The rental guarantee properties in Thailand
One type of investment that has caught a lot of attention lately is guaranteed rent investments in Thailand. These promise some very alluring yields in addition to other benefits, but they are not without their drawbacks. Here we take a close look at what they are, and the pros and cons.
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What is a rental guarantee property?
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What are the Pros and Cons of rental guarantee in terms of investment?
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Pros
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Cons
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How does rental guarantee work in Thailand?
What is a rental guarantee property?
A rental guarantee property is a property from which you will make guaranteed rent and It typically involves you purchasing a unit from a developer, such as a condo, and in return you will receive returns from the developer for a set period of time.
The rental income will typically be around 5% to 8% a year, although higher figures are available. In addition to the rent, the investor will also typically have other benefits such as being able to use the property themselves for a set number of days each year (usually 14).
What are the Pros and Cons of rental guarantee in terms of investment?
Every investment opportunity has its pros and cons, and the real estate market in Thailand is no exception.
When it comes to guaranteed rent investments in Thailand, the most common pros and cons are listed below.
Pros
- A guaranteed rental income for a set period of time.
- The option to use the property yourself, this will usually be for 14 days each year.
- The option to invest in a rental property without the concern about not being able to find a rent paying tenant.
- Advertising and other activities to find tenants are carried out by the developer.
- Many opportunities come with buy back options once the set period has expired.
- The opportunity to invest in luxury property for a relatively small sum.
Cons
- The “guarantees” are not always secure, and you might find yourself with little of the promised income.
- The properties are sometimes overpriced.
- The potential of unscrupulous developers going out of business after taking your money.
- Buy-back options are not always legally sound.
- The potential of losing out if laws/policies change at some point in the future.
How does rental guarantee work in Thailand?
When it comes to guaranteed rent investments in Thailand, the developer will usually retain rights to own the property for the duration of the agreement.
Yields will tend to be between 5-8%, sometimes higher, however, this figure will sometimes be gross rather than net so you will need to ask about any other costs such as maintenance and marketing. It is possible that the returns are a lot smaller than advertised. Some developers will also ask you to invest in a furniture package and this should also be factored in, to give you a clear picture of how much you will really make from your investment.
You should also note that, while some developers will freely allow you to use the property for longer than the allocated amount, doing so might affect your earnings from the property. This is something that should be checked if you are considering staying for longer than your allocation.
A guaranteed rent agreement in Thailand can last for just a few years in some cases, although longer periods such as 15 years or more can also be found. Those with the longer agreements tend to offer lower yields, but not always. When it comes to buybacks, some developers will offer to buy the property back for more than the initial investment.
Many guaranteed rent investments in Thailand do offer genuine and secure investment opportunities. However, as with every other investment, it is wise to inspect who you are dealing with and double-check the contracts.
For even more security, you should consider recruiting the services of a Thai real estate agent and/or a lawyer.