General Property Investment Questions

[Marcoose]

I've lived here for approaching six years and have always been too much of a woose to get involved with property.  Having just signed another rental contract on a new house for another year, I've decided that I would like this to be my last let

 

My situation: I have been with my girlfriend for almost six years, but don't want to marry her, or anyone.  I trust her but wouldn't put 25% of my net worth into her name by buying a house through her.  I run a UK business and have money to invest and was considering putting some of my savings into property.  

 

 

1.  Many people seem to think that circumnavigating land ownership laws by purchasing a house (to live in) through a company is risky.  Hypothetically, if I bought 3 homes, lived in one and rented two out, and therefore owned a trading company, would this be completely legit? 

2.  In terms of property investment as a business in Thailand, what are your thoughts?

 

Cheers!

[blackcab]

1. A properly structured company is what many people do. So far, no problems from the authorities.

 

2. In your situation I would purchase property in the UK with the specific intention if letting it (assuming it suits your tax situation - obviously it may not).

 

Hand the property to a professional letting agent and then relax. This is opposed to having to take a more hands on approach in Thailand as good managing agents who will deal in single properties are scarce.

 

I think it's fair to say that in general, well chosen property appreciates in the UK. In Thailand, this is true less often. You may hit a winner, but you may not.

 

The important thing to consider is that it is easy to get into property in Thailand, but sometimes it can be difficult to get out.

[Marcoose]

Thanks for the reply.  I've read many people comment over the years who are weary of the fact that buying a home to live in through a company, is essentially a practice that goes against Thai law and could be challenged in the future (my interpretation and poor wording :).  

 

Regarding the UK - if it weren't for these Brexit shenanigans, I would go for it.  

[KittenKong]

4 hours ago, Marcoose said:

1.  Many people seem to think that circumnavigating land ownership laws by purchasing a house (to live in) through a company is risky.  Hypothetically, if I bought 3 homes, lived in one and rented two out, and therefore owned a trading company, would this be completely legit? 

 

You still have to have Thais owning more than 50%, though there are (supposedly) legal ways of circumventing the worst effects of this.

 

My take on it is that Thailand very clearly does NOT want foreigners to own or control land, and one day they may well clamp down on it, so why do it? Plenty of other simpler ways of earning more that dont require taking any sort of Thai partner or indeed dealing with Thais in any way.

[blackcab]

13 minutes ago, KittenKong said:

My take on it is that Thailand very clearly does NOT want foreigners to own or control land, and one day they may well clamp down on it, so why do it?

 

I think you are 100 per cent correct. Land in Thailand is for Thai people. You only have to read the second verse of the Thai National Anthem to understand that point.

 

The strange thing is that the Government fully understands about companies being controlled by non Thai people, and I know of one particular industry (which has nothing to do with land) where control of a company by preference shares is expressly forbidden.

 

It hasn't happened in general though. It may happen, it may not. If it does happen, however, it will be very messy.

[robertthebruce]

As for Brexit, I have noticed Property Prices especially in London seem to have gone flat....

[trogers]

5 hours ago, robertthebruce said:

As for Brexit, I have noticed Property Prices especially in London seem to have gone flat....

I would think that one should go in at the bottom of a cycle...

[pumpuy]

Thai real estate principally  is a buyers market .

Be careful ...

[hdkane]

For me, the accepted corruption here makes any honest investment very risky...I've owned condos (management stole more than 2000000 baht from residents)...nothing you can do as the complex falls into disrepair...and Thais refuse to pay mandatory fees...houses?  I've had attorneys try to steal assets, and there's nothing you can do about it...land?  be ready for people to try to encroach, simply because you are a foreigner...and there's nothing you can do about it...

 

and then there's the fact that rental fees never approach what you would get in your home country, if you're from the USA or UK at least...also, Thais do not pay bills. simple as that.

 

to actually invest and succeed, you must be ready to adopt Thainess yourself...be prepared to bribe and threaten everyone from your tenants to the police...if you can do that, you will have plenty of hassles but maybe succeed...

 

 

 

[RDavis]

HDKane above is spot on. I have two properties purchased back in 2008 in Phuket and I can assure you that the chances of earning from property investment in Thailand are at best, slim.

