Why affordable overseas holiday home investment property in Thailand is such a great investment

Many foreigners looking for overseas ocean front or beachfront house or villa property near the ocean are put off purchasing overseas holiday homes in Thailand because they can only purchase a house with land leasehold in their name as a foreigner, unless they operate a Thai Company as a controlling director with Thai shareholders which makes a business out of purchasing and renting out holiday homes. But this article illustrates what a good investment a holiday home in Thailand can be, whether it’s a house or bungalow that you purchase leasehold, or whether it’s a beachfront condo unit that you purchase freehold, because with such low interest rates around the world, what’s the point in keeping your money in the bank when it’s probably only just keeping pace with inflation!?!

For this article we’re going to take our “Bargain of the month” property which is for sale for only 1.5 million Thai baht, freehold to Thai or Thai Company, or leasehold to foreigner, which is approximately 50,000 US dollars. The maximum term for leasehold in Thailand is 30 years, but it is possible to include agreement for renewal for up to 2 further periods of 30 years, giving a total of 90 years leasehold ownership.

Putting your money in a bank deposit account for 30 years :
If you were to place $50,000 into a bank account for 30 years at a rate of 4% compound interest per year you will end up with a total of $162,169.88, which may only just keep pace with inflation. So, if after 30 years your money is only worth in real terms what it was in the first place, then what’s the point in keeping your money in the bank?

Putting your money into vacation property :
Alternatively, invest the $50,000 into this 2 bedroom holiday home by the ocean and you only need to rent it out for $80 a night for 30 days a year for 30 years to pay back the investment of $50,000, and cover the maintenance fees – any extra rental and you are into profit, and that does not take account of the increase in rental value over the 30 years. In future years you will no doubt be able to rent it out for more money per night, which means less days rental before you are into profit.

For example, let’s say we take the figure of 4% increase per year. In this case in the first year $80 per night for 30 nights = $2400, and in the last year you would be getting $259.47 per night for 30 nights = $7,784.15.

In actual fact, this would total $142,388.00 for the 30 years, only $19,781.88 short of your total of $162,169.88 which you would have got if you had put your money in the bank – but of course you get the use of the property for the other 335 days of the year, and have easily covered the cost of paying back the original $50,000 dollars you spent, plus the maintenance costs.

But let’s say that you manage to rent it out for a total of 90 days a year, which in the first year at $80 per night for 90 nights = $7200, and in the last year at $259.47 per night for 90 nights = $23,352.30.

This would total a staggering $427,164.01 income over the 30 years…. plenty enough to pay back the original $50,000 investment and cover the maintenance costs and still leave a very handsome profit for the investment, and also have use of the property yourself for the other 275 days of the year too!!!

Perhaps now you are beginning to realize what a really good investment this property can be if you are willing to rent it out as a vacation let, or even for short to medium term lets too.

The key factor here is the ratio between the purchase price of the property and how many days you need to rent out the property to pay back this cost over 30 years, including maintenance costs. In this case you should only need only rent out the property for about 30 days per year.

Let’s take another example….

…a 6 million baht one bedroom condo at the five star Phuphatara Residence.

Putting your money in a bank deposit account for 30 years :
Your original investment of $200,000 could be worth $648,679.50 after 30 years with 4% interest per annum, and perhaps just about keep pace with inflation and be worth in real terms the same amount after 30 years, offering you no real gain whatsoever.

Putting your money into vacation property :

6 million Thai baht is approximately $200,000, so over a 30 year period you would have to make $6,667 per year to pay back the original investment.

This one bedroom condo unit would probably rent out for about the same as the 2 bedroom house, at $80 per night, which with 4% increase year on year would total $142,388.00 for the 30 years if rented out for just 30 days a year, not enough to pay back the original investment of $200,000 dollars or to cover the maintenance charges over the 30 year period.

If rented out for 90 days a year with 4% increase year on year the gross rental income would be $427,164.01 for the 30 years, which should be enough to pay back the original investment of $200,000 dollars and cover the maintenance charges, and don’t forget that you will still have the use of your luxury five star 1 bedroom condo for the other 275 days of the year too!!!

Also, there is one important difference with this property, and that is that a foreigner can own the freehold of this condo unit, and thus your original investment of $200,000 could be worth $648,679.50 if the property increases by 4% per annum year on year, keeping place with inflation, such that in real terms after 30 years the condo could still be worth somewhere around the original investment price, or perhaps more, if property prices increase more than inflation.

Summary :
The point is, it doesn’t make sense to tie up your money in the bank when you could be investing it safely in good value for money holiday home property with reasonable rental potential which could bring you in a very decent income indeed in years to come when you retire. So, what are you waiting for? Start investing your money wisely now so that by the time you retire you will have a property which is earning good rental income to support your income in retirement, and in the meantime you will have the use of an overseas holiday home by the sea for holidays for yourself, your friends and family, saving you the cost of expensive hotel costs.