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Thai Rental Investment Property | The Good, The Bad & The Ugly Details

Thai Rental Investment Property | Holiday Rental Investment Property Thailand

THAI RENTAL INVESTMENT PROPERTY

SHOULD YOU CONSIDER BUYING A THAI RENTAL INVESTMENT PROPERTY?

Are you are considering purchasing a Thai rental investment property?  There are many reasons why purchasing a rental investment property in Thailand can be a good decision for you, and Siam Society Real Estate can help with the purchase process from start to end.  Hua Hin, Thailand is a great choice for property investors with a wide range of homes, from budget condo units to the ultimate Hua Hin luxury pool villa.  We will talk below about what to expect when purchasing and owning a property in Hua Hin, Thailand, and the important details you should know before buying.

It’s been our experience that most of clients make the decision to purchase a Thai rental investment property with an eye toward eventually retiring to the villa in the near future.  Retirement in Thailand offers a low cost of living, a friendly culture, warm weather, and inexpensive travel throughout SEA.  Before retiring, most property investors hope that their Thai investment property will generate a healthy ROI while they are still working in their home countries.  A lot of investors also like the added benefit of having access to private use of the villa during their personal holidays.

The good news is that, yes, this can be a very lucrative opportunity and a good strategy to pad the retirement account, although  there are some important details to consider before spending your hard earned cash in the Land of Smiles.

WHAT KIND OF LANDLORD WILL YOU BE?

First, a crucial detail before buying property in Thailand: you must be familiar with the basics concerning land ownership and Thai property taxes, all of which are covered in our other articles here: Leasehold vs Freehold & Thai Property Taxes.

Once you are familiar with your property ownership rights and what to expect regarding potential property taxes, the next step in your decision process is to find a property that you think will give you a good return on your investment.

At this point you should ask yourself, “Will I be an active, participating landlord, or a hands-off landlord?”  I should clarify this question: as one of Hua Hin’s premier Real Estate Agencies, we sell a lot of homes, and after a sale completes, many clients will ask us to manage their properties as rental investments while they continue to live abroad in Europe, North America, South East Asia, etc

We have worked with both types of landlords: those who are active participants in managing their own property (even if they live on a different continent) and landlords who believe their property should be self-sufficient, money-making-machines that don’t require maintenance, reinvestment or improvements.  It’s usually the latter, non-participating landlords who have the most problems with their homes and who perform the worst financially.

Landlords who are quick to respond to emails with questions or requests from their Hua Hin rental agents always outperform landlords who are difficult to reach and/or indifferent to the rental client’s needs or requests.  Sometimes a tenant will ask for something simple, like a new ironing board or extra serving dishes to host a dinner party; maybe a bedside lamp for reading at night.  Sometimes, it can be a big issue, like a major piece of equipment has failed; or an emergency, like a backed up toilet that needs immediate attention.

When a landlord refuses reasonable requests or doesn’t care about emergency situations, it sets up an adversarial relationship between the landlord and the tenant, and can often put the rental agency in the middle.  It is then unlikely that the rental tenant will want to book the same property in the future; it also makes the rental agency reluctant to suggest this property to future prospective tenants, knowing that there could be problems.

This concept of taking care of your rental property and your tenant should be intuitive, but it is surprising how many property owners refuse to reinvest in their homes or take care of their tenants’ needs.  The good news is that if you purchase an investment property in Hua Hin and plan to be an active, participating landlord who cares about the value of the rental home and the tenant’s well-being, you will be in a good position to perform very well and make a lot of money from your investment.

THAI INVESTMENT PROPERTY: The Good

One of the most compelling reasons buyers invest in Thai rental property is that rental income can often be quite high, while outgoing expenses can be very low, and property taxes are almost insignificant, or sometimes even non-existent.  Taxes on rental income in Thailand is also very low in most cases.  If you use a rental platform such as Airbnb, you can specify that the rental income be transferred into your Thai bank account, or to almost any other bank account throughout the world.  How you choose to declare your rental income is entirely up to you.

It is common for the rental agents and the landlords to utilize internet rental portals, such as Airbnb, Booking.com, VRBO, etc.  These rental websites are excellent referral systems that help keep your property occupied with high occupancy rates.  In fact, we purchased a Thai rental investment property ourselves a number of years ago, and have been extremely pleased with our ROI.

