Frequently Asked Questions (FAQ’s)
What can a Foreigner Buy?
There is a general perception that Thai property law is complicated. Actually, the opposite is true: the laws relating to foreign property ownership in Thailand are quite clear. Foreigners can buy and own “freehold condominiums”. Foreigners can buy and own buildings and structures, such as villas (as distinct from the land on which they sit), and foreigners can take leases on land or property.
Can a Foreigner own Land in Thailand?
Under the current laws of Thailand, foreign ownership of land is restricted. The Land Code of Thailand generally prohibits the ownership of land by foreigners; this applies to both individuals and legal entities. However, there are different secured ownership structures which allow a foreigner to acquire real estate in Thailand. (See Thailand property ownership for more details)
What are the main Types of Land Title Deeds?
Land titles are the most common evidence to prove land ownership, rights of possession and other interests in land. In Thailand, there are various types of land title that each provides a different level of security for the owner.
Land titles in Thailand are divided into 3 main types:
2) Nor Sor Sam Gor
3) Nor Sor Sam
The most secure type of land title in Thailand is called “Chanote”, otherwise known as a land deed. Upon which you may sub-divide, sell, transfer, assign, utilize and possesses.
How is land measured in Thailand?
In Thailand, while square metres are used for measuring floor areas of villas and condominiums, the unit of measurement used for land is “Rai, Ngan and Wah.” One Rai of land is equal to 1,600m2. (See land measurements for more details).
What does Freehold mean in Thailand?
Freehold is the most complete and absolute ownership interest that can be held in property. Freehold is where land or property belongs to the owner indefinitely (as opposed to a 30, 90 or 999 year lease) and therefore represents absolute ownership of real property.
What does Leasehold mean in Thailand?
Leasehold is an interest in land or property whereby the leaseholder does not actually own the land or property (in the sense of freehold) but is granted the right of exclusive possession and use of the land or property. However, a lease is not just a contractual agreement; it is also a registrable legal interest against the freehold title document. Once registered, the lease becomes a lien upon the title deed, which serves as notice to anyone who attempts to purchase the underlying land that a lease exists and that by purchasing the land they would be subject to the lease. As a legal interest, it also means the lease can be bought and sold.
What is Leasehold with option to Purchase Freehold?
Due to the fact that only the first 30-year lease of 30+30+30 year leasehold structure is “guaranteed” by way of legal registration on the title document, leasehold with option to purchase freehold is another innovative contractual structure designed to provide purchasers with greater security and control over the underlying freehold land. Should Thai law change in the future to allow foreigners to own land directly, this structure gives the lessee the right to transfer to freehold ownership
How much Rental Income can I expect?
Property owners can expect an annual rental yield of between 6-10%. Rental Yield is a helpful way to compare and analyze properties because it quickly identifies which properties present better value. You calculate it by taking the rental income for one year divided by the purchase price. To maximize rental income, it is important to buy or build a property where there is proven rental demand.
Do I need an Exit Strategy?
Formulating an exit strategy for each property you buy just takes a few minutes of careful consideration. Knowing in advance your exit strategy will almost certainly influence a number of decisions that are subsequently made in relation to a property investment.
What are the Zoning Laws and Building Regulations?
Only about 35% of Phuket can be built on or developed according to the current zoning laws and building regulations. A zoning map divides the Province into 16 different color coded land-use zones of which about 65% must remain undeveloped and reserved for agricultural use, forestry reservation and environmental preservation (including the 80m rule).
Do I need a Real Estate Agent in Phuket?
If you are buying property in Thailand, you will probably need to enlist the help of a real estate agent to view a selection of their property listings. A knowledgeable agent can usually save you both time and money. Just remember to avoid treating the information and advice provided by a salesperson as undisputed truth.
What is the best way to compare properties?
In most cases, comparing properties on a formal basis helps investors determine which one offers the best value. For apartments and condominiums simply divide the purchase price by the size of the unit to determine price per square metre. Example: Price per m2 = (5.4M/48) = 112,500 For villas we divide the purchase price in half to calculate built up area plus land for combined price per square metre. Example: Price per m2 = (7.5M/197) + (7.5M/436) = 55,273
Another measure used to compare properties is yield. This is calculated by taking estimated or actual annual rental income divided by purchase price expressed as a percentage. Example: Yield = (800k/10M) x 100 = 8%
What is “Off-Plan” Property?
Off-Plan is basically buying the rights to a property that has yet to be built, as opposed to buying a finished property. Some benefits of buying at the preconstruction stage is the price discount of 10-30% in addition to less capital needed as payments only become due according to the construction progress. It’s important to choose a reputable developer with a good track record to minimize the associated risk and keep in mind that your rental income will not start until after the project completion date.
What is a Reservation Agreement and Reservation Payment?
When you have decided to move forward on a particular property it’s best to submit an Offer which states the price and terms for the unit you would like to purchase. This is the negotiation process and after the buyer and seller have reached a mutual agreement it is clearly stated on the Reservation Agreement and signed by both parties. At this time a Reservation Payment is due to secure the deal and takes the property off the market.
What are Guaranteed Rental Returns?
Many developers are now offering Guaranteed Rental Returns to buyers searching for investment property. For example a new property might offer “7% Guaranteed Rental Returns for 3 Years”. The guaranteed rental return will be in the contract and this owner is limited to the amount of time per year they can occupy their unit. You are usually required to purchase the developers furniture package to participate.
What are Monthly Management and Maintenance (CAM) fees?
Common Area Management (CAM) fees cover such things as security, road access and parking, shared swimming pools, gardens and landscaping, elevators, reception area and facilities such as gyms, club house, library, saunas and steam room, water storage facilities and electrical infrastructure, pest control and garbage collection. CAM fees are usually paid by the owner one year in advance and can be a set fee or on a per-square-metre basis.
What is a Sinking Fund?
A sinking fund is a sum of money that is set apart by the developer to meet the cost of major replacements and repair work to the developments common areas. Owners are collectively responsible for funding the sinking fund.
Should I use a Property Law Firm?
It is surprising how many buyers view legal advice as a cost rather than an investment. A property law firm will break the work down into 3 sections, due diligence, contract review and transfer of ownership at the land office. It is a good practice to engage a lawyer before you start viewing properties or making offers. Once engaged, your lawyer will then be available to offer advise during the entire purchasing process.