Investing in real estate is one of the safest and easiest investment one can make. Whether you are a private individual or a hedge fund, owning real estate is a sound strategy because its value is likely, if not logically, to appreciate over the course of the years. Property investment offers therefore, at the very least an anti-inflation shield and, at best, a great long-term asset.

1. Why and how to invest in Thai properties?

High loan house interest rates in America and Europe are currently weakening middle-class accessibility to the real estate market, making it harder to invest and protect liquid assets from the seemingly endless post-Covid inflation. In this context, Thailand, renowned for its robust tourism industry, emerges as a profitable and more accessible investment alternative to the American or European property markets. Indeed, many first-time visitors to Thailand discover the appealing property investment opportunities available, which often combine leisure.

Investing in a property in Thailand can be an all-inclusive investment that generates passive income, requires minimal attention, and offers free usage of the property when you spend time in Thailand, along with other benefits and discounts. Thailand’s stable economic environment, quality infrastructures, thriving tourism industry, and foreigner-friendly policies boast high property rental yields and a fair appreciation. Invest in Thai properties and achieve ambitious financial goals. Let’s explore together the spectrum of property investment options with Keller Henson, real estate agent specializing in new market and property investment, get our pro insights, best practices and recommendations in this guide.

Thai attractiveness – Quality of life:

Thailand has steady GDP growth and a resilient economy. On top of quality infrastructures, Thailand offers excellent healthcare services, reputable hospitals and medical facilities, as well as international schools. Thailand is therefore an ideal location that attracts foreigners in general, and also for foreigners willing to invest in properties, looking for capital returns and a comfortable living environment.

High rental returns – Tourism:

Thailand’s thriving tourism industry is a major driver for the property investments. Indeed, the country welcomes millions of international visitors annually, contributing to an ever higher demand for rental properties. This ensures substantial rental yields in the touristic areas. This vibrant tourism industry offers investors with opportunities to capitalize on it, through ready made property investment offers from international hotel groups, like Wyndham, Radisson, Accor, etc…

Property Value Trends:

Thailand’s property market has shown consistent growth over the years. Regionally, popular areas like Phuket and Pattaya have their unique trends overperforming the national average.. In Phuket, especially in areas like Bang Tao, property prices per square meter have been rising due to the high demand for luxury villas and beachfront properties. Similarly, Pattaya, particularly in areas like Jomtien, has seen significant development, attracting both local and international investors. These areas offer a mix of affordability and luxury properties, catering to diverse investment preferences, budget.

For more detailed information, you can refer to the Bank of Thailand’s statistics and the property price index insights.

Various properties for sale in Thailand

Thailand offers a wide range of properties to suit all budgets starting from less than a million THB (less than 27,000 EUR or 29,000 USD), for a studio condominium, to ultra-luxury properties ranging in the hundreds of millions THB (several millions EUR or USD), including beachfront villas and high-end residences in Bangkok. Please browse Keller Henson properties portfolio in Thailand exceeding 1,000 properties for sale

2. ROI – Returns On Investment in Thailand

Thailand offers a variety of investment opportunities, from hospitality groups and off-plan purchases to seek long-term capital appreciation or self-managed short term, long terms rentals through Airbnb. A property investment comes with its own set of risks, benefits, and anticipated returns on investment (ROI). Investing in the Thai property market can yield significant returns, averaging around 5% to over 10% yearly. This figure does not account for potential appreciation in property value per square meter or other benefits.

Your ROI in Thailand might be anticipated with accuracy in some cases, depending on the investment and rental program, if any, offered by hotel groups, or condominiums, upon the terms and conditions, whether the returns are guaranteed at a fixed rate, or projected only, pooled together, redistributed, calculated on a gross or net revenue basis, etc. Additionally, taxes in Thailand apply on your rental revenue, making it essential for investors to understand these variables and anticipate net ROI figures. Let’s explore the different investment structures and possibilities in Thailand. Become the owner of a hotel room or a secondary residence in Thailand with benefits, by participating in a rental program, get yearly returns and enjoy free time in your unit every year.

Invest in Thailand properties, what ownership structures ?

Fractional Ownership:

Fractional ownership is a pure investment model involving an agreement between you and a hotel management company. You own a fractional share of the property only, this share is not registered under your name at the Land Department. Instead, the managing company compensates you with yearly returns at a predefined rate, which can be guaranteed or variable based on the investment plan. As you stay in the investment program, your investment factor increases, offering progressively higher returns, potentially up to 30 years. This structure provides an accessible entry point for real estate investment with the potential for significant long-term gains but misses somehow the guarantee to own a property fully and duly registered at the Land department.

