Heavenly, with long beaches, magnificent landscapes, and tropical jungles, Thailand is one destination you definitely do not want to miss on the map if you’re looking to relocate as an expat.
With that much beauty and diversity, who could say no? Thailand has been known to be a mixture of its rich traditional culture and a view of the future — so whatever may float your boat, it’s all there. Add to that its rich medical tourism industry, and this Southeast Asian gem may just be paradise on earth.
Still, you need to look before you leap. One of the most important aspects of moving countries is the real estate. Where you will live, and how that will be arranged. Are you renting? Or will you have the opportunity to buy property as a foreigner? This guide will take you through what The Land of Smiles has in store regarding real estate.
Buying Property in Thailand as a Foreigner
Understanding Thailand’s property laws is a great step in ensuring your eventual move (should you decide to) is without any pitfalls. First, it should be clear that as a foreigner, you cannot own any land in the country, as that is reserved for Thai nationals. The penalty for going against this rule of thumb ranges from fines to jail time (up to 2 years).
Of course, there are some concessions to this regulation. Still, they require either a hefty 40 million Baht [1.13 million USD] (or more) worth of investments in Thai assets or bonds, along with the Minister of Interior’s approval, which in any event is hardly a walk in the park.
What you can buy and own instead is a condominium, which is a common practice for most expats living in Thailand, thanks to how seamless the process is. This does come with its caveat, as you must ensure your purchase and ownership falls under/ within 49% of the total property in the country owned by expats. Thai property laws in this regard work to ensure that foreigners do not end up owning more land or property, which would put the locals at a disadvantage.
The buying process for condos is pretty straightforward – it’s the details surrounding this purchase that you should concern yourself with more.
Let’s start with financing. Thai banks will NOT give you a property loan, so you have to consider what funds are available from home. However, not all doors are closed to foreigners in this regard, as you could still secure mortgage bonds from United Overseas Bank or Bangkok Bank (the only two banks to offer this to foreigners).
Where a typical mortgage would see you borrow money from a bank to buy a house and pay the bank back with interest over time, in the case of mortgage bonds, you're borrowing from a pool of investors. These investors bought a bunch of mortgages from Thai homeowners and bundled them into a "bond."
It’s a nifty little workaround, but you should also consider the catch with this approach. These mortgage bonds come in foreign currencies, mainly the Japanese Yen, US Dollar and Euro. The interest rate you’ll pay on the mortgage depends on the currency you choose. Now, because you are getting this bond in different currencies, you’ll be responsible for any risk associated with the exchange rates. In simpler terms, if the Thai Baht weakens against your chosen currency, your loan repayments will increase.
This brings to mind that before you can finance a property, you must have one in mind. Looking for a great spot? A pro tip is to leverage the existing expat community in Thailand. There are countless forums dedicated to this cause, but beyond simply asking, you can take the following steps in your search:
- Experience is a great teacher. But it doesn’t have to be yours. Look for a place where other expats own condos; there’s a good chance that if it’s great for them, it’ll also be great for you.
- Find yourself a great expat-focused lawyer who speaks great English so they can break down any fine print for you and always look out for your best interests. Don’t trust anyone blindly, however; Thailand is like any other location in the world, and scammers exist everywhere.
- Search on real estate portals. Of course, caution is always advised, but trustworthy portals like Housearch can offer you in-depth listings for property in Thailand and additional help, should you require it.
Condos aren’t the only thing you’re allowed to own, though. Under Thai Law, you can buy and have all the legal rights to a house or apartment (any structure, really) — such as selling, living in, or renting out, but you can’t directly own the land the building stands on, as we’ve mentioned before. You can also own a registered leasehold of up to 30 years, a workaround allowing you to secure a long-term lease for the land. The max term you can get is 30 years, but you can renew this– which, in a sense, technically means the land is in your possession (for up to 90 years). The lease covers either titled land and/or building, meaning your lease may apply to the land and the building itself or just one.
Phuket Old Town. Photo: Thae Jirapon (Unsplash)
Pro Tip: Purchasing a condo worth 50,000 USD or more in Thailand as a foreigner comes with the FET Thor Tor 3 form, aka the Foreign Exchange and Transaction form. Any Thai bank prepares this form, which the Land Department requires for processing your title deed and for you to legally own a condo in the country.
Owning Rental Property in Thailand
If your plans for Thailand are considerably short-term, then your condo or any other property type you own should be used — bringing in passive income while you’re away. Now, how do you set this whole arrangement up?
First, you can make your property a holiday rental, similar to what many Airbnb hosts do, and tourists who come to the country can vacation there for short stays. Or, you can just rent it out to someone else long-term. Many expats in the country are looking for accommodation and aren’t ready for the hassle of buying or building property themselves — you could provide a solution to their needs. Having a manager who can help supervise the maintenance of said property while you’re not around could benefit you, but it’s not always necessary. If it’s that important to you, most complexes have building management and they can help you oversee your property.
Your next step would be to research locations. You can’t buy just any property and hope for the best– rental income doesn’t come easy. Seeing as the market can be competitive, every decision you make has to be carefully thought out, so your choice of location needs to be top-notch.
