Investing in real estate in Thailand can be an exciting and lucrative venture, but, for those new to foreign property investing, it can also be a risky opportunity. As long as you make yourself aware of the risks and watch out for these pitfalls, you can have positive experience. As with any investment opportunity, knowledge is half the battle.
1. Real Estate Agents Operate Under Different Rules in Thailand
While you may need the help of a real estate agent in Thailand, it's better not to put the same level of trust in him or her as you would place in an agent back in the U.S. or the U.K. The reason for this is that realtors aren't regulated, as they are in other countries throughout Europe and North America. Most governments monitor how real estate agents can behave, because they have a vested interest in making a sale. Their commission encourages them to convince a buyer to commit to the sale and, when there are no safeguards in place, the realtor may act unscrupulously to guarantee the sale. If you do use a real estate agent to facilitate your investment, be aware that they may not have your best interests in mind.
2. You Should Hire a Competent Attorney
Unlike the Thailand real estate market, the legal field is regulated and generally populated by qualified and experienced professionals. However, just like any profession in any country, you will find your share of hacks and scam artists. It can be relatively easy to spot the shady lawyers in Thailand, however. The country's legal system is fairly straightforward, so, if you feel like an attorney is giving you a runaround or isn't explaining things to your satisfaction, it might be best to look elsewhere.
Additionally, you can expect lawyers in Thailand to comply with the accepted ethics practiced by lawyers everywhere. If you get an unsettling feeling about your lawyer, trust your instincts. It's better to hire a new professional than to take the chance that you're dealing with someone inexperienced, uneducated, or worse.
3. You Should Double Check Your Lawyer's Work
Even if you find an experienced and reputable lawyer, mistakes can and do happen. Be wary of any negative legal issues, especially. Just as is the case in buying real estate in any country, once you purchase the property, you're legally responsible for it.
Even though your lawyer may research your property investment in Thailand and translate deeds into English for you, there may still be legal issues unrevealed in the documents. In the U.S., you can buy title insurance and request a title search, but Thailand laws are different. You may have to conduct the search yourself. Look into the property's full history and ensure legal access rights are associated with the property. Additionally, if you plan to build on the property, make sure to look into land use laws for the area and ensure the property is zoned for the uses you plan for it.
4. Ownership is Not Established Through Building Permits
It's important to remember that investing in Thailand real estate is bound by different laws and practices. In Thailand, foreigners are prohibited from owning property, so local developers will sell foreign investors the building permit. However, getting your name on the building permit still doesn't guarantee you ownership of the land; it only means you have the right to have a structure constructed on the site.
Getting your name on the building permit does get you ownership of the structure, so you will own that building. The rights to the land, however, are still not included. For the most part, this practice may be commonplace for tax purposes. It's important not to fall into the trap of thinking the building permit can take the place of a land deed. It can't.
5. Investing Through a Company is a Risky Maneuver
One method people use for getting around the laws prohibiting foreigners from owning property in Thailand is by investing through a regional company. The idea is to have local investors associated with an established Thailand company to buy the property along with the foreign investor. The Thailand company must have a 50% share in the property, so any company willing to do this will view the venture as a real investment.
In cases where the company is acting for you in name only, instead of buying real estate in Thailand for investment, the law can be harsh. The investors representing the company, as well as the foreign investors, will all be fined and may also face imprisonment. The company will most likely be closed by the government and may have to forfeit any other land that it owns.
6. You Have to Be Diligent in Maintaining Records
When buying investment property in Thailand, be sure to keep a very detailed paper trail, especially in relation to the funds you transfer into the country. Additionally, make sure you thoroughly research the laws governing financial transactions in Thailand and how the laws regulate foreign transactions. Follow up every transaction by ensuring that the financial institution receiving your funds sends you thorough and complete documentation of the exchange.
Even after the transaction is complete, be sure to keep your documents in a secure location. You will need them later to finish the entire transaction and take legal ownership of the property. Additionally, you will need those same documents, if you ever decide to sell the property. They will be required to transfer your funds out of Thailand.
7. Taxes are a Serious Issue
In any country, taxes are taken seriously by the government and that's certainly true in Thailand. That refers to income taxes, as well as property taxes. If you fail to accurately report income earned from rental property, the government may seize the property. They will likely sell the property to recoup what you failed to pay.
Another common practice is to under-report what investors pay for the purchase of the property, so they can pay a lower sales tax. While that may save you money upfront, the Thailand government will find out what you really paid. When you go to sell the property, they will get what is owed at that time. Either way, the full sales tax will be collected.
Investing in real estate in Thailand is an attractive option, but it's not something that can be entered into lightly. Failing to adhere to Thailand's laws or losing track of important documents can cause you financial losses or legal troubles, so it's vital to be meticulous in your record keeping practices and to ensure you take the time to learn the laws. In the end, your diligence may be rewarded with a lucrative investment venture.