Have you ever considered purchasing real estate in Thailand as an investment? This is a good source of passive income, as experts forecast a rental yield of 5 – 10% per annum for Thai properties and even higher in exceptional cases.
A buy-to-rent apartment or house is a viable option. Thailand is extremely popular among tourists, which translates to high demand for rental homes. Many foreigners come to Thailand for work and also need accommodation. Bangkok has been named the world’s most visited city for several consecutive years and its international airport is a major hub in Asia.
But what about purchasing a commercial property? What types of commercial real estate are for sale in Thailand? Is it better to purchase vacant premises or a ready-made rental business? Let us delve further into this.
Content:
- How to select a buy-to-rent property in Thailand
- Purchasing a property with a tenant
- Investment in Thai commercial property: conclusions
How to select a buy-to-rent property in Thailand
There are different types of buy-to-rent commercial properties available in Thailand:
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Warehouse.
Warehouse facilities are in demand, especially near ports, airports, and major railways.
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Office.
You can buy an office in a large business center and lease it out to companies.
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Studio/salon.
A great option for a hair salon, a nail salon, or a massage parlor.
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Shop.
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Shophouse.
A building that houses commercial premises on the ground floor and residences on the upper floors.
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Other types of commercial premises.
Before purchasing a commercial property, you should research the district where it is located and assess whether this type of property will be in demand there. Take a look at potential competitors. Do not forget about parking spaces, as their availability can be crucial for a tenant.
Remember to include the taxes you will have to pay when deciding on a property to purchase, including the income tax, the commercial property tax, and the outdoor advertising tax.
An investor also faces the dilemma of whether to purchase a vacant property and find a tenant themselves or purchase premises with an existing tenant.
Both options have pros and cons. Let us consider what happens when you purchase a property with an existing lease.
Purchasing a property with a tenant
Pros:
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No need to look for new tenants.
Finding a tenant can be a difficult and costly job, particularly for foreigners who are first-time investors in Thai real estate. The process of finding candidates and signing the required documents is intricate and complex for a novice. Purchasing a property with a tenant will save you time and effort. You will also have time to prepare and study all subtleties of the contract thoroughly, even if the current tenant leaves after their lease expires.
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Instant income.
When you purchase a property occupied by a tenant, you can start receiving rental payments immediately after closing the deal and the premises will not stay vacant while you are looking for a tenant.
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All legal issues dealt with.
Another advantage of purchasing real estate with tenants in place is that it already complies with all the legal requirements. Property owners in Thailand must follow the regulations stipulated by local legislation. Real estate must also comply with the applicable industry requirements. Nevertheless, it’s a good idea to study general Thai laws regulating landlord-tenant relations. You should also make sure you understand the contract that the previous owners and the current tenants agreed on before purchasing the property.
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No additional investment is required.
Purchasing real estate with tenants in Thailand means no additional investment. You do not have to worry about renovations either. So it’s a great option if your budget is limited.
Cons:
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Lease terms to be complied with.
Purchasing a property with an effective lease means that you must stick to the terms of the contract signed by the previous owner. The former lease terms might not be advantageous for you as the new owner, e.g. if the contract is such that the landlord is now in the red. Make sure to read all the terms of the lease agreement carefully before the purchase.
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Complex and expensive eviction.
If you need to evict a tenant, this may be a long and expensive process. Remember that you will not be able to evict them simply because you’ve purchased the property and want to run your own business there or lease it to someone else. Make sure you follow all the rules that are currently in effect. If you have realized after the purchase that you do not want to continue dealing with the previous tenant, you are facing a long process of terminating the lease agreement and it would be difficult to do without a lawyer’s assistance. Some tenants may be consistently late with their rent, others may damage the property. If you want to avoid dealing with difficult tenants, look at the payment history and tenants’ credit reports before purchasing the premises.
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Transferred legal risks.
One of the risks of purchasing a Thai property occupied by a tenant is the chance that these premises do not comply with the local laws. After the purchase, you become liable for everything that breaks the law, so you must carry out due diligence and check the property carefully. You should also make sure that the previous owners meet all legal requirements and own the sold premises legally. You will also have liability to the tenants. If the previous owner failed to perform under the contract, you may have to face the consequences and incur losses.
Investment in Thai commercial property: conclusions
If you decide to purchase a commercial property, it is important to study it carefully and make sure that the investment is a wise choice.
It is entirely up to you whether you want to purchase a property with a tenant in place or a vacant premise. If a commercial property is already leased, you will not need to solve a plethora of problems related to preparing the premises and finding a tenant. The property will not stay vacant and will start generating profit immediately. You may, however, have to deal with difficult tenants who are late with their rent payments or face legal problems in tenant relations transferred from the previous owner. You will need to adhere to the terms of the contract signed by the previous owner and won’t be able to modify them.