Thailand is many people’s favourite holiday destination. Some people like Pattaya, some Phuket and some like Koh Samui, so it doesn’t really matter where you come from, it maybe Europe or you may be a Bangkok resident, Thailand is a great place for a getaway.
If you are one of those people who like to visit the same resort again and again, staying in expensive hotels, you are perhaps one of the people who should consider buying a holiday home. There are lots of advantages of owning your own property, not just the savings made on hotels bills, they are a place where you can keep your belongings, a place that has more to offer than just a bed and a bathroom – they are a place that you can visit as and when you please.
In addition, you may want to use your property as an investment property, gaining rental income as well as capital appreciation at times when otherwise the property would lie empty. This is a win-win situation, you have a holiday home and it the same time it is making you money. Developers have soon recognised the potential and are now creating properties with exactly this in mind.
It should be understood that trying to have a place to call your second home, one that generates rental income, and one the appreciates in value is not easy. Purchasing a holiday home for yourself is the easy part, you just have to choose the property that appeals to you most. However, buying a property that is desirable to others – therefore can generate rental income and appreciate in value is definitely more challenging.
The regulations here in Thailand don’t lend themselves very well to earning rental income. For instance, it is illegal to rent out your property for less than 30 days without a hotel license. This is frustrating when you consider that most people who come here on holiday stay for less than 30 days.
The good news is that many resorts have the potential for long-term rentals. The problems start to occur here when you start considering who would manage the property – especially if you are not based in Thailand yourself. Most properties owners use sites such as Airbnb or Booking.com although this by no means guarantees tenants and certainly doesn’t get around the issues of managing the property.
As a result, many owners are finding that they aren’t achieving the income that they had hoped for, their properties are getting damaged, and tenants feel that they have no-one on the ground who they can turn to if something does go wrong.
We have found that many prospective owners actually see rental income as a priority rather than finding a holiday home. They view the property as paying for itself and the rest of the rental income can be used to pay for their holiday when they arrive.
One solution that has been used to get around this type of problem is for developers to build properties that come complete with hotel licenses and provide hotel management services. This means that rental income can be secured from guests staying for shorter periods. In many cases, rental revenue is pooled amongst all owners and then everyone gets an equal share on a monthly basis regardless of if their individual room is rented or not.
This method effectively removes some of the major obstacles such as the rental management and ensuring that the property is properly maintained. The only downside is that you a relying on the now hotel operators ability to manage the property properly and most importantly, be able to attract guests in the first place. It is always advisable to do your due diligence and go with a well-known hotel chain or alternatively, a developer who has been operating and managing this type of scheme for several years.
Several developers, the New Nordic Group for instance, are offering rental guarantee concepts whereby the developer offers the buyer a guaranteed rental yield for a certain number of years. This type of deal is also offered by some of the major hotel management companies. These all seem like reasonable options but there are lesser known developers offering similar schemes so the old adage that a “guarantee is only as good as the guarantor” should certainly be heeded.
If you are interested in this type of project it is important to take several factors into consideration, not just the reputation of the management company. The location and amenities are also crucial to how popular the “hotel” will be in years to come. You need to consider if it will still be an attractive destination in two or three years or whether better places will be available – basically, the longevity of the property needs to be taken into account.
It has been noted by CBRE that there has been a significant shift, especially in resort locations, that there has been a move from own-use buyer to investment-orientated buyers. Essentially, buyers should understand their own reasons for wanting to buy the property before purchasing in order to ensure that it meets their expectations. A quality real estate agent or investment advisor can give you all the information that you require.
Emerging Trends Advisors (ETA), are a company that focuses purely on investments that are backed by property. They have their own lawyers who conduct due diligence on properties that are available and only recommend the ones that they are completely satisfied with. If you would like more information about this type of investment, contact us for details.