Property Investment

[Dan75]

I am thinking of buying a small house on Koh Samui or Phuket as an investment. I have a full time job owning a business in sunny old England so would not be spending to much time there.

Questions

1. Is there a (strong) market for renting out property either long term or holiday makers?

2. What, if any, are the inflation returns on owning property, reading some threads many people think renting is better than owning?

3. How hard is it to buy when living on the other side of the planet?

4. Is it worth it?

Any comments greatly received.

[chownah]

I am thinking of buying a small house on Koh Samui or Phuket as an investment. I have a full time job owning a business in sunny old England so would not be spending to much time there.

Questions

1. Is there a (strong) market for renting out property either long term or holiday makers?

2. What, if any, are the inflation returns on owning property, reading some threads many people think renting is better than owning?

3. How hard is it to buy when living on the other side of the planet?

4. Is it worth it?

Any comments greatly received.

<{POST_SNAPBACK}>

Owning property is not allowed to foreigners....with the exception of condo's under certain conditions. It is possible to set up a company which you control and have the company own the land. There is a ton of information about this already in the real estate forum here on ThaiVisa and I suggest you go look there at the multitude of posts about owning land in Thailand....its rather involved. The other issues (rental market, inflation returns, etc.) I know nothing about but you might find some info about them over in real estate too.

[Morden]

Just to add a bit of detail to the previous post .............

A foreigner can own a building but not the land on which it stands.

Forget about buying land through a company. As Chownah has said, it is a very complicated matter. You cannot be the majority shareholder and the company has to invest about £400,000 for 5 years in approved Thailand investments. In return for all of that and a few other conditions that I can't recall at present, the company can buy one rai. If the company is not a true trading company the government may one day descend on it from a great height. Ignore what developers tell you about owning property through a company.

I understand that the price of land in the areas that you mention can be very high.

Before you spend money or commit yourself in any legally binding way I suggest that you do a great deal of homework. This is not the same as building a holiday home in Spain!

[GuestHouse]

I think there is a missunderstanding here, the issue is not simply how can this be done, rather what are the risks.

The golden rule on investment is to remeber all three parts to the equation.

Investment

Return on Investment

Risk

Then remember the golden rule of investing in Thailand, Don't take money into Thailand you can't afford to loose.

It concerns me that many of the overseas press property sections are publishing information about the property boom in Thailand's Islands, they skip over the legal problems and I strongly suspect that they get their information ONLY from the local property dealers.

From an investment point of view, I would stick my money in the stock market back home.

[TizMe]

From an investment point of view, I would stick my money in the stock market back home.

Me 2.

[Nepal4me]

Just to add a bit of detail to the previous post .............

A foreigner can own a building but not the land on which it stands.

Forget about buying land through a company. As Chownah has said, it is a very complicated matter. You cannot be the majority shareholder and the company has to invest about £400,000 for 5 years in approved Thailand investments. In return for all of that and a few other conditions that I can't recall at present, the company can buy one rai. If the company is not a true trading company the government may one day descend on it from a great height. Ignore what developers tell you about owning property through a company.

I understand that the price of land in the areas that you mention can be very high.

Before you spend money or commit yourself in any legally binding way I suggest that you do a great deal of homework. This is not the same as building a holiday home in Spain!

<{POST_SNAPBACK}>

As is mentioned elsewhere in this thread, don't bring any money into Thailand that you can't afford to lose.

However, the post above is almost entirely wrong. First, it's easy as hel_l to set up a company to buy land. It'll cost you about 60K baht, you can only be 49% owner but your shares are preferred and have a 10 to 1 value over the other 51%. I'm not going to go into all the details but suffice it to say, literally thousands of foriegners have this type of company for the sole purpose of buying land in LOS. Takes about an hour or so at the lawyers office. They do it every day.

"£400,000 for 5 years in approved Thailand investments" Not true at all, no investment required whatsoever.

There is no "one rai" issue, you (thru your company) can buy as much land as you desire.

