Small Resort Wanted

[guitjens]

I am looking for a small resort for lease, on one of the islands in southern Thailand

not to big, does anyone know good sites where I could found them.

Please let me know.

[Khun Jean]

I have seen one in Samui, In Bahn Por. Looked ok. Need a bit upgrading. Price if i remember correctly was 5 million baht for 5 year lease. Had about 15-20 bungalows of which about 2-3 bigger ones with air. Not in Samui anymore so can not really provide details. Best is to stay at a few and ask around. Some have only 1 or 2 years lease left and might want to transfer.

[chelford67]

Hi..Take great care when being offered or you find a resort for lease. Greed is a real problem on Samui and the friendly Farrang that can help, can be your worst enemy.

My family and I planned to move to Samui earlier this year, we found the resort that we had dreamt of and started the ball in motion. We had arranged shippers and everything else was all going well. I arrived in Samui on the Friday before I weas due to sign the necesary documents the following morning. I was infomed very casualy that the owner had decided to sell to someone else the day before.

We thought we were dealing with a very proffesional agent, they advertise everywhere and claim to be the largest in Asia., HOW WRONG WERE WE!!!

Once you are discovered as an interested investor "Things" will come out of the woodwork and approach you with this idea and that... Greed and money is a great motivator and lots of people will want a slice of your pie. Samui is a wonderful place but sadly there are to many who want to help unberden you of your cash.

Good Luck and all the best for the future...I hope your dreams come true.

[mitmig]

Ah, that's a great idea ... starting a resort!! We don't have them on Samui! Please, take care of your money and put it somewhere save! Resorts are popping up everywhere on the island!

[Viking]

Yes! Yes! Good idea! Or NOT!

Save your money.

many "resorts" in Thailand like this.

Edited October 4, 2005 by Viking

[Khun Jean]

The problem with most 'resorts' in Thailand is marketing.

It seems that the people behind it think that building a few bungalows and just wait until people find them is enough.

When you market a 'resort' good returns can be made. Still it is always 'loction,location,location'. On Samui you have many rundown resorts, this is caused by a contract that finishes and no guarantee to continue the business on the same conditions. The biggest reason to stop maintaining. Why spend a lot of money when you only have one or two years left on your contract, it is almost impossible to earn it back.

I would say, never lease a 'resort' because just when you start making money, the contract is finishing. Or you have to have a really long lease like 30 years (longer is not possible whatever your laywer says!), then you would be able to make a good business plan.

[womble]

The problem with most 'resorts' in Thailand is marketing.

It seems that the people behind it think that building a few bungalows and just wait until people find them is enough.

When you market a 'resort' good returns can be made. Still it is always 'loction,location,location'. On Samui you have many rundown resorts, this is caused by a contract that finishes and no guarantee to continue the business on the same conditions. The biggest reason to stop maintaining. Why spend a lot of money when you only have one or two years left on your contract, it is almost impossible to earn it back.

I would say, never lease a 'resort' because just when you start making money, the contract is finishing. Or you have to have a really long lease like 30 years (longer is not possible whatever your laywer says!), then you would be able to make a good business plan.

<{POST_SNAPBACK}>

Actually it is possible to lease for longer than 30 years, 30 years is the maximum lease period allowed under Thai law, but in the lease agreement you can have a clause set so you are offered a new lease agreement at the end of the 30 years. You can even stipulate what the payments and terms of the lease are. At the end of the first 30 years, you then have to go and register the new lease at the land office, and pay the taxes. Thing is, hardly any of the Thai landlords would ever agree to an extension anyway on a 20 or 30 year lease. It is possible to get 30+30+30, almost unheard of for beach land resorts in popular places such as Chaweng. There are infact very few resorts with 30 year leases in samui, normally doesn't exceed 15 years, as short as 7 is common. Even 20 years is rare. Someone lucky enough to get a 30 year lease for beach land in Chaweng will certainly make a lot of money.

So to clarify, you can't have a lease longer than 30 years, but you can have a lease agreement that Garantees you will be offered an extension.

[Khun Jean]

So to clarify, you can't have a lease longer than 30 years, but you can have a lease agreement that Garantees you will be offered an extension.

No you can not. You have NO garantee.

And you said it yourself

30 years is the maximum lease period allowed under Thai law.

There is nobody who can ENFORCE the option.

Just imagine a land owner gives you a 30 year lease for example 20 million baht. After the 30 years the land is probably worth 50 or 100 million baht. If you have an agreement (contract) that he will give you an option for the next 30 years he will honor that option ONLY when it is in HIS best interest. Forget about agreeing a price beforehand (Crucial for doing business). And what if he doesn't honor it. You go to court? I know the outcome to that. As the law states 30 years is maximum. Sorry....

Leasing a resort for 7 years is only worthwhile when it is ready to run as is, without renovating or refurbishing. If you have to do that, which is highly probable you would not have time enough to make decent money. Landords here want to have it all without lifting a finger. They want a large share of the profit without the risks and work involved. The lease prices asked and the possible profit that could be made is out of balance. The landowner should only ask money for the land not 50% of your business profits too.

