How both, real estate investors and future home owners, can benefit from the ‘short-term hold re-sale market’ in Pattaya, Thailand (“Flipping”).
Real estate investing in condo flipping is considerably different in today’s market. Not so long ago flipping property was one of the more profitable real estate endeavors in the Western World.
Real estate flipping meant purchasing distressed properties, in need of repair, under market value. Chances are that you have seen a TV program about real estate investors who purchase fixer-upper homes. They make repairs and renovations, than sell the condo within a short period of time for a large profit. Although it isn’t quite as easy, this way of flipping - we call this ‘the old flipping’ - can be a rewarding and profitable investment strategy, also in Pattaya.
‘The new flipping’ also called short-term hold re-sale is a bit different strategy, known here in Pattaya and other fast growing cities. Let me explain.
In most condo developments, an average of 20% down payment is collected from buyers who commit to a project in the preconstruction stage. Another 30%, sometimes 0%, is spread over the construction period.
With the deposits, developers and their lenders receive a layer of protection: A buyer is unlikely to abandon a down payment of a fifth of the value.
After paying the deposit and signing the contract between buyer and developer, the buyer has the right to sell his contract to purchase the condo at the agreed price. Buying bulk often helps the buyers to negotiate a better price per square meter.
During the construction period the prices of the condos increase. How faster the sales, the more likely the developer decides to increase the price. Also the start of construction and reaching the middle and top floor will drive the prices up.
Now flipping the unit, selling it before the last payment needs to be made, gets interesting and can be profitable. One of the buyer’s advantages can be that he can offer the unit below developer price.
For example: say that you bought a 2,000,000 baht condominium at pre-launch stage, when the prices are the lowest, or just after. You pay a small reservation fee at booking and within a month the 20% deposit at signing contract (the height of the deposit varies per developer between 10-30%). You now have paid 400,000 baht. The next installment of 10% is most likely to be after 6 months and so forth.
Of course you will be the first to know about the pre-launch of a new development - considering you are one of our happy investors -, or otherwise at least within a month after that and you will be able to buy the units at the best price possible. During the period between your deposit and your first installment the prices will increase when more people get to know the project. Also not everybody feels comfortable buying in a project at such an early stage. When the developer starts pouring concrete for the foundation you will notice a new wave of sales too.
Ok. What makes flipping so profitable than?
Let me explain this through another example: In August 2012 we informed one of our dedicated investors about the pre-launch of the Golden Tulip Hotel and Residences just of Second Road in Pattaya. The early bird prices were set at 67,000 baht/sq.m and because we negotiated a 4% discount for him he bought three 47sqm units with pool view. Last February 2013, just before his first installment of 5%, he asked me to unload one the units with a profit. We flipped the unit just under the developer’s price of 80,000 baht/sq.m at 76,000 baht/sq.m. Initially he paid a deposit of 20%, which is 604,608 baht, over the total price of 3,023,040 baht. We sold the unit for 3,572,000 baht minus our commission and he made a profit of 408,960 baht, 67.6% return on investment, in six months.
As a future inhabitant of Pattaya or as a landlord letting properties it is also interesting to follow the “re-sales” of the short-term hold re-sale market. When you are ready to buy, that is where you find the best price.
Flipping condominiums is quite a common practice here in Pattaya. Many people are benefiting by this strategy; ‘real estate flipping investors’ as well as ‘future condo owners’ interested in living in this great city or letting their property for a healthy return. Everybody wants to get the best price when he is ready to buy!
Ask us for more information and let us help you to buy and sell your condo for the best price. We speak English, Thai, Chinese, Dutch, German and we have a Russian interpreter.
Steyn van Hovell
+66(0)38 304 136
+66(0)8 4437 3467
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