[timewilltell]

Do you ever read the news?

 

You are joking right? Fraud, scamming and theft is commonplace along with other complications.  You will have zero support from a court when you are scammed. Property investment is one huge institutionalised scam and dubious lawyers of which there are many are up to their necks in it. Do yourself a favour and carry on renting 

[gamini]

My wife and I have done very well, buying and selling property in her name over the last 30 years. We have never lost on any deal. Consequently, we are living in Thailand luxuriously with the proceeds. Our investments in Chiangmai were the best.

[robertthebruce]

 

 

I did very well too.

 

But I would never buy again, too much of a risk........

 

But that's me.....

[English Engineer]

I bought a small house with a small deposit and a 15 year installment plan from the developer. Interest rate is high but I treat installments as rent. My view is easy to buy property in Thailand far more difficult to sell. Advantage in my opinion is I have security of tenure and after 15 years no rent also keeps financial risk to a minimum. The adage is avoid investing money here that you can not afford to lose.

 

Regarding investments I largely avoid Thailand. I do all investments in Singapore which is regulated and no tax on income.

[KittenKong]

9 hours ago, blackcab said:

The strange thing is that the Government fully understands about companies being controlled by non Thai people, and I know of one particular industry (which has nothing to do with land) where control of a company by preference shares is expressly forbidden.

It hasn't happened in general though. It may happen, it may not. If it does happen, however, it will be very messy.

 

For the time being they put up with it because they need the incoming forex and economic stimulus. If the day dawns when they no longer need the money I suspect that they will clamp down hard and fast and will expropriate foreign-owned/controlled land without a second thought. After all, they have nothing to lose from doing so as the land is already here and they certainly aren't too bothered about playing fair.

[mike324]

Blackcad has good suggestions.

 

Depending where you are houses can be extremely difficult to rent out and way harder to manage and maintain. I suggest you go the condo route if you are in Thailand or don't get into properties as investment. Its really a bad time to do so.

[KittenKong]

1 hour ago, gamini said:

My wife and I have done very well, buying and selling property in her name over the last 30 years. We have never lost on any deal.

Consequently, we are living in Thailand luxuriously with the proceeds.

 

Having a Thai wife seems a high price to pay. It may suit some but I'm not interested at all.

I've done very well out of investments in the West and live in Thailand luxuriously on the proceeds, which have a definite value and would be easy to liquidate. All my investments are in my sole name and legally owned by me.

[petermik]

There is an ongoing case of the BBC reporter Jonathan Head about buying property here,read it carefully,I had a house built a couple of years ago for my GF and from the start I understood completely that the money I was spending would never be recoverable.....never spend any money here that you cannot afford to walk away from

[12DrinkMore]

I know a couple of guys who made a load of money in real estate. Bu buying up a few pieces of land a couple of years later the land has appreciated by several hundred percent.

 

Well, that's what they claim.

 

Problem is, they can't sell a single m2 at the prices they reckon it to be worth................

 

 

 

[mike324]

3 hours ago, hdkane said:

to actually invest and succeed, you must be ready to adopt Thainess yourself...be prepared to bribe and threaten everyone from your tenants to the police...if you can do that, you will have plenty of hassles but maybe succeed...

 

I think that statement is mostly false. I've been living here for over 30 years now and has invested in a few properties - everything from land, factories, running a 80 room condo, to condos in bangkok as well. I am a naturalize citizen which does help later on if you own land. The bribing part is not as bad as you claim, for buying / selling condos-houses really no need to bribe unless you want to get things done faster.

 

Before I had my citizenship, I mostly dealt with condos. Rented to non-thais and never had problems with tenants. My units were mostly mid-high end units. Naturally it attracts those who are in senior / management level tenants who are working. I think these folks are the safest bets. I understand many people may not have the same budget to buy mid end units - renting to lower income folks have higher risk of problems. To minimize that risk, you could rent to groups such as students - this is my market for my own 7 story condo. Occupancy rate is at around 85%, I predict it could be higher if I list it on Air BNB as the university often have conferences  and visiting scholars.

