Investing in Property in Thailand
Despite the diverse profile of property investors, by far and away the most common reason for investing (66%) was to provide a secure long-term investment, with investment income being the next reason.
Purchasing property ("bricks and mortar") has always been a sound investment strategy, and with the current rate of Exchange for the Thai Baht, and the resurgent Thai economy and tourist markets, buying a property in Thailand is certainly an option worth considering. Good quality rental properties are currently enjoying 10% to 12% returns.
Statistics indicate that over the long term, both share markets and property markets tend to show substantial increases in value and both can be excellent investments. Individual stocks and properties can significantly out (or under) perform market averages.
Selection of the right stock or property (in the right place at the right time) is therefore the key to successful investment. Good information and sound advice is fundamental to this investment decision- so it is always wise to speak to your Real Estate Agent before proceeding.
Investment in a property (without debt) is an investment in real assets ("bricks & mortar") that will always exist in a substantially unchanged form and be able to be put to very much the same use as originally intended (or even an entirely new one) irrespective of it's market value. As someone once said; "buy land, it's the only thing they aren't making any more of".
Stocks on the other hand, are very much intangible interests (even where the underlying company has real assets) in a business that can potentially fail and become bankrupt and completely valueless.
The next step is to plan for your investment.
Planning to Invest in Pattaya Property
Buying real estate, whether you are buying the family home or an investment, is one of life's most important financial decisions.
However, in buying an investment property, it is wise to remember that you are making a business decision. You are not buying from the heart but from the head. You are buying the property because you expect it to appreciate in value.
Common mistakes made in investing are that people look for the same things they would want in a home or buy in their local area so they can 'keep an eye on it'.
In searching for a residential investment property it is important to consider three things:
Assess your financial position
What are your cash reserves and what equity do you have in your present home? Look at your long term objectives, for example, will the property be part of your retirement financial plan?
Potential changes to your current situation should also be factored in such as the birth of a child or the loss of one income.
It is wise to seek advice from an investment adviser or qualified financial planner to help determine goals and strategies.
Decide on your strategy
Some properties provide good rental returns but have little potential for capital growth; for some the converse is true. It is more difficult to find the ideal of high yield and high appreciation potential.
It is important decide on your strategy before you start you search.
Assess the viability of the investment
You should try to assess the soundness of your investment. Study the capital growth history and the potential rental income.
If you are familiar with computer spreadsheets, try to analyse the impact of an interest rate change or a potential vacancy period.
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Professional negotiation can help ensure that you do not pay too much for a desirable property.
Negotiation can also include structuring a contract to allow items favourable to the purchaser such as access or installation of tenants
Obtain legal advice
Sound legal advice will ensure that the contract is fully examined and approved and that any changes are allowable.
A good lawyer should be an integral part of your investment strategy.
Property Management Services
Professional property management frees you from dealing with tenant issues and gives you more time to concentrate on your portfolio.
Your property manager is better suited to negotiate on your behalf should the need arise.
He is also in a position to obtain credit checks on potential tenants and has access to trades people. If you prefer not to meet your tenants then a managing real estate agent is definitely recommended.
As a landlord you should be aware of your legal obligations to provide safe premises for your tenants.
Landlords should not assume that the lease gives them protection from liability for what happens to the tenant while in occupation.
The risk of possible litigation if injury and/or theft were deemed to be the result of a landlord failing in his duty of care to provide premises that were as safe for occupation as normal actions could provide (except for defects which could not reasonably be discovered) - even though the negligence was committed by third parties.
So what can a landlord do to protect himself?
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Problems with Tenants
When doing renovations or repairs, landlords (or tradespeople) may have the gas and electricity temporarily connected and occasionally, forget to have them disconnected when the work is finished.
As a nice gesture to the tenant, they may be left connected to save the tenant the connection fee, advising the tenant to have the meter read and to change the billing details. However, what if the tenant 'forgets' to do this and later the landlord receives a bill for the usage?
Utilities are considered to be personal bills and not attached to the property so in cases like this, there is very little that can be done.
The rule then is, never come to an informal agreement with the tenant regarding the payment of utilities. The tenant should establish accounts under his own name.
A telephone can be bought and left for the tenant or leased from the provider in the usual arrangement.
What happens if the telephone 'vacates the premises' with the tenant? Whose responsibility is it if the phone breaks down and needs repairing or replacing?
It may be easier to define responsibility if the tenant provides his own phone.
Meter box problems
Landlords are advised to have apartments metered separately. This avoids bitter disputes between tenants about who pays what amount.
TV antenna and telephone connections
These days tenants expect that a landlord will provide a TV antenna and a telephone connection point. If the tenant pays to have a telephone line installed it will remain after the tenant vacates - to the benefit of the landlord. Removing a TV antenna is an awkward job so that will probably remain too when the tenant leaves.
Although both these items are for the benefit of the tenant and therefore not strictly the responsibility of the landlord, it is probably wise for a landlord to have both these connections installed. Apart from adding to the capital value of the property and making it a better rental proposition, it will remove all chances of dispute over responsibility and costs.
One of the most common source of disputes between landlords and tenants arises from a landlord's refusal to maintain the property in a livable condition. Some landlords feel that they shouldn't bother about the condition of the property as "a tenant will only wreck it".
Apart from allowing a valuable asset to deteriorate, if the landlord treats the property with disdain he is likely to attract the type of tenant who will be right at home in that environment. The property has to be fit for human habitation or fit to live in.
Refund of the security deposit is the most frequent cause of dispute between landlords and tenants. The security deposit should never be considered as the landlord's money. It is held in trust for the landlord against any future breaches of the tenancy agreement. Two month's rent is the usual security deposit amount but it can be more for prestigious properties or when it is the landlord's own home. The security deposit amount must be entered on the tenancy agreement and the tenant must be given a receipt.
At the end of the tenancy, if the rent is paid up to date and there are no claims for damage or any breach of the tenancy agreement, the security deposit must be refunded to the tenant.
If the landlord lodges a claim against the rental deposit, the tenant can sign a release of the money or if the tenant refuses to sign, the landlord can seek legal redress.
If the tenant does object to the claim of his rental deposit, he may also take legal action himself to recoup the monies. Many landlord-tenant disputes are resolved by negotiation before a hearing takes place.
In most cases, it is the Real Estate Agent who successfully mediates the dispute and legal action is avoided.
A Real Estate Agent is a professional who can negotiate in a calm and impersonal manner on behalf of his client. Landlords are often too emotionally involved to argue their cases successfully, and as a result tend to win fewer cases than tenants, often because proper leases were not prepared, condition reports were missing, expenses could not be documented, etc.