Should I even consider my (less than ideal) local market?

[Gary Dezoysa]

I really want to get into real estate investment, but my local area (Pattaya, Thailand) has some rather undesirable traits that are making me reconsider.

I was hoping more experienced investors could offer insight into whether I should even consider being a landlord in this market, or avoiding it. Here are some relevant details:

-- As a foreigner I'm restricted to buying condos only

-- Appreciation is weak to nil. There are many new constructions going up in this expanding tourism/retirement area

-- Gross rent yields on retail properties (at list price) seem to hover around 5-12%

-- The area is seasonal due to the tourism. (There is a base of permanent expats and local workers also though)

-- Taxes are based on sales prices, not cap gains.

There are positives though. The local market is high distress; some retiree foreigners have financial issues and go back to their home countries. Entry prices are low; a low end condo can be had for around $20,000.

What do you guys think? Is there potential here? Or would it be prudent to look elsewhere, even with out-of-area hurdles considered?

Thanks

[Jeffrey H.]

I would run a test advertisement to see how much rent the $20,000 condo (or whatever your price point is) would pull per month.  If you're getting 3+ calls per day you would probably have it rented quickly.

Put together your pro forma and if the numbers make sense pull the trigger based on cash flow / cash on cash type metrics.

The only question mark is whether you're planning to cater to a 12 month tenant or rather a seasonal expat tenant - you will need to be very careful with your vacancy rate given the nature of the location.  Hopefully the market is out-of-band right now and the test ad will give you an indication of demand during the "slow season."  If your demand is good then you should be pretty good to go.