Should I Buy an Apartment in Thailand to Rent It Out?
Investing in foreign real estate remains one of the most profitable options. Buying a condominium in Thailand could be a great investment choice. As one of the largest countries in Southeast Asia, Thailand attracts tourists year-round, making local housing investments potentially lucrative. Let’s explore whether purchasing property in Thailand is worth it and what kind of returns foreign investors can expect.
CONTENT:
- Why Thailand?
- Can I rent out my condo after buying in Thailand?
- Other things you should know
- Monthly rental rates in Thailand
- Return on investment for rental properties in Thailand and taxes
- Differences between residential and commercial real estate investments
- Office rentals in popular areas of Thailand
- Conclusion
Why Thailand?
The global real estate market offers a wide range of opportunities, so why should you consider investing in this sunny kingdom over other countries? Several reasons make buying an apartment in Thailand appealing:
- Affordable cost of living and favorable climate conditions attract tourists and expats, keeping demand for apartments high.
- Steadily growing economy driving infrastructure development, urbanization, and increasing demand for housing.
- Competitive real estate prices—Thailand offers more affordable options compared to resort destinations in the US or Europe, with prices steadily rising since the pandemic.
- High return on investment, whether through long-term rentals or reselling your apartment.
Can I Rent Out My Condo After Purchase in Thailand?
In Thailand, there are virtually no nationality restrictions when buying or selling a condominium, allowing any foreigner to purchase an apartment and manage it as they wish. However, local laws state that foreign nationals can only own up to 49% of the real estate within a single residential complex.
Foreigners can purchase a condo for rental purposes and either rent it out themselves or use property management companies. For those who don’t reside in Thailand full-time, property management services are the easiest option. These agencies handle the maintenance, tenant search, and payment processing for a commission.
Property management companies operate on a contractual basis and may charge a fixed fee depending on the property’s size or take a commission based on the rental income.
If a foreigner rents out their property independently, this is considered a business activity, requiring either a work permit or the establishment of a company authorized for entrepreneurial activities.
Each tenant must be reported to the Immigration Department. This applies to anyone temporarily staying outside their registered place of residence. Even when hosting friends or family, immigration registration is required, or the owner could face a fine.
What Else You Need to Know
Before renting out an apartment in Thailand, consider the following points:
- The condominium's rules, decided by the general meeting, must permit rentals. If there’s a ban, renting is not allowed. It’s recommended to confirm this before making a purchase.
- Condominiums are not considered hotels. Short-term rentals are only permitted if the property has received official non-hotel status. This involves submitting a notice to the local county office with documentation proving the condo does not meet hotel requirements.
- Some condominiums are sold as hotel apartments, where investors contribute capital to the property and earn profits through a loyalty program. However, owners are limited in using their units, typically allowed to stay for 14 to 30 days annually. This arrangement usually yields the highest returns.
- Not only apartments but also villas can be rented out in Thailand. More flexible rules apply to villas, but a license is required if they have more than four rooms.
Monthly Rent in Thailand
Rental prices vary and depend on several factors:
- Size of the property and number of rooms
- Comfort level and amenities of the residential complex
- Development of local infrastructure
- Proximity to the sea or key attractions
- Distance from the international airport
As a result, monthly rents range from USD 150 to USD 500.
Return on Investment for Rental Property in Thailand and Taxes
For those considering investing in Thai real estate, a key question is whether renting out an apartment is profitable. The profitability depends on the location and size of the property. In 2023, the average returns by region were as follows:
- In Bangkok, the return on investment for a studio apartment reached 6.85%, while for a one-bedroom apartment, it was 5.63%.
- In Pattaya, the figures were 7.69% for a studio and 6.36% for a one-bedroom.
- In Phuket, a one-bedroom apartment could yield up to 10.66% annually.
Rental income varies by region and specific location, so it’s advisable to thoroughly research current rental rates in your desired area before making a purchase.
Owning rental property in Thailand involves paying taxes. Income tax on rental profits is calculated by subtracting housing maintenance costs from the total rental income and then applying the progressive tax rate, which ranges from 5% to 35%, depending on the amount of income. Additionally, income earned outside of Thailand is subject to a 15% tax on profits.
Investors planning to rent out property should retain records of income and expenses for the entire year, as financial returns must be reported annually to the tax department, regardless of whether the property was profitable.
Difference Between Residential and Commercial Real Estate Investments
Foreigners cannot purchase commercial properties in Thailand as private owners unless they register a business in the country. Commercial real estate must be registered under a Thai company or a joint venture where at least 51% of the shares are owned by a Thai citizen. Alternatively, commercial property can be leased under a leasehold agreement.
The primary difference between residential and commercial properties is the rental terms. Commercial properties are typically leased for a year or longer, and the return on investment (ROI) for commercial properties can be nearly double that of residential properties, reaching up to 12% annually. The initial investment in commercial real estate doesn’t always exceed that of residential properties, as smaller commercial units such as offices, salons, or retail spaces may cost similar to multi-bedroom apartments.
Office Rental in Popular Areas of Thailand
As of the publication date, office rental prices based on listings were as follows:
- In Chonburi, a 135-square-meter office was available for USD 1,435 per month.
- In Bangkok, a 320-square-meter office space was rented for USD 3,400 per month.
- In Nonthaburi, an 825-square-meter office could be rented for USD 2,240 per month.
Most commercial rental offers are concentrated in Bangkok, while Pattaya and Phuket focus primarily on the tourism industry.
Conclusion
Here are the main points discussed in this post:
- Can a foreigner buy an apartment in Thailand? Yes, foreigners are allowed to buy property in Thailand.
- Will this investment be profitable? Purchasing real estate in a prestigious area is likely to generate profit.
- Is it worth buying commercial real estate for rental purposes? Commercial properties can be highly profitable, but it's important to select a high-demand sector and a location with minimal competition.
- Can stable income be guaranteed? Like in any rental market, guarantees are difficult to provide. However, Thailand's strong potential for growth makes investments potentially lucrative.
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