Holiday Home or Investment Property?
Thailand and its popular resort cities are an extremely popular holiday destination both for international visitors and those already living in the Kingdom and wanting a weekend getaway.
For many people, they like to return to the same resort and hotel every time they visit, they have had a good experience and feel relaxed returning. However, staying in hotels, especially on a regular basis can prove to be expensive so considering a holiday home may be an option. If you buy a property you will not only save on hotel bills but you can come and go as you please and no doubt have better facilities in the room than you would in a hotel.
The problem for many is that their new property will lay empty for long periods when they are not in Thailand. Some see this as an opportunity to generate a return via rental income. This will allow the property to effectively pay for itself as well as appreciating in value. The problem is then, what happens when you want to stay in your property but you already have a tenant?
The laws of Thailand don’t really help people in this situation as rentals under 30 days, what you would really need, are illegal without a hotel license. This means that you are looking at more longer-term rentals and this could well interfere with your plans. Balancing a place for yourself, gaining rental income as well as capital appreciation can prove very complex.
This can be the problem as buying a holiday home for yourself is relatively straightforward. You probably already know what area you are interested in and the type of property you want – meeting your own personal enjoyment goals is easy, however gaining rental income and capital appreciation may not be quite so simple.
If you are looking for tenants on a short-term basis, but over 30 days, you could try advertising on Booking.com or Airbnb.
Once again you will be met with potential problems as who is going to manage the property on your behalf, collect the rent, pay bills, ensure that it is properly maintained? Finding a quality management company can be expensive and many won’t look after your interests.
In reality, you need to decide what your primary objective is with your new property? Is it your holiday home or is it something that you are looking to generate rental yields from? If it is a holiday home you perhaps need to forget about rental income unless you are planning on renting to friends or you know someone who will manage the property on your behalf.
This type of deal can prove to be very attractive. For one, it removes any rental management issues, and secondly, you can be confident that your property will be properly maintained. However, you do need to choose a reputable hotel management company, one that will fulfil their obligations whilst at the same time having the pulling power to continually attract guests.
In fact, many developers have recognised this need and the potential, so much so that they are now offering rental guarantee concepts. Basically, the developer guarantees the purchaser that they will pay a certain yield on an annual or monthly basis. Naturally, due diligence needs to be conducted as the buyer needs to consider the sustainability of any potential rental income after the end of the guarantee period.
Of course, there are other factors that need to be taken into consideration. Is the property in a prime location, does it have quality facilities and is it somewhere that is likely to be desirable in two or three years’ time? Any tenants staying in these types of properties will expect everything to be the same as they would in a 5-star hotel, so you need to be confident that you will meet their expectations.
It is always advisable to choose a recognised and established hotel management company such as Amari or Best Western. Alternatively, you could consider buying from a developer who has managed this type of concern with great success for several years, the New Nordic Group for example. Quality is the key to achieving your rental property goals and it is important that this stays at the forefront of your mind.
Investment advisors such as Emerging Trends Advisors (ETA) are a great place to start. They conduct their own due diligence and only recommend properties that they are 100% satisfied with to their clients.
If you would like more information on these types of investment, why not contact us today?
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