What is the purpose of real estate investment?
Defining the purpose of real estate investment is a critical part of the process when building or purchasing real estate and land in Thailand. Being clear on the purpose will help make the right decisions throughout the purchasing process. The main purposes can be simplified into the following:
- Financial gain through rental revenue
- Primary residence
- Investment for capital appreciation
- Retirement purposes
After defining the primary reason (or reasons) for investment it should then be focused upon in order to help go through the correct decision making process from beginning to end. Consistency is key but it can often be easy to let emotional decisions and preferences become dominant. This can happen in for instance when an investor has the single goal for a financial gain but chooses a property that may be more visually appealing to them in terms of style and taste but not be so productive via rental income and overall ROI. Another example is when investors are planning and building property but do not consider the end buyers or users preferences, but instead focus on their own.
Going over each investment purpose will ensure that the primary one is chosen and that the end goals are clear:
If the only investment purpose is for a primary residence then this is extremely straightforward. The property can simply built or furnished according to the individuals’ own tastes and preferences. The only restrictions that one may have are budget and building regulations. Even so, any investor should keep a note in mind that in future they may wish or need to sell the property and that may also affect decisions from the end purchaser.
One factor that is possibly the most important is any applicable management or maintenance charges. Making sure that any fees are affordable and reasonable is very important if the only income being relied upon is generated from an investor’s personal finances.
Financial gain through property rental:
This investment reason involves taking a number of factors into account. Location is important to consider, as rental clients will have different preferences on both immediate location and also surroundings. While some may wish to be near to nice beaches, others may wish to be near busier tourist areas and others may wish to balance both.
It is also worth thinking about the price factors and also unit sizes including number of bedrooms. Thinking about the target segments will help determine what size and type of property to consider investing in.
Similarly, it is important that consideration is given to the interior and style or property, as the property must appeal to holiday tourists. Additionally, the materials and durability of the property is important due to maintenance and flow of guests using the property.
Important things to consider with this are having comfort and accessibility throughout the villa. Also, surrounding amenities and facilities are important to think about. It is also possible that investors may wish to use the property for retirement in the future and allow rental services meanwhile. This would also require taking into consideration some of the above factors.
Investment for capital appreciation:
Real estate investment often takes place for capital gain when the investment price allows a required markup and profit forecast over the short term, if the property is off-plan and will be complete soon, and also in the long term if other factors and surroundings increase in value such rises in land values. This can achieve great returns but it is important to carefully go through all details and information along the way and make sure investments are accurate and secure. This is also a good time to have the assistance and support of a reputable real estate agency.
Combined investment purposes:
Sometimes investors can find that there is no single reason for investment and that they overlap, although there is still usually a primary reason to focus on. An example of this is using the asset as a holiday home and renting it out at others periods in order to return a profit and additional income. Another example is to use the property for financial gain and rent it out with the aim of occupying it in the future as a retirement home. Either way, it is important to balance the primary and secondary purposes and focusing on this throughout the purchasing process.
Summary and conclusion:
Defining the reasons of real estate investment through questioning each of the different purposes, and also being consistent, is essential in order to achieve the desired outcome and goals.
A key way of ensuring that this happens is by engaging with a Thailand real estate agency that has the knowledge, skills, understanding and structure to support throughout the process from beginning to end.
Working with a property and real estate agents in Thailand can be highly productive, efficient and enjoyable if the right company and people are selected and chosen.