A great strategy is searching for the not-so-popular neighbourhoods in popular tourist locations (if you want to run a service for holidaymakers) or serene and safe areas for longer-term tenants (expats tend to want less busy areas). You must do your due diligence with this research; you don’t want to throw in all your cash for a problem area. For instance, some expats have complained about the packs of dogs synonymous with major Thailand areas. One dog isn’t necessarily a problem, but a pack of them is another conversation that would quickly end any possibilities of high rental income.
Most expats recommend middle-class gated communities because they come with a level of care that just puts you at ease. After all, who wouldn’t want armed guards patrolling and keeping the safety or a capable manager to handle any issues that may arise? So you should definitely consider this as an option.
Some choice areas that most expats would find a great place to call home include Phuket, Pattaya, Chiang Mai, Hua Hin, and Koh Samui. For instance, Phuket has a 5-7% ROI, Pattaya has 6% per annum, while Koh Samui boasts a high 15% + return on investment thanks to its huge holiday activities.
And what about the legal aspects? There isn’t a Landlord-Tenant regulation in Thailand that specifically oversees this relationship, so you have the standard Thai real estate and contract laws for protection. However, Thai laws generally favour landlords more, so for all intents and purposes, any agreements you have with your tenant(s) should be as fair and reasonable as you can make them. It saves you any potential trouble and could create a great business relationship with your tenants in the long run.
If you find a suitable location, the next step is to choose a complex and study its by-laws to see if it aligns with your purposes. Some complexes don’t let you rent out at all, while others agree to periodic arrangements. It would be a shame to purchase in a complex and find out you’re prohibited from making rental income on it. In all, professional legal advice would ensure none of this happens.
Marketing your property is another plot point to consider. You can either list on Airbnb or employ the services of a real estate agency. It’s all about how much input you want in the whole process. Just be sure to use trusted sources.
Pro Tip: if you’re looking to own a number of rental properties, Thai rental laws, effective since 2018, state that any individual with more than 5 properties will be classified as a contract-controlled business. Under this regulation, you, as a landlord, cannot charge more for basic utilities than they cost. Additionally, you can only ask for a month’s rent and security deposit in advance, in contrast to many landlords who ask for security deposits up to two months in advance. You also cannot charge tenants for normal wear and tear usage. Any inspections you intend to carry out must be done with a written notice.
Phuket. Photo: Arkady Lukashov (Unsplash)
Building a House in Thailand
Usually, it’s an either-or situation for Thai real estate and expats/ foreigners. You’re either buying or renting. However, in some instances, and with all factors in place, you may be able to build your own home. You just need to cross all the Ts and dot the Is.
Land is the simplest factor that causes the most drama for foreigners building houses in Thailand. While there have been expats who have built without permission or right to do so in the first place, there have also been expats who have not been so lucky to go scot-free. As always, the most important thing is ensuring that all of your actions are legal under the country’s laws– and if you’re not sure what your rights are, you should seek legal advice for clarity.
A common mistake for expats is not making sure what the limits of their rights are, so ensure you’re not building over the limits of the land (it is only partly your land). The boundaries you have to follow are determined by the type of title deed you possess. Here are some of the most important ones:
- Chanote, or the NS-4 title deed, confers the property’s full rights to the document holder. It is the highest land title deed anyone can hold, and it bears the official size and boundaries of the land.
- The right of superficies is a title that gives holders the right to build on the land even without them owning it. Thai laws allow foreigners to either register the right of superficies as a separate right or in combination with a land lease.
- Right of usufruct lets the holder earn profit from property belonging to another individual.
- Nor Sor Saam (Nor Sor 3) is used to confirm ownership rights unofficially. It also indicates that the boundaries are unsurveyed, unspecified, and unofficial. Generally, there are no issues holding this. However, not knowing the boundaries or actual size of the land means you don’t know the limits for building, which is a potential problem in the future. You can always request an upgrade to Chanote at the Land Department.
- Nor Sor Saam Gor ranks slightly higher than the Nor Saam deed, officially confirming ownership rights. However, this title deed also means the land has not received any official surveying, so the limit problem may still exist. And just like Nor Sor Saam, an upgrade can be requested from the land department.
Aside from land deed titles, timing is another major factor to consider if you build your house in Thailand. Starting in cooler weather/ seasons (beware of the rainy season as well) means your builders don’t get tired out by the excessively humid weather and can be more productive. Be sure to take holidays into account. Observing them is a big deal in Thailand, so watch when you set deadlines.
You should also be mindful of what materials you use in your building — for instance, some houses built with the most expensive materials turn out unsavoury. Rather, you should focus more on the skills of your builders and workers.
In a Nutshell
When all is said and done, what matters most is your plans for moving to Thailand. If you’re looking for a long-term change in lifestyle, buying may be a cost-effective option for you, but you need to exercise caution so you don’t get trapped with a property you can’t get rid of.
Building your own house, on the other hand, may afford you the opportunity to design accommodation to your liking, but sometimes the cost of materials and labour, as well as the intricacies in dealing with land permissions, may outweigh the benefits.
In all things, careful consideration of all three options gives you the best preview — and you’re less likely to make a mistake with your move should you eventually make a decision.
Cover photo: Krabi, Thailand. Pascal Debrunner (Unsplash)