Investment in Pattaya real estate

Apr 2012  "TurnKey, Russian Real Estate Magazine"

When flicking through magazines and newspapers devoted to real estate and speaking to real estate agents in Pattaya, the new "investor" may think that Pattaya is a place of miracles, where investment capital quickly and continually makes a profit.


Of course, the investment climate in Pattaya is more than favorable when compared to other areas, and this primary includes the real estate market, but before you invest your savings elsewhere, you need to know the difference between that which is real investment and what is just a fairy tale.


In world practice there are long-term investments in the economies of various countries with a view to profit. We will discuss investment in the property market in Pattaya in order to make a profit.


Most often profit is the difference between price of the subsequent sale of property, and in 70% of cases is expected to return within a year. This kind of investment is just banal speculation in a dynamic market: buy cheap – sell at a more expensive rate. This works in Pattaya, but its effectiveness is dependent on a number of unpredictable factors.


Often buyers ask agents to show them the most successful project in which to invest in at the initial stage and withdraw money at a profit in a short time! In fact, it is very difficult to predict if the project will be successful or not due rapid growth in the real estate market, and priorities changing almost every six months. In order to obtain the most up to date information about the market a detailed analysis is needed and this is not necessarily provided by all agencies.


And even if you manage to choose a very successful project and obtain a good apartment, after some time the investor has the difficult task of selling, the process of which can be much more complicated than buying. There are a lot of potential buyers out there wanting to purchase nice apartments, the problem however lies in the difficulty of investors drawing the attention of the buyer to their respective apartment.


In such "fast" investment many people make mistakes in calculating time and money. Suppose a property in the zero phase of the project costs 2 million baht, down payment is about 25% (500,000 baht) and then paid monthly or quarterly payments and a final payment on completion of the project in a couple of years.


Normally the scenario follows as such where the investor thinks that they will invest 500.000 baht and immediately put an apartment for sale for 2.2 million baht, three months before the first payment quickly selling the flat and thereby making a profit of 200 thousand. In reality however this is virtually impossible! Firstly because it is simply unrealistic to assume that one can sell an apartment in only 3 months, since other developers have a lot of similar apartments with possibly lower price. Secondly, you need into account additional costs such as fees for the agent and re-registration costs of the contract.

As a result, an investor who has only half a million of the actual money and is unable to continue to pay under the contract, will most probably lose the entire amount which they initially invested. With the best case scenario being, an investor continues to respect the terms of the contract while investing more and more capital, and finally being able to sell the apartment before the final payment.  This however is without the profit that he had originally counted on at the beginning.


It should be noted that the purchase of an apartment in the zero phase is the most lucrative investment option. But, the financial amounts and time frames should be more realistic.


Another option in order to make profits is investment is rental property. Here it is possible to achieve a 6-8% profitability margin, however, the presence of many factors and certain conditions must be taken into account.


In discussing the rent-ability of apartments where it seems as though there are a large number of apartments of rent at any given time in Pattaya is simply a myth. Seasonality of business in Pattaya is primarily reflected in the rental market. If we're talking about a nice apartment with one bedroom, located next to the beach for a short period of time (a month) in the period from November to February, these apartments are hard to find, since they are booked several months in advance and the rental price is 2-3 times higher than in the low season or for long term lease. The paradox here is that most the owners come to Pattaya in this period and therefore refuse to rent out their apartments to tenants.


We can consider several options for renting out apartments:


Renting out apartments on a daily or weekly makes 3 times more profit than renting out accommodation for long periods.


Exploitation of apartment costs can also be more expensive, and the owner should always be present in the city to deal with any issues or even evict tenants. Alternatively, you can give full control of an apartment to a trustworthy agency, respectively, but at the same time receive less income. In such a lease, usually the instead of recommending hotels and guesthouses the agents and owners would recommend apartments. There is a huge and constant demand for short- term living options especially during high season.


For tenants renting for 1-3 months, it is 15-20% more expensive than renting for 3-6 months. You can make more profit by renting apartments on a monthly basis than renting for long term, however you risk 'missing" those clients who may want to rent on a long term basis. Demand for monthly rental is more profitably and reliable than rental for a 3 month period


There are plenty of offers available to owners who may want to seek the help of real-estate agents. Normally agents are willing to take on the management of apartments on short leases (with commissions ranging from 10-15% of the contract). The constant presence of the owner is not required, but still desirable (with the owner on-site an agent's work becomes easier and more efficient.) Amortization of apartments in 80% of cases justifies profitability.


Renting out apartments for 6 to 12 months – is the most effective lease variant and less problematic for the owner. The cost is usually 15-20% lower than for 3-6 months. Amortization, fully justifies such a lease option, as the majority of tenants rent an apartment for a long time, taking care of the houses just like the owner.  Market demand is readily available with sufficient proposals. Agents take on similar apartments with (commission - 0.5 month's rent for a contract for 6 months or 1 month per contract year). Once a long term contract is signed, the landlord can

simply sit back and relax until the contract expires.


Many owners put some restrictions on the lease in addition to the terms and prices. For example, only renting out housing to married couples or not allowing families with children. Any conditions set by the owner can certainly work to safeguard an apartment from damage, and save the owner from extra hassle, but at the same time reduce its demand.


In addition to this investment in residential property in Pattaya has a large number of investment opportunities in areas such as commercial real estate / business / in the ground, etc. However, this "is another story." In any case, dealing with investment objectives, is the job of professional real estate consultants, to solve the investor's problems, find solutions and of course provide you with their expert professional advice.