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What You Need to Know to Become a Property Rental Investor

It is known in general that the best investment properties for non-professionals are residential, especially condominium. Why? Because condos require less maintenance – juristic office is there to assist with minor fixes so that you should only worry about the interior. In addition, as opposite to Europe and USA, condos are tend to garner higher rents and appreciate faster than single-family homes in Thailand. Why? Because of foreigners who can only buy condos.

So, it’s clear that rental investment in Thailand are predominantly condos. Let’s take a look at things to be considered when searching for the right rental investment condo.

Neighborhood is a King

A neighborhood in which you buy condo will dictate the types of tenants you can attract and how occupancy frequency. If, for example, you buy condo with a neighborhood near a university, there is quite a chance that most of your potential tenants will be students, so that you mostly probably face vacancies on a regular basis during vacation periods. If, as in opposite, you buy a condo in Asoke, or other business area, you will face much less vacancies.

Schools are also to be considered. Many of tenants have children and need a decent school for them. You will want to know that the school in your neighborhood is a quality one, as this can be an additional value of your investment.

Crime situation in the area. Tenant don’t wants to live near hot spots for criminal activity. Investigate crime statistics for neighborhood where you consider to invest, and don’t rely on the homeowner or developer – they hope to sell property to you. Look for vandalism rates, serious crimes, petty crimes and recent activity. Frequency of police presence in your neighborhood is also a good indicator.

Job Market is a Prince

Locations with great employment opportunities attract more tenants, that’s for sure. If you read news about another large company moving to your neighborhood, you can be sure  that workers are following as well. This is especially correct when international corporations moving to your location or expand their current operation – meaning that foreigners and more wealthy people will need to rent apartment soon. And then, what these people need?

Amenities

This kind of people like parks, they need malls, gyms, movie theaters, public transportation  and other attractions. If you don’t know specific area, take a time to Google about it and you will find loads of promotional and informative content that can give you an idea of where the best blend of public amenities and private property can be found.

Building Permits and Future Development

Ask the municipal planning department or professional real estate consultants in your area about the new developments that are coming or has been zoned into the area. If there are many new condos, business buildings, shopping malls and eatery locations in your area, it is certainly a growing area that is good for your purposes. Still need to check that new developments don’t hurt the price of surrounding properties – additional condos could also provide competition for you, so be aware of that possibility.

Number of Listings and Vacancies

It worth to check if there is an unusually high number of listings for your targeted neighborhood. It can be also a seasonal cycle or a a sign that something is going wrong in your targeted neighborhood – just make sure you figure out which it is before you buy property. You should also determine vacancies – similar to listings, the vacancy rates indicates how easy it will be for you to attract tenants, since the higher the vacancy rate the lower the rents.

Rental Yield is Your Profit Indicator

And finally, let’s talk about rental income that is the bread and butter of your rental property. For real estate investor, rental yield is the rental income as a percentage of investor’s property cost. Property cost can be calculated as a gross cost – before expenses are added, or as a net cost, with additional expenses and purchasing or transaction costs accounted for.

To calculate Annual Rental Yield – take the amount of annual rent collected and divide it by your cost of the property and multiply by 100 to get the percentage of annual rental yield. In other words, annual rental yield is an indicator of your success, or profit you will do from this specific property.

Step 1. Calculate your total property cost
Step1. Calculate your total property cost
Calculate the gross rental yield
Step 2. Calculate the gross rental yield
Calculate the net rental yield
Step 3. Calculate the net rental yield

To calculate your yield  you need to know what is potential rental price you may get. You can decide to advice with professional real estate brokerage agency in your area if you have difficulty to find this information yourself.

What annual rental yield value is considered as a good one? Let’s talk about this in one of next posts.