7 Things you must Remember while Investing in Property

‘7’ Do's and Don'ts While Investing in Real Estate Thailand!

Buying real property is the primary goal of every investor. Before searching for a property in real estate Thailand, it is essential to make a thorough research on every part of the property in order to pursue several benefits. A well-researched property holds the ability to diversify income streams and generate long-term capital for their investors. But sometimes, investors do it in the wrong way when it comes to real estate and costs, which can be quite significant. Therefore, it is recommended to always start with the basics. This will help you to stick to the fundamentals that work in real estate investing.

By performing your due diligence and with a little guidance, you can fetch real money and avoid common mistakes. Property investment is not as simple as buying a house, filling it with tenants, and ranking in the cash for your retirement fund. You have to do a lot. So, what you have to do and not to do while investing in Thailand property.

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Do’s and Don'ts While Investing in Real Estate Thailand Do: Beware of Real Estate Agents Don’t: Over-Concentrate in One Asset Class Do: Consider Real Estate As a Diversification Tool Don’t: Rush Through Your Cash Flow Projections Do: Consider an Investment Property If you Cash Flows are Already Strong Don’t: Do not Use a Company Only to Own Real Estate Do: Hire a Professional Investment Property Conclusion

Do’s and Don'ts While Investing in Real Estate Thailand Do: Beware of Real Estate Agents

Real estate agents and brokers are middlemen who put a buyer and seller together.

When the deals complete, the agent will get their commission in the form of a percentage. So, agents have a financial interest in completing every deal. In addition, the agents hold your finances in their hands during a deal. And, they should not be allowed to guide you into making an unwise investment for the sake of their commission. But, sometimes agents put their interest in the commission above the interest of the buyer.

So, you should be aware of such situations and make sure your agent is not putting the overall interests of commission on the top priority. Therefore, do not trust their false statements and trust your instincts and stay-aways from any fraud.

Don’t: Over-Concentrate in One Asset Class As you know, real estate provides diversification. So, you can easily concentrate on your holdings in one asset value. A beginner investor may face a higher risk if the property represents a much larger piece of their overall net worth. Why is this not considered appropriate? The real estate market is volatile But, there are a majority of factors that drive local and national markets together for investing in property. These factors can fluctuate considerably. So, consider the impact of a major employer moving in or out of the community, changes in interest rates, sharp increase to property taxes, and changes to the public services offered in a community.

Do: Consider Real Estate As a Diversification Tool One of the major benefits of buying real property is diversification in addition to traditional investments like stocks and bonds. It can offer you a huge income and asset holdings. Having multiple sources of income helps to reduce the impact on your finances. The real estate market is not directly correlated with the stock market, so you can hold both types of assets easily. If your assets are a component of your net worth, then keep in mind that real estate can diversify it. In addition, consider the location is the main driver to increase the relative value of your property. It is important to be familiar with the local market, but do not overlook the added risk if your own home is in the same community.

Don’t: Rush Through Your Cash Flow Projections While making an investment in a buy-and-hold property, make sure your cash flow strategies are strong to ensure you're making a good investment. So, do thorough research to get reliable income and expense figures and analyze building out a model to bind it all together. A standard and properly prepared model includes the expected vacancy rate, taxes, cost of capital, and discount rates. This further becomes your required rate of return for the investment. As real estate carries more risk than traditional investments, cash flow modeling is a critical step before making any purchase. So, consider every scenario of analysis as part of your cash flow projections.

Do: Consider an Investment Property If you Cash Flows are Already Strong Real estate is one of the main means of earning more cash. If you are holding too much cash, then investment property can be one way to put those funds to work for you. Real estate is unique and requires a lot of cash upfront and ongoing cash reserves to maintain and cover for ordinary expenses. For selling a property, you must require unexpected repairs, prolonged vacancies, or past-dues. But, it also leads to financial problems if cash reserves are light. So, consider an investment when you can have strong cash flows in your pocket.

Don’t: Do not Use a Company Only to Own Real Estate Using a company to own real estate in Thailand is unwise. Yes, a company registered in Thailand can own land when Thai shareholders who own more than 50% of the company’s share capital. But, those Thais may not be mere “nominees”. They must be actual investors in the company that has paid for the share capital. If the authorities find that the Thai shareholders are not actual investors then both those Thai “nominees” and foreigners who benefitted from a Thai acting as a nominee will be subject to imprisonment, fines, or both. In such a case, the company can also be shut down.

Furthermore, if Thai companies are not actually doing business, then it will be subject to closure and cost you a lot more money than you expected. Therefore, do not use a company to own real estate.

Do: Hire a Professional Investment Property While investing in real estate, it is imperative to hire a professional and experienced agent to educate yourself about the real estate market and its trends. These agents already come a long way after facing a lot of challenges and problems. So, it is good to take advice from them and earn more profit in return. In addition, you also need to ensure compliance with the numerous local and federal laws. You may expose themselves to financial and legal risks if you do not properly comply with building codes, escrow procedures, housing discrimination laws, and many more.

Conclusion Investing in real estate is attractive for collecting a tangible asset with passive income potential. But, it is important to understand the real estate market and then objectively assess the opportunity to obtain potential net income after taxes. It may be challenging to find an appropriate property with more and sufficient cash flow but it is more challenging to protect yourself from any risk and cost. Therefore, hire a professional and gather more and more information and secrets to earn more through real estate.