Use Your Sipp To Buy Property In Thailand ? Maybe .

[churchill]

From Today's FT -

A room with a view to retirement

By Elaine Moore

Published: August 1 2008 18:48 | Last updated: August 1 2008 18:48

The downturn in property values has failed to quench investors’ thirst for putting bricks and mortar into self-invested personal pensions (Sipps). As a result, providers are turning to increasingly exotic schemes in order to meet demand.

Fareps, the Far East property expert, is launching a scheme for investors to buy hotel rooms, starting at £184,300, in the Himmapan Beach Samui resort in Thailand. The rooms can be included in a Sipp, benefiting from 40 per cent tax relief, through providers such as Pointon York, Hornbuckle Mitchell and Dentons.

John Moret of Suffolk Life says: “There are a whole range of hotel-type investments of this sort, such as GuestInvest in the UK, where investors can secure a room and, subject to restrictions, include the investment in their pension.”

While the Revenue allows hotel rooms to be included in Sipps, it is cautious about what constitutes a commercial hotel building as opposed to a residential property. One of the strictest stipulations is that investors cannot make use of the hotel room they purchase.

Properties with kitchens are generally regarded as residential and cannot be included in a pension. And if a hotel looks like an apartment, even if it doesn’t have a kitchen and investors call it a hotel, it can still attract trouble from HMRC.

Sipp providers face serious consequences if a property falls outside the rules governing what may be invested in a pension. Tax charges of up to 70 per cent of the value of the property or lease could occur, as well as charges on income received and capital gains made. As a result, many providers have steered well clear of this asset class.

“In any proposal it comes back to what are the risks and are they worth taking,” says Moret. “We have been approached by foreign hotel schemes and to date we haven’t become involved because we felt that, as the provider, the costs and risks just weren’t worth it.”

Mike Morrison at Winterthur Life says investors need to make sure they are aware of the risks of investing in overseas property. One point that has caused confusion in the past is whether ski chalets, which have shared facilities but do not look like typical hotels, can be regarded as commercial property. Problems have also occurred when some foreign governments have reclaimed properties that have been bought by pension providers and run by trustees.

Assetz, the property investment company and one of the providers offering investment in the Fareps Himmapan Beach Samui scheme via a Sipp, runs a division devoted entirely to hotel room investment. It offers schemes in countries including Portugal, Bulgaria and France. Stuart Law, managing director, says there are insufficient hotels to meet demand, so as an investment, this area should grow.

Hotel rooms can be viewed as a distinct asset class, with different characteristics to other forms of commercial property. Revenue depends on occupancy levels – in other words, the number of nights that the hotel room has been booked up and paid for by customers.

Fareps, for example, is targeting occupancy levels of more than 82 per cent, which it says will provide investors with an annual yield of 14 per cent. The company will provide a guaranteed yield of 8 per cent for the first two years on the assumption that occupancy will be 55 per cent or above.

Law believes that in a year or two more Sipp providers will offer hotel rooms, both in the UK and abroad, as they become a more mainstream asset class.

However, some advisers have questioned the wisdom of putting such a comparatively risky and exotic asset class as foreign hotel rooms into a savings pot intended to fund retirement.

Winterthur, for example, shies away from foreign hotels, but says it is possible to invest in UK hotel rooms and still benefit from yields of 8 per cent.

Law acknowledges that hotel rooms, particularly those based abroad, are a riskier investment than other, more classic asset classes such as equities and bonds, which are typically included in pension pots. He says investors have to be very careful about where they invest.

However, he believes that investors who take the time to research the location, operator and brand of the hotel can stand to benefit from returns that more than outweigh the risks.

[ace]

Doesn't really add up does it? £184,000+ for a hotel room? Maybe if it was $ , but even then

[jbaldwin]

In my view most people are already over invested in residential property because they own the home they live in. In many countries (but but all) hotel values are fairly highly linked with residential property prices because many sites are suitable to be developed either as condos or hotels. Other types of commercial property , such as offices would proivde more diversification.

Edited August 2, 2008 by jbaldwin

[GuestHouse]

DON'T BRING MONEY THAT YOU CAN'T AFFORD TO LOOSE TO THAILAND.

SIPP - That's your pension right?! That's money that you need to keep you when you are old and unable to work right?!

[LaoPo]

From Today's FT -

A room with a view to retirement

By Elaine Moore

Published: August 1 2008 18:48 | Last updated: August 1 2008 18:48

The downturn in property values has failed to quench investors’ thirst for putting bricks and mortar into self-invested personal pensions (Sipps). As a result, providers are turning to increasingly exotic schemes in order to meet demand.

Fareps, the Far East property expert, is launching a scheme for investors to buy hotel rooms, starting at £184,300, in the Himmapan Beach Samui resort in Thailand. The rooms can be included in a Sipp, benefiting from 40 per cent tax relief, through providers such as Pointon York, Hornbuckle Mitchell and Dentons.

