integrate into an expat community? With most expats living in the heart of the city and most expat bars and restaurants in these areas, it would be very difficult for a newcomer to build up a group of friends on the outskirts of town. Yes Thai people are friendly and yes they have very endearing attributes, but with little to no English from most people and not much in common, this novelty will wear thin pretty quickly.

As mentioned I certainly don't claim that the above is 100% fact and cannot be opposed, and yes there will be a few exceptions to the above rules, but the chances of them happening to you are a tiny percentile. Yes you may get very lucky with a property where the landlord drops the rent hugely. Yes you may get very unlucky with an immoral landlord who takes all the deposit and makes life difficult for you, but these two examples could happen in London or NYC too! At the end of the day Bangkok is just another big city like any other.




Comments

Thank you for that, Neil! Could you say something about tax losses and other incentives? Lots of landlords cannot even enjoy positive cash flow when you compare some sale prices versus rents. Point in case, I bought a SFH in Gadsden AL for ~ $ 36 k and am getting $ 7.2 k rent p.a. Over here, some people buy a condo for 1.5 m which they could rent for maybe 8-9 k. This makes no sense to me! As does the behavior of landlords who accept vacancies for years rather than lower rents or offer some "moving in special" like a month's rent off.

By Chris, Northern Thailand (11th August 2011)

Great article Neil. I do not say this often but I actually agree with just about everything here. What gets me is that since I've been here for 10-years and I've always had an apartment within 10-minutes walking distance from my school/job. I've always relocated to one of those 1-room apartments with a small balcony. They were always partly furnished, a bed with a smelly mattress, a TV cabinet minus the TV, a wardrobe and one time I got really lucky and had a table in one of the apartments. I've always and continue to live on the Thonburi side of the river.

Average rent about 4,000 Baht per month plus your 2-months deposit. The part that gets to me is that I've been living in a townhouse now for the last 4-years and this house is located in a private village about a 10-minute ride from The Mall Bangkae. This village is very quiet and clean and has no type of street vendors except for the mobile ones that come everyday selling their goods and then leave. I am paying 5,000 a month for the 3-story/bedroom townhouse with a back yard (however very small twice the size of a bathroom) and a front yard with gates that swing open to park the car (although the streets are wide enough for two parked cars opposite each other and still drive between them). Did I mention about the community center 2-min. walking distance from my home with a pool (I haven't yet tried), tennis courts etc.

Also my electric is about 3,000 a month and that isn't bad considering I was paying about the same with those huge markups to the apartment management offices and now I pay directly to Egat or whatever. Oh no furniture but a very good price if you want your space along with living in a more civilized community not much traffic or those so called jams. All in all a super great value here and I'm here for life. Screw those apartment building managers who tack on 7-10% on the water & electric bills plus the fee for the sleeping security officer and the old lady who mops the hallway floors on the last day of each month using the same water from the previous month. So nice here and at last count 7 soi dogs and 2 cats inside the whole village and they usually hang out by 7-11 right near the main entrance to this great village.

By Donald Patnaude, Bangkok, Thailand (9th August 2011)

Very good article.

By Paul Rogers, Bangkok (7th August 2011)

Good article. I agree with Neil's conclusions on the truth behind those myths.

By gogreen, USA (7th August 2011)

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