ETA | Rental Guarantee Feasibility Report
We are confident enough in our product not only to secure your principal amount invested with a freehold title deed but to pledge further assets giving security to both the returns and any “Buyback Guarantees.”
We have calculated the rate at which we need to acquire a property to sell it with a “Rental Guarantee” that is possible and with minimal risk. As long as we can purchase at a rate equivalent to the % shown in the graph below, discounted from the final sales price (bank valuation price), we know that we have a variety of options available to us that make it wholly viable and profitable.
Please see below the various ways we can go
Bank Value – 92,000 THB per Sqm
Bank Value of Unit – 3,542,000 THB
As above shows units between 3,000,000 THB – 5,000,000 THB require a 39% discount
so 3,542,000 x 39% = 1,381,380 THB
Our maximum purchase price 2,160,602 THB
Sale price 3,500,000THB
ETA agent comm – 3%
Sub Agent comm if not ETA – 7% 3,150,000 THB
Original purchase price – 2,160,602 THB
Net profit – 989,398 THB
Rental Guarantee to the buyer – 245,000 THB (7% of 3,500,000 THB)
Property Management/ Maintenance – 10,000 THB
Wear and Tear – 25,000 THB
Total Annual Liability – 280,000 THB
Realistically Achievable Income
Market rate 15,000 THB per month
Minus 1 month for agent comm
Minus 3 months unoccupied
Total Achievable Income – 135,000 THB
Annual Deficit – 145,000 THB
Total Deficit over five years – 725,000 THB
Kai – Faak (sale with right or redemption)
Thailand maximum interest rate – 15%
Kai Faak agents commission max – 5%
We have our own Kai Faak agencies that enable us to lend securely and legally and receive 20% interest per annum.
Compound interest is calculated by multiplying the initial principal amount by one plus the annual interest rate raised to the number of compound periods minus one. The total initial amount of the loan is then subtracted from the resulting value.
Here is an example of what the “initial profit” would turn into after five years compounded at 20% per annum.
This was done using the compound calculator on money chimp – http://www.moneychimp.com/calculator/compound_interest_calculator.htm
Initial profit after five years in Kai Faak is more than enough to cover the annual deficit and still return a healthy profit.
2,461,916 THB – 725,000 THB total deficit = 1,790,000 THB total profit
Obligation to buy back a condo that has had a reliable tenant for five years for 3,500,000 THB in which I have made a 1,790,000 THB profit. Plus, other unencumbered properties that had been securing these guarantees. So, the option to get a mortgage is always there.
Simply use the initial profit to make up the deficit on a monthly basis:
7% of 3,500,00 THB / 12 = 20,416 THB per month
135,000 THB / 12 = 11,250 THB per month
20,416 THB – 11,250 THB = 9,166 THB
Initial profit per month
989,389 THB / 60 = 16,489 THB per month
Initial profit – 16,489 THB per month
Monthly deficit – 9,166 THB per month
As you can see our initial profit margin is sufficient enough to enable us to meet our commitments comfortably.
Please note I’ve used very conservative figures here to show the math and at the highest price I’ll buy at. On average, we have managed to acquire properties at these prices, making our initial profit considerably higher.
Utilising our network of companies, we are doing multiple things that again give us more options when it comes to making sure both us and our clients are secure.
1) Constructing our own properties
2) Renovating run-down properties
3) Love Pattaya All Inclusive Packages
4) Utilising the units to house our staff, for maximising the occupancy rates.