There are only 2 accuracies in Morden's post. Do a great deal of homework and it's true, the gov't could descend and take it all away. If they did this, they would lose a lot of tax revenue from these types of companies which is an incentive for them not to do this but...."This is Thailand". Be warned.

Suggest you visit Samui and Phuket and talk to a lot of people, talk to contractors, lawyers, land agents, rental/property mgmt people etc. the more people you can talk to the better your understanding will be. It really isn't rocket science, it's not too difficult to get it sorted out but remember land agents for the most part are full of crap, but there are a small percentage of them that won't bs you.

For renting out, they have mgmt companies that can do this for you and they'll take anywhere from 15% to 30% off the top. Some good, some not.

Land price varies greatly based on where it is and how much land you're talking about.

In the end, determining "is it worth it" is up to you. There is huge capital appreciation in land going on, will it stop? will it crash? Who knows. That's the risk, you need to finally decide for yourself.

Good luck..........

[Morden]

Just to add a bit of detail to the previous post .............

A foreigner can own a building but not the land on which it stands.

Forget about buying land through a company. As Chownah has said, it is a very complicated matter. You cannot be the majority shareholder and the company has to invest about £400,000 for 5 years in approved Thailand investments. In return for all of that and a few other conditions that I can't recall at present, the company can buy one rai. If the company is not a true trading company the government may one day descend on it from a great height. Ignore what developers tell you about owning property through a company.

I understand that the price of land in the areas that you mention can be very high.

Before you spend money or commit yourself in any legally binding way I suggest that you do a great deal of homework. This is not the same as building a holiday home in Spain!

<{POST_SNAPBACK}>

As is mentioned elsewhere in this thread, don't bring any money into Thailand that you can't afford to lose.

However, the post above is almost entirely wrong. First, it's easy as hel_l to set up a company to buy land. It'll cost you about 60K baht, you can only be 49% owner but your shares are preferred and have a 10 to 1 value over the other 51%. I'm not going to go into all the details but suffice it to say, literally thousands of foriegners have this type of company for the sole purpose of buying land in LOS. Takes about an hour or so at the lawyers office. They do it every day.

"£400,000 for 5 years in approved Thailand investments" Not true at all, no investment required whatsoever.

There is no "one rai" issue, you (thru your company) can buy as much land as you desire.

There are only 2 accuracies in Morden's post. Do a great deal of homework and it's true, the gov't could descend and take it all away. If they did this, they would lose a lot of tax revenue from these types of companies which is an incentive for them not to do this but...."This is Thailand". Be warned.

Suggest you visit Samui and Phuket and talk to a lot of people, talk to contractors, lawyers, land agents, rental/property mgmt people etc. the more people you can talk to the better your understanding will be. It really isn't rocket science, it's not too difficult to get it sorted out but remember land agents for the most part are full of crap, but there are a small percentage of them that won't bs you.

For renting out, they have mgmt companies that can do this for you and they'll take anywhere from 15% to 30% off the top. Some good, some not.

Land price varies greatly based on where it is and how much land you're talking about.

In the end, determining "is it worth it" is up to you. There is huge capital appreciation in land going on, will it stop? will it crash? Who knows. That's the risk, you need to finally decide for yourself.

Good luck..........

<{POST_SNAPBACK}>

You've been talking to too many 'contractors, lawyers, land agents, rental/property mgmt people etc' Of course you can set up a Thai company with next to no capital. Of course those who want you to give them your money will tell you that company can own property. That doesn't mean that they tell the truth. As you say. 'This is Thailand'. If your assertions are right, why the warning?

I did my homework before we bought land and I am right. A land agent in Phuket suggested that we set up an Anglo/Thai company to own a plot of land. Indeed, it is possible, but it is not acceptable in law and, one day, the government might act against such a company. Our lawyer explained why that is folly and, if you dig around elsewhere, you will find an English translation of the appropriate Thai Regulations. If you read Thai, you will also find the original wordings.

