Have you ever considered buying a property in Thailand as an investment? It's an excellent source of passive income, since the average rental yield you can earn is 5-10% per year.
Buying a house or apartment to rent is the most obvious option. Thailand is extremely popular with tourists, and many foreigners also come here to work, so the need for housing is growing all the time.
Bangkok has been one of the world's busiest cities for years, its infrastructure network is being extensively modernized and its airport is a major hub in Asia. All these factors make Bangkok an obvious choice for real estate investors.
However, there are other ways to invest successfully in Thailand besides residential property. What about buying commercial property? What types of commercial property are available for purchase in Thailand? Should you buy empty premises or a ready-to-use rental business? Let's take a closer look.
How to choose the right type of commercial property?
There are different types of commercial premises for rent in Thailand:
Warehouses:
Warehouses are in high demand, especially those near airports, ports and major rail lines.
Office space:
You can buy office space in a large shopping mall in order to rent it to businesses.
Shophouses:
This is a building unit that houses commercial spaces on the first floor and their residents on the upper floors.
Other types of commercial premises and stores:
Before buying a commercial property, it's a good idea to do some due diligence on the location and surrounding area, and assess whether the property type is in high demand in that particular area. Examine competitors, talk to neighbors. Ask for balance sheets. Be sure to take note of parking spaces and their availability, as these can be vital for tenants.
Be sure to include taxes - such as income tax, business premises tax and outdoor advertising tax - in your purchase price!
Investors also need to decide whether they want to buy a vacant property and find a tenant themselves, or buy a property with an existing tenant, with each option having its advantages and disadvantages.
Each option has its advantages and disadvantages. Here we look at most of the possible scenarios associated with buying a property with an existing lease.
Buying a property with a tenant
Advantages:
No need to look for new tenants.
Finding the right tenant can be difficult, costly and time-consuming, especially for first-time buyers in the Thai real estate market. The process of finding and selecting tenants is somewhat complicated, especially if you are not assisted by a real estate agent. Buying a rented property will save you energy and give you more time to plan.
Immediate income.
If you buy a home that's already occupied by a tenant, you'll start receiving rental income into your bank account as soon as the transaction closes. What's more, the property won't sit empty while you look for a new tenant.
Legal issues of all kinds have probably already been settled.
Another advantage of buying a property whose premises are already occupied by tenants is that it is likely to meet all legal requirements, since property owners in Thailand must have complied with local laws, rules and regulations. In any case, it is always advisable to examine the general Thai laws governing landlord-tenant relations. It is also important to ensure that you are familiar with the terms of the lease that previous owners and tenants signed before purchasing the property.
Unless you personally deem it necessary to make improvements to the property, no additional investment is required at the time of purchase.
Buying already-rented properties in Thailand is a great way to save money. You don't have to worry about making major renovations, and it's a great choice when you're on a budget.
Disadvantages :
Lease conditions must be respected.
Unless the previous owner included a break clause in his or her lease, a property purchased with an existing lease means that you must respect the terms of the lease signed by the previous owner. The terms of the lease may not be advantageous to you. So be sure to read the terms of the lease carefully before you buy, so you don't inherit a burden or debt.
Evictions can be costly and complex.
If you decide to evict your tenant, the procedure can be long and costly. Your tenant would have entered into a lease agreement with the previous owner, and you would probably have signed an assignment agreement, taking over the rights and duties of the previous owner. Evicting the tenant without justifiable proof would put you in breach of this contract. Make sure you comply with all applicable laws. If you discover after the purchase that you no longer wish to work with your tenant, this could result in financial compensation at best, and legal proceedings at worst. Some tenants may be persistently late in paying their rent, others may cause damage to the property. If you want to avoid difficult tenants, review the tenant's rental payment history and credit report before buying the property.
Transferred legal risks.
One of the risks associated with buying a Thai property already occupied by tenants is the possibility that it may not meet local legal standards. Please note that once you have purchased a property, you are responsible for any breaches of the law, so you should carry out a thorough check of the property before you buy. You need to make sure that the previous owners complied with all legal requirements and acquired the property legally, and that the current tenants are managing the property properly. If the previous owner has not complied with the terms of the lease agreement, you could be held liable to your tenants and incur unexpected additional costs.
Investing in Thai commercial property: conclusion
If you're considering buying a commercial property in Thailand, it's essential to study the property carefully and make sure it's a safe and sound investment before taking the plunge.
It's up to you to decide whether you want to buy a property with tenants or simply vacant premises, as both options are viable.
If the commercial property is rented out, you won't have to deal with the myriad problems associated with preparing the property and finding the right tenant. The property won't sit empty, and you'll start reaping profits immediately.
However, you may be confronted with problem tenants who are in arrears with their rent payments, or who have legal problems that have been contractually transferred to you by the previous owner. You will have to abide by the terms of the lease signed by the previous owner, and will probably not be able to modify its conditions.
To minimize the risks, it is strongly recommended that you use the services of a real estate agent and lawyer, as they have the necessary real estate network and legal knowledge to assess the property, the former owner and the current tenants.
