Investing in popular locations
When we talk about investment properties regardless of where they are in the world we are always told that location is one of the most important factors in ensuring their success. After all, if you are to get a return on your investment in the form of rent, you need to be confident that you can find tenants. Even though demand is high for rental properties at the present time, simply own a property and making it available for rent will not bring you in the returns you are looking for!
The downside of course with purchasing property in a popular location is that it will be more expensive without necessarily giving the returns match. In fact, more and more people are looking at alternative locations as their desired properties in their home countries may simply be out of their price range. Up and coming countries that have huge potential are now often the favoured option for many investors due to reduced capital outlay.
Investing abroad can have some complications especially if you aren’t particularly familiar with the country, its laws and its culture. For this reason, it is often advisable to employ the services of a local management team to take care of your property on your behalf. They will know where to market it, what is and what isn’t needed as well as being able to deal with any issues at a local level. Of course, management companies aren’t free so it will diminish your ROI to a certain degree plus there can be no guarantees that they will actually be able to find tenants.
With this in mind, we have seen an increase in the number of rental guarantee concepts that are springing up. The idea of a rental guarantee concept is quite straightforward. The investor buys a property and immediately ‘rents’ it back to the person they bought it off – usually a developer. They pay the investor a set return for a given number of years and then sub-let the property to waiting guests or tenants taking a percentage themselves. As the investor is guaranteed their ‘rent’ it doesn’t matter if their individual unit is rented or not. This type of scheme gives investors security and confidence.
These types of scheme have proved so successful and popular for all parties that now some of the major 5-star hotels are joining in on the act. The types of deal offered by these hotels are obviously very appealing to investors. Not only do they have a unit in a 5-star hotel, it will be marketed and maintained by their management teams as well as being in a prime location therefore giving greater potential for capital growth. The financial power of these hotels also means the investments are very secure – something that most investors crave.
Here in Thailand we have three very notable rental guarantee concepts that are sparking a huge amount of interest. A scheme in Pattaya is available in the completed Amari Hotel and offers investors a healthy return of 5% p.a. guaranteed for five years with predicted returns of 8% p.a. in following years.
Similar schemes are available in Phuket and are offered in the Best Western and Ramada hotels. The projects are both still in the construction phase so the returns offered are slightly higher to act as a further incentive. Both deals are the same, 7% p.a. guaranteed for five years and projected future earnings of 10% p.a. in the years thereafter. All three deals have the benefit of being in hotels managed by these world-renowned brands.
It is easy to see why those investing in popular locations would choose a rental guarantee concept such as the ones offered by these major hotels.