Choosing The Best Condominiums for Investments
Property is an extremely popular investment vehicle with investors realising healthy returns through rental income. However, to maximise your return it is important that needs of the tenant a fully understood.
Firstly, different locations have different markets. For example, the prime rental market in Bangkok is expatriates whereas in Pattaya the trend has shifted more towards short term rentals, predominantly holiday lets.
In Bangkok, there are 85,000 expatriates with work permits plus large numbers of diplomats and other people living in the capital but with work permits for other areas. These expats tend to favour central Bangkok with the Sukhumvit area being the most appealing followed by Lumpini and Sathorn.
It is therefore common sense that an investor who is looking to maximise their returns needs to buy a property in one of these areas. Of course, in these areas some sois will be more appealing than other with expats tending to opt for locations close to BTS and MTR stations and away from the popular entertainment areas.
Where in past expats were given large housing allowances this is no longer the case. In Bangkok, the average budget for a two-bedroom condominium is between THB60,000 and THB70,000 per month. Once again, for an investor to maximise their earning potential they need to be looking at a unit that will rent in this price range.
In Pattaya, the market tends to centre around guests staying for between one week and three months. Most of these visitors come from China and Russia and a part of organised tours and usually families. Their preference is generally something close to the beach and with all the necessary amenities close by. The Pratamnak and Naklua areas therefore have a natural appeal.
The properties that are desired by holiday makers as opposed to expats is significantly different and therefore properties renting for THB60,000 to THB70,000 for a month wouldn’t be appropriate. Indeed, most will be unaware of the cost of the property in its own right as they will come on package holidays. These package holidays need to be reasonably priced so naturally the accommodation that investors purchase will need to be in this bracket.
Of course, cities that rely heavily on the tourist industry will also be subject to high and low seasons with occupancy rates throughout the year reflecting this. This affects the ROI with many condominiums laying empty for a few months a year. Developers have realised this and are now selling condominiums that come with a rental guarantee – a monthly rent is received regardless of if your unit is occupied.
This is a very appealing investment with returns being offered of anywhere between 5% and 10% p.a. When this is coupled with a guarantee that could be anything up to 20 years, you start to appreciate that investors are flocking to these types of investment in holiday destinations. In fact, it is not just condominiums that are offering this type of deal but some of the developers are offering similar deals for units in 5-star hotels.
In markets such as Pattaya, these rental guarantee concepts seem to be the way forward bringing together both demand and supply. This is not the case in Bangkok so once again we return to the point that it is vital that the market is fully understood. In either case, the primary objective of investors and developers is to generate the highest possible return and this can only be achieved by giving tenants what they want.