Buy-To-Let ? Make Mine “Rare”
By Bart Walters / Apr 10 • Categorized as International Real Estate •
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Welcome to the world of Buy to Let
“Buy a nice place … rent it out … live on the rent … sell for a profit” … it seems like a simple plan. Being a landlord is second only to English teacher as the choice occupation for expatriates in Thailand.
With a little money, you can set yourself up in such a one-person real estate enterprise which will feed you quite well without much hassle. Welcome to the world of BTL (Buy-To-Let). Choosing the right property and making it a home to the right kind of renters is the key to success.
When I first moved to Bangkok I was a typical greenhorn expat. I wanted to live in a James Bond bachelor’s pad in the middle of the action. Shopping for rental apartments in a city of 12 million people can be a grind. Most places I saw were small with crappy generic furniture. Serviced apartments are nice, but hardly home. I broke down and took a place in a prestigious building on Wireless Road; mostly to impress my attractive property agent.
I’ve never hated living in a place more in my life. It was cold and unfriendly. The wealthy Chinese-Thai families living there resented the very sight of me. My landlord tried to charge me extra for taking the plastic wrap off the sofa and chairs. During a fire alarm I learned that our fire escape stairwell was completely blocked with overflow storage of other tenant’s crap.
Three months after I moved in, a new shopping mall attached to the building opened and our lobby was situated directly below the food court. So, when you walked into our opulent granite and marble entrance hall you were greeted with the vulgar aroma of Mc Donald’s French Fries.
I broke the lease, forfeited my deposit and moved to Phuket after 6 months. (On a positive note, a torrid romance broke out with the attractive property agent and it remains my best memory of that place and time.)
Later that year I returned to Bangkok with a new plan. The only thing I ever learned in Economics class was the old axiom “we value that which is rare”. There were clearly not enough affordable bachelor cribs in Bangkok and I would take advantage of this situation. And so my vision was formed, The BBC; Bangkok Bachelor Cribs.
The first thing I did was locate a building that had the magic three elements: location; management and amenities. I settled on an older building on Sukhumvit Soi 16. This street is nicknamed “Soi Rahnahan” or Restaurant Street. Besides boasting a dozen or so really great places to eat, this soi is walking distance to one of only two Interchange Stations in Bangkok, where the Skytrain meets the Subway; the carotid artery of Bangkok.
The management of the building was immaculate and the security incredibly professional. The place runs more like a residential hotel you might see in New York. Laundry, taxis, food or any other services can generally be handled by the courteous staff.
Besides the aforementioned restaurants, there is a 24-hour grocery store across the street, and a huge fitness facility occupying 4 floors of the big high-rise on the corner. No less than 10 motorcycle taxis wait across the street all hours of the day; metered taxis can be summoned in 2 minutes. There simply is no more convenient location in Bangkok.
My first purchase was a tired old 76 square meter one-bedroom that hadn’t been renovated since it was new 10 years prior. I paid too much for it, and then spent too much renovating it. It turned out really nice, so I moved in and shopped for more property.
One day the building manager came to me about another unit that was urgently in need of a new owner. Upon viewing the condo, I felt sorry for the poor Japanese couple selling it. It was nice and big, with a really great view, but they had tried to renovate it themselves and screwed up so badly that the lights wouldn’t even come on. On top of it all, the husband had been laid off and they had to move back to Japan. I almost felt guilty about the price I got.
When the second crib was ready, I moved in and put my first creation on the rental market. Someone told me that Japanese were the best tenants, so I made my own sales poster using MS Publish and paid 1200 THB to post it outside The Villa shopping market in a high-income Japanese part of town. It wasn’t exactly “target marketing” but it was effective.
Within 3 weeks I had my first renter. She is a Japanese national working for Thai Airways. That’s right … my first bachelor’s crib went to a bachelorette. She fed me 40,000 THB per month for 4 years, and then connected me with a buyer when I decided to sell.
My second crib was bigger, nicer, cost me 30% less, and was a great place to live for another year. I ended up renting it to an American guy for a year, then an Irish oil and gas engineer who was only in the country 1 week per month. They fed me 50,000 THB per month; a 9% snack.
Sadly, one of my neighbors in the building was killed in a bizarre robbery during a trip to Hong Kong. Thais are notoriously fearful of ghosts and spirits so her Thai landlord was freaked out and wanted to fire sale the big corner unit. The owner gave me a deal so I transformed it into Crib #3, promptly putting a spirit house on the balcony nice enough to accommodate even the most discerning returning ghost.
It’s hard to beat a city sunset view from the Jacuzzi. This was easily the best place I lived in Bangkok, and it hurt me to leave and rent it out for 70,000 THB per month. I had run out of places to live and moved back to the beach.
Last year I finally sold all my Bangkok property to fund new project near the beach. When I look back at the BBC, I feel pretty good about my first attempt at the Buy-To-Let (BTL) game. I didn’t get “fat”, but I certainly felt well fed.
My first place gave me a steady income of 6.8% net return for 4 years, and I got all my money back at the end. What’s more, the money I got back was worth 23% more in USD than when I purchased.
The second crib gave me an even higher income of around 9% annually, and sold for a 35% profit after two and a half years.
The big corner condo returned a little over 9% per annum and sold for a 16% profit after 2 years.
All three units were sold with renters in place within 6 weeks of listing. It really is hard for a prospective buyer to argue price when he is looking at immediate returns of 8% net on his investment. It was like selling three mini-businesses.
And, I got to live in all three bachelor cribs for different periods of time!
If I hadn’t been so impatient to start a new project, I’d still be land-lording right now. (Apparently I’m not an income kind of guy … I need a project)
In Bangkok, finding the right building with the good management was crucial. Locating in a part of town that is desirable and convenient was essential. Being smart about people and knowing a good tenant when you interview them is an art form that must be embraced.
But, the real secret to successful BTL, especially in Bangkok, is making your place like a home and not a hotel room. Remember your Econ 101 … “we value that which is rare”. Bangkok is like a big concrete beehive; escaping the buzz is next to impossible; comfort and privacy are cherished commodities.
In a situation like this, don’t be cheap … make your place nice, easy to move in and difficult to leave … an inner sanctum … the eye of the storm … a place where people really live, not just where they change their clothes. People will pay more and stay longer, I can prove it.
From Athens to Amsterdam, a modicum of observatory powers will uncover the part of the market that isn’t getting served. Don’t listen to property agents or developers. Go live in a place and talk to people you’d want to rent to. Find out what they can’t get and give it to them. No place is perfect.
So it really is a simple plan. Find the right buildings in the right part of town and start looking. When your nose for a bargain or secret real estate informant finds a tasty BTL prospect, don’t be shy … open the door, greet the space warmly and say “hello sweetheart … what’s for dinner?”
You just might get fed.
About the Author: Bart Walters is a retired advertising executive from Orlando, Florida. He is now a part-time real estate developer celebrating his 10th year in Thailand. Bart lived several years in Bangkok, spent 3 years on the island of Phuket and now resides in Ban Amphur on Thailand’s eastern seaboard.
