Which is more profitable for an investor – buying vacant premises or an existing business in Thailand?

Which is more profitable for an investor – buying vacant premises or an existing business in Thailand?

Have you thought about investing in real estate in Thailand? It's a great source of passive income, with experts predicting a rental yield of 5-10% per year for Thai properties, and even more in exceptional cases.

Buying an apartment or house to rent out is a promising option. Thailand is extremely popular among tourists, leading to a high demand for rental properties. Many foreigners also come to Thailand for work and require housing. Bangkok, named the world’s most visited city for several years, and its international airport, which is a major hub in Asia, further drives this demand.

But what about purchasing commercial real estate? What types of commercial properties are available in Thailand, and is it more beneficial to buy vacant premises or a ready-made rental business? Let’s explore this in more detail.

CONTENT:

1. How to select a buy-to-rent property in Thailand
2. Purchasing a property with a tenant
3. Investment in Thai commercial property: conclusions

HOW TO SELECT A BUY-TO-RENT PROPERTY IN THAILAND

There are several types of commercial buy-to-rent properties in Thailand:

• Warehouse: Warehouses are in high demand, particularly near ports, airports, and major railway hubs.
• Office: You can purchase an office in a business center and lease it to companies.
• Studio/Salon: This is an excellent option for a hair salon, nail salon, or massage parlor.
• Shop: Traditional retail shops for business.
• Shophouse: These buildings feature commercial spaces on the ground floor and residential units on the upper floors.
• Other Commercial Premises: Various other types of commercial properties are available based on the location.

Before buying a commercial property, you should evaluate the area where it is located to determine if there’s demand for that type of property. Consider the competition in the vicinity and don't overlook the importance of parking spaces, which can be essential for attracting tenants.

Be sure to account for the taxes that come with owning the property, including income tax, commercial property tax, and outdoor advertising tax.

As an investor, you may wonder whether it's better to buy a vacant property and find a tenant yourself or purchase a property that already has an existing tenant.

Both options have advantages and disadvantages. Let's examine what happens when you purchase a property with a tenant already in place.

Purchasing a Property with a Tenant

Pros:

1. No need to search for new tenants
   Finding a tenant can be time-consuming and expensive, especially for foreign investors who are new to Thai real estate. The process of screening candidates and signing the necessary documents can be complicated for beginners. Buying a property with an existing tenant eliminates this hassle, allowing you time to familiarize yourself with the intricacies of the lease agreement before the current tenant's lease expires.

2. Immediate income
   When purchasing a property that is already leased, you can begin collecting rental income right after closing the deal. You avoid the downtime of a vacant property while searching for a tenant.

3. All legal issues already handled
   A significant benefit of acquiring real estate with tenants in place is that the property typically already meets all legal standards and regulations. This saves you the hassle of ensuring compliance. However, it is still advisable to familiarize yourself with the general landlord-tenant laws in Thailand and to fully understand the terms of the existing lease agreement.

4. No additional investment required
   Buying property with tenants in Thailand means you avoid the need for further investment, such as renovation costs. This can be an ideal option if you have a limited budget.

Cons:

1. Lease terms must be honored
   Purchasing a property with an existing lease means that you are bound by the terms of the agreement made by the previous owner. These terms may not be favorable for you, especially if they result in financial loss. Carefully review the lease agreement before buying.

2. Complicated and costly eviction
   If you need to evict a tenant, it can be a long and expensive process. You cannot evict them simply because you purchased the property and want to use it differently or rent it to someone else. Ensure you follow the current laws and be prepared for potential legal challenges if you wish to end the tenant's lease.

3. Transferred legal risks
   When you buy a property with a tenant, there is a risk that the premises may not fully comply with local laws. Once the property is yours, you become responsible for any legal violations. It's essential to perform thorough due diligence to ensure the property and its management are legally sound.

Which is more profitable for an investor – buying vacant premises or an existing business in Thailand?

Investment in Thai Commercial Property: Conclusions

Before purchasing a commercial property, it's crucial to conduct a detailed analysis to ensure the investment is sound.

Deciding whether to buy a property with a tenant or a vacant space depends on your preferences. If the property is already leased, you avoid the challenges of preparing the space and searching for a tenant. The property will generate income immediately. However, you may face issues with difficult tenants or legal complications transferred from the previous owner. You must also comply with the existing lease terms, limiting your ability to modify them.