THAI INVESTMENT PROPERTY: The Bad

There are always nightmare stories about owning rental properties.  These experiences can happen anywhere in the world.  There are nightmare tenants who can do a lot of damage to a property, but luckily, these tend to be few and far between.  We have only seen a handful of really bad rental clients in the past 8 years of working in this industry.  And the good news is that owning a concrete home means that at least the structure is pretty indestructible.

That said, pets and kids can do a lot of damage to furniture (you can always stipulate that pets are not allowed); water leaks that go unreported can be expensive to fix if left unattended for a long period of time, but overall, these issues are manageable in Thailand.  Labor is cheap; home insurance is very affordable compared to western countries; maids and housekeepers are inexpensive; and pool, garden & pest control services are all reasonably priced.

A COST BREAKDOWN: The Ugly Details

I think the best way to describe what it’s like to own a Thai rental investment property is to break down a real life example with actual figures.  We manage a property which gets most of its bookings through Airbnb, but also quite often through our own Hua Hin real estate website.

On average, this particular property generates between 60-70,000 THB/month (US $1,962 – $2289 per month).  Some months are better than others, and, of course, the majority of the rental income is generated during the high season months.  However, the house has a pretty good occupancy rate throughout the year.  Repeat business is extremely important, so we try to ensure that our guests are happy by trying to anticipate guests’ needs and by being available in case there are any issues that might arise (and issues can and will come up from time to time).

Typical, monthly outgoing/operational costs include electricity and water, internet service, maid service, and pool & garden services.  The average monthly electric bill is about 4,500 THB/month (US $147/month); water is about 1,000 THB/month (US $32/month); internet is about 800 THB/month (US $26); maid service is 1,600 THB/month (US $52/month); and pool & garden service is about 2,000 THB/month (US $65/month).

Occasionally, there are repairs that need to be done at the house, but usually nothing serious, as most houses in Thailand are solid concrete structures.  That said, the owners are slowly reinvesting into the house.  The house is an older (15 years old) 4 bedroom pool villa with an outdated concrete kitchen.  This year, the owners are planning to install a brand-new, western-style kitchen, retile the living room floor to brighten up the living space, add a BBQ kitchen near the pool, and do some other minor remodels.  We estimate these renovations will cost around 350,000-400,000 THB (US $11,447 – $13,082), with the majority of the money spent on new kitchen cabinets: 250,000-300,000 THB (US $8,176 – $9,811).

For the 2018 calendar year, Airbnb’s performance report gives the property a 42% occupancy rate.  However, the actual, true occupancy rate is slightly higher, since this report doesn’t include bookings through our own website and the bookings received through other rental portal websites, such as booking.com.

This particular rental house is not located in a super popular area of Hua Hin, but in a relatively quiet, more remote location.  I believe that if the house were in central Hua Hin or directly on the beach, it would perform even better.

In fact, we have another client who asked us to manage an ultra luxury home located on a prestigious golf course in Hua Hin.  The nightly rate for this ultra luxury home is around US $1,000 per night!  Yes, the house is absolutely stunning, and this property is practically booked all the time!  We recently rented it out for an entire year to one of our clients.  This golf course home performs incredibly well on Airbnb, and the location is extremely desirable for most high-end vacationers looking for a unique experience and a stunning home with fabulous golf course views.

To summarize the performance of an average 4 bedroom rental property located in Hua Hin & Pranburi, you can see all the gory details in the spreadsheet below (Please note that this is a report generated from Airbnb only – there were additional bookings received outside of Airbnb, but these figures are not recorded below):

AIRBNB Profit vs Expense Report

AIRBNB Profit vs Expense Report

Recommend Rental Investment Properties Currently For Sale:

  1. 3 Bedroom North Hua Hin House For Sale: https://siamsociety.com/listings/charming-3-bed-hua-hin-home-under-5m-thb/
  2. The Views at Orchid Palm Homes –  3 Bedroom Pool Villa: https://siamsociety.com/listings/orchid-palm-homes-villas-for-sale/
  3. Absolute Center Of Hua Hin – walking distance to beach: https://siamsociety.com/listings/central-hua-hin-modern-house-for-sale/
  4. Golden Sands Luxury Villas – walking distance to beach: https://siamsociety.com/listings/top-quality-hua-hin-beach-homes-for-sale/
  5. Central Hua Hin Townhouse – Perfect Airbnb Property: https://siamsociety.com/listings/hua-hin-homes-under-4m-thb-for-sale/

 


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