Investments in Phuket real estate are attractive due to a combination of a relatively low entry threshold, stable capitalization growth and high rental yields. The main drivers of the market are the growth of tourist flow and interest from expats, which creates a stable demand for quality housing in a tropical climate and developed infrastructure.
There are several basic investment strategies on the market, each of which requires the selection of objects in accordance with the goals, planning horizon and financial capabilities of the investor. The choice of strategy - whether it is long-term ownership, obtaining stable rental income or active speculative operations - determines the parameters of successful investments in this market.
Best Property Deals in Phuket
Investment Strategy 1: Assignment
The assignment strategy involves purchasing a purchase and sale agreement at an early stage of construction, which allows the investor to lock in a minimum price and avoid the costs of registering ownership before construction is completed. In this scheme, the property does not become the property until the contract is resold, and the transaction is carried out by transferring the rights under the contract.
Advantages of the assignment strategy:
Low initial costs: Purchasing a contract at the start of sales allows the investor to purchase the property at a minimum price.
No Registration Costs: Since the property is not registered until resale, there are no taxes or registration fees.
Fast capital turnover: The ability to sell a contract before construction is completed allows you to quickly return your investment and make a profit.
Speculative potential: Under favorable market conditions, capital can be increased by 100% or more within 1-3 years.
Disadvantages of the assignment strategy:
High competition: Liquid apartments sell out within a few weeks, which requires prompt decision making.
Limited supply: Finding a project that can be quickly and profitably resold during construction can be difficult.
Risk of delayed resale: If the contract fails to resell on time, the investor may have to register the title with additional tax costs. Therefore, this strategy is not recommended for investing “with the last money”.
Need for rapid response: The strategy requires prompt interaction with developers and agencies, as well as a quick response to changing market conditions.
Since speed is important here, independent search for properties is most likely doomed to failure, because the best options are taken apart even before the official start of sales. It is better to look for suitable options through trusted agencies and brokers who have early access to sales.
Investment Strategy 2: Buying with Long-Term Lease and Subsequent Sale
The buy-let-sell strategy is a balanced approach that combines rental income and capital gains. The investor purchases the property at an early stage at the lowest possible price, rents it out to provide a stable income, and plans to sell it no earlier than 5 years later to reduce the tax burden. Additionally, the ability to use the property for personal recreation allows for a significant reduction in vacation costs.
What to look out for
Limited number of properties: Suitable properties for this strategy are rare and sell out quickly, so making a timely decision is critical.
Professional management: Choosing a reliable management company plays a key role, since the occupancy of the property and its technical condition depend on its work. No private agent can compare in service level with a large management company or hotel operator, which will ensure good occupancy of the property.
Account for all expenses: It is important to account for all possible expenses – from maintenance to taxes – to avoid unpleasant surprises and ensure an accurate understanding of your net profit.
Comprehensive income assessment: The assessment should be carried out comprehensively - an object with a lower rental yield, but a high potential for growth in value, may be much more profitable in terms of long-term capitalization. Therefore, you should not focus only on the expected rental income.
This strategy for investing in Phuket real estate is optimal in terms of risk and expected income. The next strategy is the most conservative option.
Strategy 3: Linked Contract
The "Linked Contract" strategy is the most conservative investment model, essentially similar to a bank deposit. The investor buys real estate and signs a long-term contract (for 10-15 years), under which the developer guarantees a fixed annual income. The contract often includes a buyback option, under which the developer undertakes to purchase the property at a price equal to the original or with a slight markup (for example, +10-15%).
Carefully review the terms of the contract: make sure the guaranteed return meets your expectations and evaluate the prospect of a buyback.
Peculiarities
Freezing of capital: The long term of the contract (10-15 years) means that the investment remains illiquid for a long time. Reselling such an object is quite difficult.
Limited Income: A fixed income guarantees a steady stream of income, but does not allow for additional income if the property generates large rental revenues and also increases in value significantly (with a buyback option).
Developer Reliability: The key is to select a reputable developer who can meet fixed income and buyback obligations.
No maintenance costs: This strategy is attractive because the operating costs are borne by the developer, which further reduces the financial risks of the investor.
The Linked Contract strategy is therefore suitable for investors seeking stability and risk minimisation, even if this means limited potential for capital gains compared to more speculative schemes.
How to increase your income
Let's look at some common solutions to increase your income from investing in Phuket real estate.
Buying two studios next to each other
When renting out under the Rental pool program, the highest yield in percentage terms is provided by small apartments - studios or one-bedroom apartments. However, their resale on the secondary market is often associated with difficulties, since most units in Phuket aparthotels have compact layouts, and buyers prefer spacious options with two bedrooms. An effective solution is to purchase two studios located next to each other and combine them with a connecting door. This approach allows you to not only increase rental income, but also to create an object that, when redeveloped, can be sold as a full-fledged two-bedroom apartment, which makes it more versatile for a wide range of buyers.
Installments and discounts from the developer
Some developers offer flexible financial terms for investors. When implementing such schemes, the buyer makes an initial payment of about 50% of the cost of the property, and pays the remaining amount through a loan for a period of 1 to 5 years at attractive interest rates (from 3 to 7%). Even in projects with the "Guaranteed Income" program, rates are usually fixed at about 5% per annum, which allows you to use rental income to repay the loan and stay in the black. If the investor is able to pay 100% of the cost at once, he is often given a discount of 5-10%. There is also an option to refuse a guaranteed income in exchange for increased profitability (for example, 7% over three years) or purchase the property at a significant discount of up to 21%, which allows you to lower the entry threshold to the market.
Early entry for the best price
The strategy of early purchase of objects at the construction stage is justified. At this stage, developers offer the most favorable conditions, setting minimum prices, which allows fixing the cost of real estate before its subsequent growth with the development of the complex, and the rental income is divided between the owners, and the percentage ratio is more favorable for those who paid less. In addition, participation in closed pre-sales through trusted brokers provides exclusive access to a limited number of apartments at special prices long before the project enters the mass market.
Professional realtors with deep knowledge of the market can negotiate favorable terms, including payment installments, gifts in the form of furniture, discounts on complex maintenance and other bonuses, while all commission expenses are covered by the developer. Such a comprehensive approach allows you to optimize costs, increase profitability and ensure high-quality transaction support without additional financial burdens for the investor.