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Buying Property in Phuket for Investment

Posted by stormphuketstg on September 28, 2023
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Are you thinking about buying property in Phuket for investment? Then here’s your comprehensive ultimate guide on investment properties in Phuket and how things work.

Phuket, a renowned global holiday destination, attracts millions of tourists annually, including a substantial expatriate population. With its consistent tropical climate, stunning beaches, rich Thai cuisine, and an affordable cost of living, Phuket holds an irresistible charm for many. Beyond its allure as a vacation spot, Phuket offers a unique opportunity for investors to acquire properties, ensuring substantial returns and a taste of the island life.

In this comprehensive guide, we’ll delve into the various avenues for earning income through real estate investments in Phuket.

Buying Property in Phuket with Guaranteed Rental Returns

In Phuket’s dynamic property market, investing in condominium units often involves collaboration with renowned hotel management companies such as Radisson, Wyndham, M Gallery, and Ramada. These partnerships instill confidence in investors, especially those concerned about local developers’ experience and financial stability.

These hotel groups commit to manage completed projects as 4 or 5-star hotels, offering property owners an annual guaranteed rental return, typically ranging from 5% to 8% of the purchase price for periods spanning 3 to 7 years. The goal is to achieve an overall annual return of 12-14%, making the whole buying property in Phuket for investment process more appealing.

Things to Consider when Buying Property in Phuket for Investment

Expenses and Taxation: While some projects exempt owners from Common Area Fees, others may collect these annually. The management company usually covers utilities, and owners are subject to a 3% withholding tax on their income.

Usage During Rental Period: Property owners can enjoy up to 30 days of complimentary stay per year. However, during the peak tourist season (December 15 to January 15), property usage may be restricted due to high demand and rates. Owners might opt for 15 days of usage during the high season (October to April) or the full 30 days during the low season (April to October).

Unused Allowance: Typically, unused allowance does not carry over to the next year.

Post-Guaranteed Rental Period: Most projects transition to a Rental Pool (profit-sharing) scheme after the guaranteed rental period expires, though extensions may be offered in profitable cases.

Property Condition: Projects usually maintain the property’s original state post-program, with minor fixes but no furniture renewal.

Third-party Use: Property owners can designate others to use their allowance with prior notification.

Guaranteed Return Assurance: Regardless of hotel occupancy, the hotel management is legally bound to pay the declared percentage.

Exit from Program: Exiting the program prematurely is uncommon due to signed agreements, but it’s worth discussing with the management.

Selling During Rental Period: Selling the property during the guaranteed rental period is possible, but buyers often assume the remaining rental obligations.

You can find all the investment properties with guaranteed rental return from here.

Investment Properties with Rental Pool

The Rental Pool system offers property owners profit sharing based on their individual property’s performance rather than the hotel’s overall performance. Higher occupancy can yield higher returns than the guaranteed rental model.

Profit Share: Property owners typically receive 60-70% of generated income after expenses, while the hotel management retains 30-40%.

Equal Distribution: Some projects distribute yearly profits equally among property owners of the same unit type.

Expenses: Property owners cover Common Area Fees, maintenance, utilities, cleaning, and repairs. The hotel management’s share represents their profit.

Exiting the Rental Pool: Property owners can exit the rental pool with advance notice, provided no future bookings are affected.

Contract Duration: Rental pool agreements are usually signed annually.

Peak Season Usage: Property owners can use their units during the peak season, potentially maximizing profits.

Self-Rental: Ownership of certain properties may allow long-term rentals by property owners, typically ranging from 6 to 12 months.

You can find all the investment properties in Phuket with rental pool option from here.

Rental Management Companies in Phuket

While not all properties have in-house rental management, those that do often require owners to exclusively work with them. Properties without in-house management allow owners to choose external rental management companies or real estate agencies. This is an important part to consider when buying property in Phuket for investment purpose.

Profit Share: Rental management companies typically offer profit-sharing arrangements, with 60-80% going to owners.

Responsibilities: Rental management companies focus on maintaining high occupancy rates, using online platforms, arranging check-ins/check-outs, communicating with clients, offering additional services, and organizing cleaning services.

Costs: Owners may be billed for cleaning, laundry, and utilities, depending on the agreement. It would be a good idea to check it before buying property in Phuket for investment.

Rental Duration: Rental management often focuses on short-term rentals.

Renting Out the Property by Yourself

Many owners have an idea of buying property in Phuket for investment and rent it out by themselves. Self-rental offers the potential for higher income without sharing profits with third parties but comes with responsibilities.

Deposits: Short-term rentals may require a deposit for utility coverage. Long-term rentals typically involve a two-month deposit and the first month’s rent.

Legal Procedures: Property owners are responsible for registering tenants with local authorities.

Selling a Rented Property: It’s advisable to include selling intentions in rental contracts and cooperate with tenants for viewings.

Return on Investment: Rental returns in Phuket can range from 5% to 8% yearly, with the potential for capital gains due to limited land availability.

Conclusion: Phuket stands as one of the world’s premier destinations for real estate investment, offering lucrative rental returns and potential for long-term gains. Whether you opt for guaranteed rental returns, the rental pool system, or manage the property yourself, Phuket’s property market provides an enticing opportunity to bask in the sun while being extremely happy with your decision of buying property in Phuket for investment. With the island’s enduring popularity, property resale is also swift, making it an ideal location for capitalizing on your assets. Don’t miss the chance to invest in Phuket’s thriving real estate market; it’s an opportunity unlike any other. Buying property in Phuket wether for investment or residential, it always makes sense.

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