Return vs. Interest

Investors will always consider the rate of return on their money. Even the value of stocks are based on their estimated income and the rate of return that investors are willing to accept. If he is a real estate investor from the US, he is justified in rejecting an offer that gives him under 2% rate of return. Real estate investments in the US will generate much more. In fact, you can park your money in an Ally (a US bank) savings account and make almost 1%. Investors are always trying to balance the risk and return of an investment. If an investment is more risky, or requires more leg-work, they will require a higher rate of return in order to invest in it. For example, if they can make almost 1% by buying CDs or putting money in a savings account (no risk), it would not be worth it for them to invest in real estate with a rate of return of 1.5%, because the real estate investment is more risky than a savings account and requires more work on their part.

In Vietnam, it is a little different from a completely open economy because the government has put monetary controls in place to prevent people from owning too many stable investments (foreign currencies, gold, etc.), so the price of land is higher than it would be normally, which drives the rate of return down (the more an investment costs, the lower the rate of return is).

jakejas wrote:

Investors will always consider the rate of return on their money. Even the value of stocks are based on their estimated income and the rate of return that investors are willing to accept. If he is a real estate investor from the US, he is justified in rejecting an offer that gives him under 2% rate of return. Real estate investments in the US will generate much more. In fact, you can park your money in an Ally (a US bank) savings account and make almost 1%. Investors are always trying to balance the risk and return of an investment. If an investment is more risky, or requires more leg-work, they will require a higher rate of return in order to invest in it. For example, if they can make almost 1% by buying CDs or putting money in a savings account (no risk), it would not be worth it for them to invest in real estate with a rate of return of 1.5%, because the real estate investment is more risky than a savings account and requires more work on their part.

In Vietnam, it is a little different from a completely open economy because the government has put monetary controls in place to prevent people from owning too many stable investments (foreign currencies, gold, etc.), so the price of land is higher than it would be normally, which drives the rate of return down (the more an investment costs, the lower the rate of return is).

Thank you! I understand what you say.
What I don't is
- Where did he get that "7.99% annual return" cause no bank in Vietnam has high interest rate. He said "Viet bank". You can compare interest rates of banks here http://laisuat.vn/so-sanh-lai-suat.aspx
I can't define "return" he's using. I though it must be "interest rate". Sorry if it's silly question cause I'm not good at this field.
- He said he knows Vietnam real estate well but he didn't know that if you rent out a commercial place at $1800/month. You only pay 10% VAT tax, no more for any other thing else. There's no applying vacancy factor cause he can immediately continues contract with the tenant.
- Real estate in Vietnam is at it's bottom line, which will give him big chance to have add value if he buy the properties now and sell it later in next 1 and a half year. In the mean time, he still can lease it.

I want to make things clear before I keep emailing & persuading him or stop our conversation.

I can put 16B vnd ($762,000 usd) in a Viet bank for one year and get 7.99 % annual return or  approx. $60,960 usd in annual interest.  It appears I am better off with money in the bank.

The rule of thumb, apart from the interference from SBV, is that the rate of interest is exceeded by the rate of inflation, therefore his money depreciates.

Rental agents typically charge one months rent as commission on a One Year Rental - and of the lease is short-terminated the Agent is obliged to find another tenant.

If the US character is not VNese (Viet Kieu) he cannot, at this time, own a house. This is under review. I believe there is also a tax (at least on business buildings) if they are sold and the money destined to return overseas.

I only acquire land. Another method is to form a company, transfer ownership to it, then sell the company rather than selling a building. My lawyer advised that my wife's two hotels be set up this way whereas the office and home buildings are in our names.

This is why you need legal advice!

Thank you, Jaitch!
Btw, this man is contacting me for his real estate company.