One can either accept the advice that I pass on from my own research and that of others or ignore it. Up to you, as they say!

[Morden]

I think that my memory let me down and I combined two separate issues here. Probably because I drew the same conclusion about each! Sorry about that. So let's get the record straight.

An individual wanting to buy land has to invest heavily in Thailand and so on. Boy

is it difficult. The amount is much more than £400,000 at the current exchange rate. No-one with a brain would be likely to even try that one.

A company must have a substantial majority Thai shareholding and even then there are many hoops to go through. There are foreigners who find that they can set up a company with Thais and use it to buy land. The point about that, is unless they have complied with all of the government's requirements they may have a problem when the company comes under scrutiny. But who would want to put a substantial amount of money into a company controlled by others in a foreign country? And take a look at the other Regulations that unscrupulous partners could exploit to their own ultimate advantage. I wonder how many farang notice them or are persuaded to ignore them. Might as well just give it away.

This very website summarises the Regulations. The only part I don't follow is the paragraph about Strategy which suggests that there are ways of protecting your cash as a minority shareholder. No details are given and I would say that if something is not absolutely clear in law, regard it as unreliable. And, as they say in Tesco, when it's gone, it's gone!

If you want the Thai government English translation of the law, go to:

http://www.dol.go.th/eng_version/menu.php

[Dan75]

Thanks everyone for your comment's, I think I tend to agree that investments are better made in England and to spend the profits in Thailand.

[astral]

Forget about buying land through a company. As Chownah has said, it is a very complicated matter. You cannot be the majority shareholder and the company has to invest about £400,000 for 5 years in approved Thailand investments. In return for all of that and a few other conditions that I can't recall at present, the company can buy one rai. If the company is not a true trading company the government may one day descend on it from a great height. Ignore what developers tell you about owning property through a company.

<{POST_SNAPBACK}>

Not sure where you got these ideas from.

Sure you cannot be the majority shareholder, BUT you can be the MD with the signing power!

My company has 1M baht capital, £13,000 not £400,000.

Yes the company does need to trade, so you rent the house from your company

at a reasonable rent.

This does not mean you pay the rent, just the tax on it!

The poster here wants to rent the property so he will definitely be trading!!

A good lawyer will advise him.

He definitely needs a company to trade under!!

Edited December 13, 2005 by astral

[Morden]

Not sure where you got these ideas from.

From taking the advice of a Thai lawyer who has no connection with a property developer, from doing my own research and from listening to the advice of people that I know and who have some experience.

[GuestHouse]

I believe there are clauses in the land acts that specifically and unambiguously prohibit the use of a company as a means of foreigners owning land.

[johnnyk]

Not sure where you got these ideas from.

From taking the advice of a Thai lawyer who has no connection with a property developer, from doing my own research and from listening to the advice of people that I know and who have some experience.

<{POST_SNAPBACK}>

Talk to 10 lawyers and get 10 different opinions.

astral has actually done it and bought his house/land.

I'll take experience over opinion.

[Morden]

Not sure where you got these ideas from.

From taking the advice of a Thai lawyer who has no connection with a property developer, from doing my own research and from listening to the advice of people that I know and who have some experience.

<{POST_SNAPBACK}>

Talk to 10 lawyers and get 10 different opinions.

astral has actually done it and bought his house/land.

I'll take experience over opinion.

<{POST_SNAPBACK}>

The law is quite clear and I gave a link to an official Thai government translation. Have a look too at this Forum's piece on the subject.

Yes, farang do buy land through Thai companies and I know people who have done it. Experience to date is fine but it's not over until the fat lady sings (or the government checks the books). It's like speeding on the road; you get away with it until you're caught.

Then there's the matter of the tax man. I read somewhere, though I don't remember where, that if anyone leases a property at a rent lower than the taxman thinks is a reasonable rent, the lessor will, when found out, be taxed on what the rent should have been. That's of importance to anyone considering the 'rent from your wife or company for 30 years' option. As I said, I can't remember where I read that but I'm sure that anyone who wants to think before acting will find it.