Does anyone hear some bells ringing ?

GBP 184.300 for a hotel room ? The developers didn't succeed with their first plan and now change into selling hotel rooms....

Better read this:

http://www.thaivisa.com/forum/Himmapan-Samui-t197589.html

and this: (thanks to member Churchill)

http://www.ft.com/cms/s/0/0877a6be-5ff0-11...?nclick_check=1

LaoPo

Edited August 2, 2008 by LaoPo

[GeorgeKi]

Why on earth would anyone want such a bizarre illiquid 'asset' as an investment in a pension?

Clearly they have come up with the scheme as they cannot sell via the normal development market.

The involvement of the Assetz clown confirms its dodgy nature, he was among the last to leap head first into the UK BTL boom.

[churchill]

I find it surprising that the revenue would allow investments into a project that is not yet started , especially in Thailand , where so many are not finished . and Does anyone know the location of this project - is it not on the old " Peak " development that was stoped because of questions over upgrades of land papers

[Paul MBMG]

I find it surprising that the revenue would allow investments into a project that is not yet started , especially in Thailand , where so many are not finished . and Does anyone know the location of this project - is it not on the old " Peak " development that was stoped because of questions over upgrades of land papers

HMRC vet the nature of the asset - not the quality or the extent of completion. So this is an income yielding right so it is allowable (structurally compare it to a bond that has a renewable 30 years maturity date and a variable income) because taht is how it's written. HMRC's approval from a structural point of view doesn't confer any opinion either way as the reliability of the income stream, the viability of the contract or the quality of the udnerlying asset. As with any other invetsment, the invstor must perform that due diligence for himself. HMRC won't do it and I wouldn't let any forum do it for you either. It's important to ask the right questions and try to satisfy yourself (or not) about any project.

There are other ways to get Thai property into SIPPS too - REITS and other collective schemes can be a good way - commercial and invetsmemnt property can be an excellent pension asset if the real yields and the capital risks stack up. For retirees in Thailand, I'd see Asian property as an important asset class within a balanced investment portfolio.

cheers,

Paul

[Boater]

But under Thai Law, you CANNOT sell hotel rooms?.......

[Paul MBMG]

But under Thai Law, you CANNOT sell hotel rooms?.......

with a lease like this, it's a right to future income rather than physical property

You never actually own the room - just the right for a period (and extensions to that)

[AFKAFSinLOS]

This sort of product just screams at me to stay away. I struggle to imagine who this product is really suitable for...

Let's face it: it's probably worth no more than 5% of your asset allocation given the risks. At GBP 180k minimum, that suggests you have upwards of GBP 3.6mio to start with. The majority of people with that sort of money don't put it in a SIPP where proceeds are taxable and getting your money out is hardly the most flexible of arrangements.

It falls in the category of: if you can afford it, why are you bothering to consider it?: You've got enough money anyway, and can afford to invest in sensible things. If you can't afford it why are you bother considering it...

If you really want to find a use for that barge pole, combined with a hotel room. Might I suggest Venice...

[GuestHouse]

This sort of product just screams at me to stay away. I struggle to imagine who this product is really suitable for...

The people selling would be my guess.

[jarno]

Selling hotel rooms has been good for investors in Banyan Tree, so it is not so daft to me. Asian economies are going to perform much better than US and Europe and Thailand is one of the main countries for vacations, so for sure I rather invest my money here than back home where everyone thinks it is the end of the world. Of course you need to do your homework on anything before you spend your money, but Samui is booming and hotels there are expensive and full (tried to get a room at Four Seasons recently?!), so anything quality there is worth a look.

[Paul MBMG]

This sort of product just screams at me to stay away. I struggle to imagine who this product is really suitable for...

Let's face it: it's probably worth no more than 5% of your asset allocation given the risks. At GBP 180k minimum, that suggests you have upwards of GBP 3.6mio to start with. The majority of people with that sort of money don't put it in a SIPP where proceeds are taxable and getting your money out is hardly the most flexible of arrangements.

It falls in the category of: if you can afford it, why are you bothering to consider it?: You've got enough money anyway, and can afford to invest in sensible things. If you can't afford it why are you bother considering it...

If you really want to find a use for that barge pole, combined with a hotel room. Might I suggest Venice...

3.6 Mn in a SIPP wouldn't be smart because of the excess tax charge - although I guess you could have a SIPP of <1.6 Mn and the other 2 Mn in investment assets and look at this as part of your total portfolio allocation in that sense. I have to say, I do know of this project and I think that it's mainly being focused, from what I understand, at investors in the UK and Europe, so that implies, although I certainly wouldn't know enough about it to be able to swear that it's been FSA approved for distribution as well as HMRC approved for inclusion within a SIPP??

But again, with every investment, investors should do their own due diligence as far as possible.