Leasehold Ownership:

Leasehold ownership terms allow foreigners to lease a property in Thailand for 30 years, the lease can be renewable up to twice. The leasehold terms are a common ownership structure in Thailand for foreigners when they cannot, by law, purchase in full the property. It is a long term lease that substitutes an outright ownership. International hospitality groups like Wyndham, Radisson, Hilton, Intercontinental, Accor, Melia and others offer this leasehold ownership to individuals looking to invest in Thailand in their hotels, against returns on investment and other privileges. Unlike fractional ownership, leasehold contracts are registered at the Land Department, providing more security. Additionally, leasehold terms have a lower total registration fees, only 1.1% total, making it a cost-effective solution to register a property in Thailand as a long time lessee, a cost saving alternative to freehold ownership.

Freehold Ownership:

Freehold ownership allows foreigners to own a property outright under their name, offering better security in terms of inheritance and protection against possible lessor defaults compared to leasehold contracts. This is rendered possible by ”The Condominium Act” in Thailand within the Foreign Quota, which cannot exceed 49% of the total property surface. Only a few investment offers from hospitality groups include freehold terms, requiring an additional condominium license on top of a hotel license. Freehold ownership is often available in the mixed-use residences. The total registration fees for a property in freehold ownership at the Land Department are 6.3%.

Investment properties with Rental Programs

A rental program from a hotel management company or condominium management company offers peace of mind, saving you from administrative tasks and client relationship management. These rental programs are designed to provide owners with a hassle-free experience while ensuring a steady stream of rental income, sometimes guaranteeing a fixed amount and an exit strategy. For these hospitality corporations, partnering with individual investors helps mitigate the high costs associated with bank interest rates.

Guaranteed Rental Program:

A guaranteed rental program guarantees a specific return on investment, the hotel management company agrees and commits to paying a guaranteed amount, typically ranging from 5% to 8% per year. This return is calculated based on the property’s base price and is guaranteed for a set period, usually between 1 to 10 years. At the end of the guaranteed period, the program may be renewed or transitioned to a pooled rental program.

Pooled Rental Program:

Unlike a guaranteed rental program, a pooled rental program does not offer a fixed return, the return is projected in some cases, but not guaranteed. Instead, returns are based on the overall revenue of the hotel, with no maximum cap on earnings. The total rental income from all units is combined and distributed proportionally among owners based on the square meters owned, minus a share for the management fee. This structure often results in higher returns than guaranteed programs, as it reflects the hotel’s real performance and ensures a minimum revenue regardless of your unit being rented fully, partially or not at all.

FEATURED PROPERTIES WITH RENTAL PROGRAMS

Payment of the rental returns

Returns are generally paid yearly and locally in Thailand by the management company. Taxes apply, Keller Henson can assist with opening a bank account and other tax ID registrations, tax declaration, etc.

Rental Program Benefits

Investing in a property in Thailand with a rental program comes most of the times with free time for personal use and other privileges, benefits, and possibly investment exit options

Free time

The rental programs offer a certain number of days per year for you or your relatives to enjoy your property, typically around 30 days, with variations between low and high seasons. Some programs offer “points” and a night is valued at one or more points depending on the seasons. The pooled program is more flexible, allowing for extended personal use, though it may impact your returns based on additional days used outside the rental pool.

Other Benefits

Network discounts worldwide for various hotel Brands – shopping discounts, vouchers in clinics, sport complex ect  

Buy-Back Option 

Some investment programs offer their investors a buy-back option. That sounds like an exit strategy, in essence, you are assured by a letter of intent that the developer will purchase the property back after a certain period, usually, after 5 years, (to avoid SBT tax on resales under 5 years). The buy-back option may or may not take the appreciation of the unit for the same period of time whether you are guaranteed a buy back option at 100% of initial price or more. 

Rent out your property in Thailand

Investing in a property in Thailand and managing the rentals independently or through a third party offers flexibility and potential for higher returns, but is likely to require more attention and time than the hotel rental programs.

Platforms like Airbnb allow you to list your property for short-term rentals, which can be highly lucrative in popular tourist destinations. However, it’s essential to consider associated fees, such as third-party agency fees for property management services, which can range from 10% to 30% of rental income. Additionally, ensure compliance with property management and with local regulations regarding short-term rentals to avoid legal issues. Airbnb is only tolerated in Thailand, not authorized officially for hotel license issues. Short term rentals are not accepted everywhere in every property in Thailand. The property management may prohibit short terms rentals in some cases : residences with a trademark, luxury residences in Bangkok, etc

Handling the rentals privately gives you full control over operations, and allows for potential higher profits, returns, against more client management, maintenance, compliance with local regulations. Third party agencies offering property management services alleviate the above, taking a substantial share of the rentals revenue and therefore reduce your net ROI ultimately.

How to Calculate Your Net ROI?