There's a saying to the effect that farang leaves his brains at the airport. Wishing that we could own land and think that we can get round Thai law indefinately does not change the facts.

[johnnyk]

Not sure where you got these ideas from.

From taking the advice of a Thai lawyer who has no connection with a property developer, from doing my own research and from listening to the advice of people that I know and who have some experience.

<{POST_SNAPBACK}>

Talk to 10 lawyers and get 10 different opinions.

astral has actually done it and bought his house/land.

I'll take experience over opinion.

<{POST_SNAPBACK}>

The law is quite clear and I gave a link to an official Thai government translation. Have a look too at this Forum's piece on the subject.

Yes, farang do buy land through Thai companies and I know people who have done it. Experience to date is fine but it's not over until the fat lady sings (or the government checks the books). It's like speeding on the road; you get away with it until you're caught.

Then there's the matter of the tax man. I read somewhere, though I don't remember where, that if anyone leases a property at a rent lower than the taxman thinks is a reasonable rent, the lessor will, when found out, be taxed on what the rent should have been. That's of importance to anyone considering the 'rent from your wife or company for 30 years' option. As I said, I can't remember where I read that but I'm sure that anyone who wants to think before acting will find it.

There's a saying to the effect that farang leaves his brains at the airport. Wishing that we could own land and think that we can get round Thai law indefinately does not change the facts.

<{POST_SNAPBACK}>

Morden,

If the company is set up legitimately and actually does business (as opposed to a sleeping company), has revenue and pays tax there is no problem.

Keep the tax man happy and you will be happy.

The problem comes when people try to make an end run around the law and think they are smarter than the tax man. My experience in several countries is the tax man wants his cut and is not stupid. He tends to get annoyed when people treat the law as though he is stupid.

[Morden]

Morden,

If the company is set up legitimately and actually does business (as opposed to a sleeping company), has revenue and pays tax there is no problem.

Keep the tax man happy and you will be happy.

The problem comes when people try to make an end run around the law and think they are smarter than the tax man. My experience in several countries is the tax man wants his cut and is not stupid. He tends to get annoyed when people treat the law as though he is stupid.

<{POST_SNAPBACK}>

Johnny,

Yes, the arrangement that you describe is legitimate. My focus was on the many farang who think that they are cleverer than the authorities and can use a company that doesn't trade in order to have a part share in a property. There's the law to satisfy as well as the tax authourities, of course.

[Gary A]

A farang sets up a company to be a profit making business, pays taxes and everything is legal. OR! A farang sets up a company to own his own house. This is NOT the intent of the law and is clearly illegal. Those who have a company to enable them to own a house can put icing on it or paint it any color they like. I say that it's better them than me. I like to sleep at night. I know a couple of guys who have set up legitimate businesses and they pay an accountant plus a minimum of 2,500 baht per month tax. Neither of the companies makes much, if any money but they still MUST pay the accountant and the minimum tax. How many "home" owners pay their accountant and the 2,500 baht per month tax?

Morden,

If the company is set up legitimately and actually does business (as opposed to a sleeping company), has revenue and pays tax there is no problem.

Keep the tax man happy and you will be happy.

The problem comes when people try to make an end run around the law and think they are smarter than the tax man. My experience in several countries is the tax man wants his cut and is not stupid. He tends to get annoyed when people treat the law as though he is stupid.

<{POST_SNAPBACK}>

Johnny,

Yes, the arrangement that you describe is legitimate. My focus was on the many farang who think that they are cleverer than the authorities and can use a company that doesn't trade in order to have a part share in a property. There's the law to satisfy as well as the tax authourities, of course.

<{POST_SNAPBACK}>

Edited December 16, 2005 by Gary A

[skipdivils]

Some of you people can be ridiculous! It actually makes me laugh at some of the negativity here.

You WILL get your house and land taken away! You are an idiot farang who is GOING to get ripped off here!

