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Buying-to-Let in Thailand: The Facts
THE FACTS
Thailand promises a beautiful vacation paradise, where you can live out your getaway dreams in a land of stunning beaches, historic sights and an attractive, cultural melting-pot. This wonderful and tempting lifestyle is precisely why Thailand’s property market is so healthy and competitive, making it an attractive target for those looking to invest in real estate.
With a greater number of people retiring to the country, and a steady growth in tourism, amounting to 10% per year, an increasing number of investors are interested in ‘buy-to-let’ properties, or properties that are purchased and then rented out for income.
If you’re an investor looking to capitalize on this property and renting boom, it’s important to know the facts about the investment you’re about to make. In this article, we present the facts that you should take into account before buying a Thai property to rent out.
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Price Check
If you’re operating in an unfamiliar market like Thailand, you’ll definitely need to scope out the prices of properties and cross-reference them with your target property. If you believe that what you want is overvalued relative to current market conditions, then you should address this with the realtor and the real estate agency. If you can provide evidence that the property is overvalued, that typically provides you with enough leverage to renegotiate the price.
Also, remember to consider how much your estimated rental income will be and compare it to how much you’re paying for the property; your investment must have a good yield after taking this into account.
Meeting Demands
Supply and demand will dictate many of your investment’s parameters. Consider both the number of available rentals in the area you’re scouting and the demand for spaces to rent by tenants. If your area has too many available units for rent, you may not be able to find tenants. Similarly, an area with too little demand will not be as profitable as you’d like. Ensure you do your research, and that includes looking into added- value services in the area, such as accessibility to public transportation, proximity to malls and groceries, and other favorable amenities.
Relating to demand, also take note of the kind of tenants and type of unit you’re aiming for. If you’re thinking of investing in properties that are tailored towards wealthier residents, ensure that there is an adequate market for these potential tenants in whichever location you’re considering.
You can also look into adding value to provide a unique selling point for your property, whether for rentals or future resale. Adding an additional living space, pool, loft, bathroom or basement will definitely add value and catch a potential client’s eye. You’ll only get one chance to impress them, so make it count.
Purchasing Property
Providing a property that’s available to rent naturally requires you to own it in the first place. As a foreign investor, you are not allowed to own property in Thailand in your own name. To own property, you must either purchase it through a Thai limited company that you create or acquire it through a renewable leasehold agreement.
In the first case of starting a company, what you need is a lawyer to set up the company and a fee of approximately US$1300. The lawyer will set you up as the director of the company and add two Thai shareholders, as is required by Thai law. You’ll maintain complete control over the company, and you can also change the shareholders at any time.
By creating a Thai limited company, you get certain tax breaks on your property because you own it through your company. You also get more freedom as to how you can develop, sell, transfer, and otherwise, do whatever you want with it. The only additional consideration is that you will need to take care of the company’s financial books, and there must also be regulated shareholder meetings and minutes. All of these can easily be handled by a hired accountant.
In the case of leasing, you can pay a fee and get a 30-year leasehold on your property. This can be extended in increments of 30 years, up to two times, enabling a total lease period of 90 years. This is the more expensive option, with the fee for a leasehold agreement weighing in at around US$1900.
Buy-to-let in Thailand
Tourists are visiting Thailand in ever increasing numbers. 32.4 million people visited the country in 2016, representing an almost 11% growth in the tourism and travel industry, and the sector appears set to grow at an average rate of 6.5% per year, establishing it as the 10th fastest in the world for tourism.
This astounding growth has spurred investors to snap up some of the many developments that are popping up to meet the demand. Property prices are still low and interest still high, especially in places like the island paradise of Koh Samui.
When considering your buy-to-let strategy, you’ll need to decide whether to opt for a short-term or long-term approach with your rentals. There’s a peak season of November to February, where you’re likely to make the most income, so one optimal strategy would be to rent out more expensive, short-term periods during these months, then rent out cheaper long-term durations during the off-season. If you’re tackling other demographics besides tourists, this may or may not apply, and you could be working long-term tenants all year round.
This isn’t a simple matter of how long or short you choose to rent out your unit. You’ll also have to consider the maintenance cost of your property while no one is using it.
Whatever you choose, purchasing property and renting it out is definitely a lucrative market in Thailand, and the returns are going to be well worth the investment. Just what these returns are will be dependent on how you handle the market and the information you uncover when you do your research.