Calculating your net Return on Investment (ROI) is crucial to understanding the net profitability of your investment. Here are some essential factors to take into your calculation and get a net net ROI

The CAM Fees: 

Common Area Maintenance fees for shared spaces in condominiums or residential complexes.This is expressed in THB per sqm per month. The cost of Cam fees is a variable that depends on the common facilities available for the co-owners and their maintenance costs, ex : swimming pools, gardens, gaming area, etc. The Cam fees are usually payable 1 year in advance.

The Sinking Fund: 

One time payment, for new properties, expressed in THB per sqm – This is a provision fund set aside for future major repairs or replacements for the building. Payable before handover.

Thai Personal Income Tax:

The returns from rental revenue fall into the Personal Income Tax scheme. Understand the tax implications for rental income and capital gains from property sales. See below applicable rate table when you have a Thai Tax ID, If you don’t, a flat 15% tax is withheld from the returns.

Special Business Tax: 

Special Business Tax: 3.3% (if any) if property is sold within 5 years – 

Basic net ROI Calculation:

Formula: net ROI = (Net Profit / Investment) x 100

Example: If you purchase a property for 5 million THB and your net annual income is 300,000 THB after removing all your expenses,, your net ROI would be (300,000 / 5,000,000) x 100 = 6%

3. Invest in Off-Plan properties in Thailand

Any discerning investor willing to invest in properties in Thailand will be looking at buying the cheapest price. How much cheaper could it be than the “pre-sales” price? Not much, since this is usually a price that stands way below the average market price. Off-plan properties, by definition, means a property before its construction is completed, or even planned or construction is in progress. Investing in an off the plan property in Thailand offers several key advantages one should consider to maximize investment outcomes.

How to Bet on Long-Term Capital Appreciation ?

Investing in top properties for long-term capital appreciation involves a strict selection of properties with a blend of strategic location, high projected demand, desirable features. The Off plan properties with the highest appreciation potential feature well-known brand names and hotel certifications, which add to their value, ensuring occupancy, performance levels, and international standards.

Key features such as beachfront access, pool access, sea view, and other special features make these properties highly attractive. Additional benefits like discounts and exclusive services further increase their potential and profit when reselling the property. By focusing on prime locations and desirable features, investors can expect steady value appreciation and strong demand, leading to substantial long-term returns.

Advantages of buying Off-plan properties

Pre-Sales Prices:

Secure properties at a lower price, pre-construction prices, pre-sales prices, resulting in significant savings, ranging around 20 – 30% below the market price.

Flexible Payment Terms:

Payments are installed according to the construction progress of the property, or building, making it easier for you to manage finances. The payments can therefore be installed over the period of the construction up to 2 years.

Anticipated Value Increase:

As the project nears completion, the price per square meter is likely to rise in the meantime, and correct at the current market price resulting in natural capital appreciation between the start and completion of the construction.

Resale Opportunity:

With off plan properties, investors may choose to resell the property – or, technically, to assign to someone else the Sales and Purchase Agreement, even before the handover of the property, before the registration at the Land department, potentially achieving a profit from the increased value, net of taxes. This approach allows investors to capitalize on market trends, securing properties at advantageous prices and benefiting from potential value appreciation as the project is completed.

4. Investment properties and Visa / Residency benefits

Buying a property in Thailand does not give you residency de facto, Thailand offers several residency programs like the Thailand Privilege Long Term Visa.(ex Elite Visas). Designed to attract affluent individuals by providing a range of exclusive benefits. The Thailand Privilege Visa offers new membership tiers, each with varying lengths of stay and associated perks, including expedited immigration procedures, access to government concierge services, and discounts at luxury resorts, golf courses, etc.

Overview of Thailand Privilege Visa and Benefits:

• Membership Tiers: The Thailand Privilege Long Term Visa offers multiple tiers ranging from a 5-year privilege entry visa to a 20-year
• Benefits: Members enjoy VIP treatment at airports, expedited immigration, government concierge services, exclusive discounts, and access to high-end leisure and business facilities.
• Application Process: The application process is straightforward, with options to apply individually or as a family. Keller Henson assists with the entire process, ensuring a smooth and seamless experience for all members.

Property investment with Visas privileges:

Investing in Thailand’s property market offers various opportunities, from high returns and economic stability to diverse investment options and favorable residency privileges. Whether you are interested in the potential for long-term capital appreciation, the attractiveness of Thailand’s booming tourism industry, or the financial stability provided by the country’s robust infrastructure, there are many ways to achieve your investment goals.

From affordable condominiums and fractional ownership opportunities to luxurious beachfront villas and freehold properties, the variety of investment options ensures there is something to suit every budget and preference. Thailand’s real estate market is not only a safe and lucrative investment choice but also offers the potential for a high quality of life, combining leisure and financial growth in a prime destination for international visitors. Whether you are a first-time investor or looking to diversify your portfolio, Thailand’s property market presents an attractive investment with promising returns.