And the only string of evidence that you cling to is that, "Hey, check the Thai law. The government can take the land back anytime they want blah blah blah."

Well yes then, it is POSSIBLE that this could happen. But let's assume that we have brains, and we can use them. How many foreigners have now setup companies to own land and houses in Thailand? How many of them have had their land taken away by the goverment? How many of those are just stories that you HEARD from "a friend who knew somebody that it happend to"?

I would bet that less than 0.1% (1 in 1000) of foreigners that have bought here have gotten ######ed by the Thai law, and the other 999 have not had the government come and take their land, or house.

Why is this? Again, use your brains now kids, and not your cynicism, and think. Because it is much better for the Thai goverment to want to continue to attract affluent foreigners to come in there for semi-retirement and bring their big bucks to Thailand. But no, they will probably just take everyone's house one day, kick out all foreigners and never have another foreigner buy there again? I mean, really now.

Okay, you got me, yes it is possible, but you negative people who live your lives in fear of shit like this freak me out. I prefer to take the odd chance, check the cynicism at the door and 'go for it'.

And guess what, anyone (okay, most) who has done that on Samui or Phuket over the last 15 years, has made a good decision.

Skip

[Sir Burr]

To the OP,

As you can see from the previous posts, even owning a house and land is not straight forward.

Let's get to the 'return on investment' bit. Here in Phuket, for long term rentals, you will be lucky to see 5% to 6% return on your capital.

If you go short term holiday rentals, you will get a much better return, though, there are other disadvantages.

You will have to use an agent to rustle up business and they take a big bite. Also, maintenance costs go up due to the high usage of your house. Don't forget, holiday makers have no incentive to look after the place whilst they're in it.

If you really have your heart set on a property investment, go to Singapore.

You are allowed to buy in your own name, the currency is fully convertible, there is rule of law and it is easy to rent out. Singapore's prospects are bright and I think you'll make a killing on capital appreciation in the next five years.

[astral]

Not sure where you got these ideas from.

From taking the advice of a Thai lawyer who has no connection with a property developer, from doing my own research and from listening to the advice of people that I know and who have some experience.

<{POST_SNAPBACK}>

Then you lawyer hasgot it wrong, which is not uncommon.

Go to a lawyer who is used to handling such deals.

[astral]

It is essential to be a working company.

Sleeping companies will be closed by the Companies Office.

Yes, you must set a reasonable rent for the house.

If I remember rightly mine is about 8K per month.

The tax office is not stupid. However their scale of values is Thai, not farang,

so the rent does not have to be outrageous.

Edited December 16, 2005 by astral

[Gary A]

Have a good laugh then. You roll the dice and you take your chances. As I said, better you than me. I'm not comfortable waiting for a Thai politician to get a hard on for the farangs. Sleep well and make sure you pay your taxes. By the way how much do you pay your accountant and how much are your taxes?

Being able to read makes me negative?

Some of you people can be ridiculous! It actually makes me laugh at some of the negativity here.

[surfline]

Some of you people can be ridiculous!  It actually makes me laugh at some of the negativity here. 

You WILL get your house and land taken away!  You are an idiot farang who is GOING to get ripped off here! 

And the only string of evidence that you cling to is that, "Hey, check the Thai law.  The government can take the land back anytime they want blah blah blah."

Well yes then, it is POSSIBLE that this could happen.  But let's assume that we have brains, and we can use them.  How many foreigners have now setup companies to own land and houses in Thailand?  How many of them have had their land taken away by the goverment?  How many of those are just stories that you HEARD from "a friend who knew somebody that it happend to"?

I would bet that less than 0.1% (1 in 1000) of foreigners that have bought here have gotten ######ed by the Thai law, and the other 999 have not had the government come and take their land, or house. 

Why is this?  Again, use your brains now kids, and not your cynicism, and think.  Because it is much better for the Thai goverment to want to continue to attract affluent foreigners to come in there for semi-retirement and bring their big bucks to Thailand.  But no, they will probably just take everyone's house one day, kick out all foreigners and never have another foreigner buy there again?  I mean, really now.

