Leasehold Businesses

[gorber]

I apologise if this question seems really stupid but I have not seen the answer in any research I have done so far.

I am in the very preliminary stages of planning my move from the UK to Thailand and taking a cursory look at businesses for sale (I am interested in something like an internet cafe/shop, but am yet to decide).

What I want to know is, when a business is for sale for, say, 1M Baht with a 3 year lease at whatever baht per month rental, what happens at the end of the three years? Do you have the right to extend the lease? Or is the 1M Baht essentially spent?

Sorry again to whomever considers this is a stupid question, but I just don't know the answer.

Cheers,

Andrew

[johnnyk]

Every landlord is different but you can be pretty certain that the 1 million baht is "essentially spent".

It is "key money" and gives you the right to acquire the lease.

You should count on having to pay key money again if you want to renew the lease. It is possible the landlord will appreciate a good tenant and not demand it but I would build it into any business plan. If your business is successful and makes money the landlord will see this and likely want to get in on the action so the 2nd three years monthly rent may well be more costly than the first.

Yes, its terrible, not fair etc. but its business in Thailand.

Edited January 1, 2008 by johnnyk

[Chang_paarp]

It is the same as any lease, you negotiate to renew the lease. If you are lucky the rent does not go up too much.

Usually leases are 3+3, meaning 3 years with an option to renew for another 3 years. The Thais like this style of lease as the lease does not have to reistered and they avoid paying tax on the income.

There is lot of information onleases, key money and company formation in this section and te main business section, just go back through the pages. It will be time well spent.

Edited January 1, 2008 by Chang_paarp

[gorber]

Thanks for that. It looks even riskier than I had thought. In some of the businesses I have seen for sale, it seems unlikely that the return would repay the initial cost by the time the lease has run out, so you are taking a big gamble on the good nature of the landlord.

Edited January 2, 2008 by gorber

[Chang_paarp]

Thanks for that. It looks even riskier than I had thought. In some of the businesses I have seen for sale, it seems unlikely that the return would repay the initial cost by the time the lease has run out, so you are taking a big gamble on the good nature of the landlord.

It depends on the lease, I am on a 12 month rolling lease that was written by the previous owner, so the terms in that lease are very favourable to the tenant. Other leases can state that the rent can only rise by a certain %. While there are horror stories about averous landlords, there are some who are very fair. You can negotiate a new lease at purchase or upon renewal.

A smart landlord will not come and put new locks on the doors the day the lease expires, they will negotiate. If you are a good tenant who adds value to their property and pays the rent promptly they will want you there.

What is just as important is to have your own independent team of professionals. While Sunbelt are very professional in their dealings if you are buying a business from them, I would advise having a different company do your legal and accounting assessment of the deal. The same goes for any other company, if the sales folk are telling you "trust us" or "it is quicker and cheaper this way" run, do not walk to get independent advice. If is takes longer or costs a little more so be it, you have peace of mind knowing you have done the best you can to cover your investment. Remember the seller's agent is just that, an agent for the person selling the business, they are not your friend, business partner or advisor. Using Sunbelt as an example again (I am familiar with their paperwork, Greg Lange has also posted in the business forum a couple of times before the SME section was formed) they have in large letters on the information about businesses they sell stating that the financial information is what the current owner has told them and the purchaser should do due diligence on the business prior to purchasing it.

BTW the dumbest question is the one you did not ask.

If you search through the SME and the business fora you will find a lot of information about leases, key money, business transfer and purchase. As the SME section is only a few months old not all the relevant information is in here.

[blizzard]

20 baht an hour is wot true charges to use internet if you buy 50 hours.

can you compete with them.

mom and pops also offer 20 baht an hour thruout bkk.

only is adult areas can you get 1 baht one minnute............lol.

[loubrockbank]

Hi Andrew,

I too am from the UK and will be moving over to thailand by the end of the year. We have seen a B&B that Im really interested in ...but Im really confused with regards to visa / permits etc, can I ask are u getting a business via to do this or just the standard non immigrant visa??

sorry Im trying to read as much as I can and am too just throing some options round at the mo

louise

[Chang_paarp]

Hi Andrew,

I too am from the UK and will be moving over to thailand by the end of the year. We have seen a B&B that Im really interested in ...but Im really confused with regards to visa / permits etc, can I ask are u getting a business via to do this or just the standard non immigrant visa??

sorry Im trying to read as much as I can and am too just throing some options round at the mo

louise

Louise

The current recommendation for visas to Thailand from the UK, is to deal with the Hull consulate. They are relatively flexible, you will find more information in the visa section. I have a 12 month multiple entry business visa issued by the Perth consulate, that is the visa to start when you are starting a business, once up and running you can do other things like work permits and so on, there is lots of information in the visa section.