 

I do also own single unit condo close to ABAC school, the return there is good. But its not anymore for those who are trying to get in, prices have gone up and there is oversupply.

 

You can succeed if you pick your investments wisely. Too many people fall in the marketing scam of XX percent return, or don't do their research property in regards to demand. Timing also plays a big  part in regards to property markets in Thailand.  Some properties may be cheap in Thailand, but its hard to rent and sell.

 

Given how much prices of property went up these past few years, the return is not very good if you are looking for any secure/stable investment. I would say I succeeded mostly due to the combination of buying in the right time and renting to the right people.

 

[elgordo38]

4 hours ago, hdkane said:

For me, the accepted corruption here makes any honest investment very risky...I've owned condos (management stole more than 2000000 baht from residents)...nothing you can do as the complex falls into disrepair...and Thais refuse to pay mandatory fees...houses?  I've had attorneys try to steal assets, and there's nothing you can do about it...land?  be ready for people to try to encroach, simply because you are a foreigner...and there's nothing you can do about it...

 

and then there's the fact that rental fees never approach what you would get in your home country, if you're from the USA or UK at least...also, Thais do not pay bills. simple as that.

 

to actually invest and succeed, you must be ready to adopt Thainess yourself...be prepared to bribe and threaten everyone from your tenants to the police...if you can do that, you will have plenty of hassles but maybe succeed...

 

 

 

Advice about as good as you will get. 

[Destiny1990]

3 hours ago, gamini said:

My wife and I have done very well, buying and selling property in her name over the last 30 years. We have never lost on any deal. Consequently, we are living in Thailand luxuriously with the proceeds. Our investments in Chiangmai were the best.

In her name ?glad it worked out for u but to advice it to others?

[Destiny1990]

Why u intend buy houses for rental instead of condos in your name to rent out?

[Suradit69]

15 hours ago, blackcab said:

Hand the property to a professional letting agent and then relax

Had a work colleague when I was in the UAE who did this. The agent found someone to rent her place in UK. During the course of the renter's stay she stopped making monthly payments and did substantial damage to the property. Not sure how it all ended, but my friend suffered financially from the experience.

 

Not saying this is typical, but nothing is a certain success either.

[lvr181]

Invest your money in a first world country and economy and use the "profits" to pay your rent in Thailand! The political risk in Thailand is too high!

[Thaidream]

I have put money into property all in my wife's name as I have been married for years but frankly if I was starting anew and unmarried- I would not invest in any type of property in Thailand. I would invest only in a first World country such as the US or UK and live off the proceeds in Thailand. Thailand has too many risks when investing in property and as one of the  posters mentioned - the day will come when the government will expropriate all the cozy deals they are turning a blind eye too at the moment.

[khunPer]

In answer to your (OP's) questions:

 

1.  Many people seem to think that circumnavigating land ownership laws by purchasing a house (to live in) through a company is risky.  Hypothetically, if I bought 3 homes, lived in one and rented two out, and therefore owned a trading company, would this be completely legit? 

 

You cannot legally own more than 49% of your Thai company limited, and in the faith of the law legally neither control more than 49%; however some co. ltd.'s has preferred shared, which (to my knowledge) has not yet been tested in Court. Having several houses for rent in a co. ltd. makes it a legit business rather than proxy for a foreigner's land-ownership, but you shall expect to pay a market rent for the house you live in, just like you are renting another house, and the company shall pay tax of the profit (expect that a Thai co. ltd. with foreign shareholders, often shall pay tax). Also when selling any property, the company shall pay tax of the gain. However, a foreign held/controlled co. ltd. with larger property holdings, may rather be a subject for scrutiny, than a small co. ltd. holding a foreigner's private home only.

 

You can also split land and house; a foreigner can own a house, but not the land under it...