And yes i know there are some businesses who do it anyway. It is a great way to launder money, and a few "drug" criminals are doing just that in Samui and Phuket. I am from the netherlands and know some that did their time in jail are now celebrating live and have "legitimate" businesses in Thailand. Just read the newspapers. A landowner only cares about if he gets money not about who.

It is the same with 3 year leases and "rights" to extend.

Example:

you find a nice shop for rent. Keymoney 1 million baht and 30.000 per mont. (Not rare for Chaweng) Contract for 3 years with option to extend.

The owner will not set a fixed price for the next 3 years.

2 possibilities:

1 You are doing your business and are sucsessful.

The owner is smiling. You're going to extend the contact. New keymoney is now 2 million baht and rent 50.000 baht a month. Because you make money the owner wants a big part of it. You think hard and probably hate his guts but now that you have an established business what choice do you have. The owner owns the whole %$#* street.

2 You are doing your business and are not making enough money.

Your contract gets shorter and shorter and it is hard to find someone who want to take over the remaining contract. You also have to pay the owner a fixed amount or a percentage of the sale. (Who wins again?)

You decide to try it another 3 years. Owner asks 2 million baht because he knows you are not making enough money (Sounds crazy but it is Thai business logic). The rent increases to 50.000 baht. With these conditions you decide it is not worthwhile. The owner doesn't care and "up to you". Even if the shop stays empty for 2 years the owner will not budge.

It doesn't happen all the time but it does most of the time. If you do serious business a 3 year lease is not enough. Demand a longer lease and never pay keymoney but pay a little higher monthly rent instead. If the owner don't want that, find another one because it is a sign that you will be screwed when the contract finishes. (Again not all but most).

Never sign a contract that you would have walked walk away from in your home country.

Edited October 19, 2005 by Khun Jean

[womble]

So to clarify, you can't have a lease longer than 30 years, but you can have a lease agreement that Garantees you will be offered an extension.

No you can not. You have NO garantee.

And you said it yourself

30 years is the maximum lease period allowed under Thai law.

There is nobody who can ENFORCE the option.

Just imagine a land owner gives you a 30 year lease for example 20 million baht. After the 30 years the land is probably worth 50 or 100 million baht. If you have an agreement (contract) that he will give you an option for the next 30 years he will honor that option ONLY when it is in HIS best interest. Forget about agreeing a price beforehand (Crucial for doing business). And what if he doesn't honor it. You go to court? I know the outcome to that. As the law states 30 years is maximum. Sorry....

Leasing a resort for 7 years is only worthwhile when it is ready to run as is, without renovating or refurbishing. If you have to do that, which is highly probable you would not have time enough to make decent money. Landords here want to have it all without lifting a finger. They want a large share of the profit without the risks and work involved. The lease prices asked and the possible profit that could be made is out of balance. The landowner should only ask money for the land not 50% of your business profits too.

And yes i know there are some businesses who do it anyway. It is a great way to launder money, and a few "drug" criminals are doing just that in Samui and Phuket. I am from the netherlands and know some that did their time in jail are now celebrating live and have "legitimate" businesses in Thailand. Just read the newspapers. A landowner only cares about if he gets money not about who.

It is the same with 3 year leases and "rights" to extend.

Example:

you find a nice shop for rent. Keymoney 1 million baht and 30.000 per mont. (Not rare for Chaweng) Contract for 3 years with option to extend.

The owner will not set a fixed price for the next 3 years.

2 possibilities:

1 You are doing your business and are sucsessful.

The owner is smiling. You're going to extend the contact. New keymoney is now 2 million baht and rent 50.000 baht a month. Because you make money the owner wants a big part of it. You think hard and probably hate his guts but now that you have an established business what choice do you have. The owner owns the whole %$#* street.

2 You are doing your business and are not making enough money.

Your contract gets shorter and shorter and it is hard to find someone who want to take over the remaining contract. You also have to pay the owner a fixed amount or a percentage of the sale. (Who wins again?)

You decide to try it another 3 years. Owner asks 2 million baht because he knows you are not making enough money (Sounds crazy but it is Thai business logic). The rent increases to 50.000 baht. With these conditions you decide it is not worthwhile. The owner doesn't care and "up to you". Even if the shop stays empty for 2 years the owner will not budge.

It doesn't happen all the time but it does most of the time. If you do serious business a 3 year lease is not enough. Demand a longer lease and never pay keymoney but pay a little higher monthly rent instead. If the owner don't want that, find another one because it is a sign that you will be screwed when the contract finishes. (Again not all but most).

Never sign a contract that you would have walked walk away from in your home country.

<{POST_SNAPBACK}>

That's an excellant post, and very informative.

But if I had terms laid out for an extension, or even just a first refusal, I would take the Landlord to court for breach of contract.