Okay, you got me, yes it is possible, but you negative people who live your lives in fear of shit like this freak me out.  I prefer to take the odd chance, check the cynicism at the door and 'go for it'.

And guess what, anyone (okay, most) who has done that on Samui or Phuket over the last 15 years, has made a good decision. 

Skip

<{POST_SNAPBACK}>

Nice one Skip, well said

[solo siam]

So what about all the 5* Hotels, I wouldnt think that every single one of them is rented, leased from or owned by Thais.

You just have to look at all of the really big real-estate players, law firms and funds investing in property in Thailand. I have never heard of anyone in Thailand who has done all the right things legally, having property taken away from them.

I'm sure bad things could happen to your investment as well they could anywhere else, so in all probability the potential for higher profit is probable.

[Nepal4me]

So what about all the 5* Hotels, I wouldnt think that every single one of them is rented, leased from or owned by Thais.

You just have to look at all of the really big real-estate players, law firms and funds investing in property in Thailand.  I have never heard of anyone in Thailand who has done all the right things legally, having property taken away from them.

I'm sure bad things could happen to your investment as well they could anywhere else, so in all probability the potential for higher profit is probable.

<{POST_SNAPBACK}>

Succinctly put

I agree 100% with Skip's post. I've never heard of a farang losing his land, it just doesn't happen. Ok, maybe it's happened but there would have to have been very extenuating circumstances. I suspect 95% (not based on data, just a guess) of the many thousands of foreigners that have invested in land on Samui or Phuket over the past 10 years have made a lot of money. The doomsayers either don't have the money, don't have a clue about the process, worry about breaking the law (probably the smallest group) or are just too risk averse, after all just buying a house is a huge worry to most people.

[johnnyk]

nepal4me,

39 years and still counting!!!!! 55555

[cclub75]

Because it is much better for the Thai goverment to want to continue to attract affluent foreigners to come in there for semi-retirement and bring their big bucks to Thailand.

We should add that Thailand is an "image" country.

Thai's law forbid farang to own house, land... Very well.

And behind, many farangs and thai lawyers laugh about this law.

Face is saved, business can continue. Therefore, everything is sabai sabai.

I don't believe of the "grand soir" theory = the gvt would "nationalize" all the properties occupied by farangs...

[Gary A]

I haven't seen any numbers about how much these homeowners pay for taxes. As I have posted before the farangs I KNOW about pay an accountant and a minimum of 2,500 per month taxes even if they make no money. It's all about money. A lawyer makes money, an accountant makes money and the government makes money.

[Maigo6]

I bought Land in Issan and built a house on it, is it in my name? No.

Do I care ? No.

If it was in my name and I was able to kick the wife out if it all went pearshaped, would I be able to sell it, would I want to live in the same place as all my ex wifes family, would anybody be willing to pay the money that it cost me to build ? No.

Would I want sleepless night knowing I am flouting the laws of Thailand, and that one day my bogus company would be investigated and found to be a front for skirting the law ? No.

I like to know where I stand, and I'm perfectly happy the way it is.

I know some guys that went the company route, all they do is worry about what future changes in the law may mean to them or the property they live in.

They can't afford to lose it, maybe they should have rented.

[Dragonman]

Strangely enough most of the posts regarding Company ownership are mainly correct, although there seems some heated debate

As astral says if the company is set up under strict guidelines there is nothing to stop you trading by only renting under current legislation. If a case were ever brought to Court, the Judge would have to consider the likelihood whether this was a Company or not. In other words were you trying to evade Land Laws.

The Supreme Court has already held that the Government cannot confiscate your land and home as some have suggested, but they can make you sell it within the prescribed timescale.

The Government announced in I believe April 2001 that it was aware of alien purchase of property through vicarious means and would be looking into the matter. Nothing has happened since! It is basically up to you, but at least you can sleep a bit better knowing you can sell the property, allbeit you may not get full market value.