 

2.  In terms of property investment as a business in Thailand, what are your thoughts?

 

I learned that Thais are calculating a house to drop around 10% in value a year (depending of maintenance level) – i.e. 2nd year it will drop 10% of 90%, 3rd year 10% of 81% etc. – whilst land only increase in value. However if you build at the right location and of potential interest for foreigners, who wish to avoid to hassle of controlling the building process, you may be able to gain a short term profit. If you cannot sell in short time, you begin to loose value, especially if the house is empty (nobody lives there); and if someone lives there, it's a used 2nd-hand house. After what I can see, one need to investigate carefully in local market terms, and what other Thai-constructors offers, as you may not be able to compete with them in price (i.e. construction costs). Some level of luxury after Western thinking may well be the answer, but that include a higher investment – and a higher risk – but where I live, I see luxury-houses are more easy to rent out (100k+ baht/month-level), than "normal" houses.

 

Land seem to be the way to make a profit in property business, especially raw land – for example farm land up Isaan has gone up 100% to 400% over a the last decade, depending of location, whilst land in developed tourist areas in many places have been more-or-less standing still; i.e. almost same price now as 10-years ago. If there's something as "normal", your investment shall double in 10-years; i.e. market interest/outcome of 6-7% pa. I would think carefully, especially about location and potential buyers (foreigners or Thais), before considering land in tourist areas as a better investment than for example bonds or equity.

 

"Investing" in property, either as a house to live in, or property for rental, you may not loose money in long term – as land will go up, whilst building(s) may fall in value, if not extremely well maintained – but your gain may be (very) limited. However as a house to live in, you live for the interest loss of your investment. But as rent-prices often are modest in Thailand – often Thais calculate 10% of the building cost only, but not land value, as they already owns that – it's worth looking at other sources of investment and dividend outcome, and perhaps just rent a house for some of the outcome. Building one's own house may rather be, that you get exactly what you dream about – something you're not likely to rent.

 

Another way of thinking is to build and rent out property for Thais, which is (much) cheaper to build and potential number of clients higher – your real treasure is the land under the concrete structure...

 

For your info: I'm shareholder in a co. ltd. that owns more than one property, land only.

Edited February 28, 2017 by khunPer

[blackcab]

2 hours ago, Suradit69 said:

Had a work colleague when I was in the UAE who did this. The agent found someone to rent her place in UK. During the course of the renter's stay she stopped making monthly payments and did substantial damage to the property. Not sure how it all ended, but my friend suffered financially from the experience.

 

Not saying this is typical, but nothing is a certain success either.

 

With a good letting agent it is mandatory that the tenant buys annual insurance to cover such losses.

 

No insurance, no tenancy.

[mike324]

1 hour ago, khunPer said:

Land seem to be the way to make a profit in property business, especially raw land – for example farm land up Isaan has gone up 100% to 400% over a the last decade, depending of location, whilst land in developed tourist areas in many places have been more-or-less standing still; i.e. almost same price now as 10-years ago. If there's something as "normal", your investment shall double in 10-years; i.e. market interest/outcome of 6-7% pa. I would think carefully, especially about location and potential buyers (foreigners or Thais), before considering land in tourist areas as a better investment than for example bonds or equity.

 

I agree farm lands are decent investments that are overlook, but most won't be able to buy land here. But I will also put it out there for those that can.

 

I have invested in farm land 1.30 hours away from Bangkok. Land cost ranges around 250,000 to 350,000 per rai. Monthly income is 1000 baht per rai, no maintenance needed at all :-) which is why its a good alternative investments.

 

When prices do rise, it usually jumps fast due to how cheap it is for 1 rai of land. Things like widening roads / pave roads, can have small increase in prices. Its not too hard to sell too due to the low cost as well.

 

Collecting payments can sometimes be a problem, so far the person who rents my land has been paying on time for the past 4 years. Land price has increase by about 25%

 

 

 

 

[Suradit69]

1 hour ago, blackcab said:

 

With a good letting agent it is mandatory that the tenant buys annual insurance to cover such losses.

 

No insurance, no tenancy.

Insurance may have covered the damage and, I believe, the tenant eventually evicted, but I believe loss of rent income during that tenancy as well as during repairs and delay in finding a new tenant still cost my friend money. I know she was royally pi**ed at the agent and was financially disadvantaged by the whole thing.

 

Predetermining "a good agent" as opposed to a bad one, may not always be easy to do. I believe this one had generated recommendations.

 

 

Edited February 28, 2017 by Suradit69