Overseas buyers can’t buy land in Phuket, but they can acquire the right to use the land via a 30-year lease. Once you have a lease, you can then apply for a construction permit to build a house, villa or any structure on it. The lease is guaranteed for its duration meaning the land cannot be taken away from you by the lessors assuming you have followed the terms of the agreement. In some cases, leases can be extended for two additional 30-year periods if both parties agree.
There are also several developers in Phuket that are building villa projects. Residences in these villa complexes are leasehold, but unlike the above-mentioned method, everything is paid for in one lump sum. You get the lease to the land as well as the built villa. In some cases, the developer will offer a guaranteed buyback at the end of the lease term.
Either way, you are obligated to pay a registration fee for the lease which is 1.1 percent of the property’s rental value.
Steps to making a Phuket leasehold villa purchase:
- Draft the lease with agreed upon terms between you and the lessor. This should include issues such as lease extensions, transfer of lease, etc.
- Sign the purchase agreement and complete payment
- Go to the Land Office and register the lease with the government
Something to consider
You will also find leasehold condo units for sale in Phuket. The purchase process is the same as buying a leasehold villa, although some developers offer unique terms to make these properties more attractive to buyers. It is one of many things you must consider when buying Phuket real estate.
Is making a Phuket leasehold villa purchase a good financial decision?
It can be easy to dismiss making a Phuket leasehold villa purchase altogether, but it’s not as crazy as you may think. Let’s say you have your heart set on a Phuket villa, it can still be a solid investment even if you don’t technically own it.
In fact, it is possible to make it a profitable investment over the initial 30-year lease period even if you don’t have a guaranteed buyback clause in your agreement. Let’s start by assuming you want to use the villa for one month every year and the villa you bought costs THB8 million. This will get you a nice mid-range, multi-villa bedroom that you can rent out for THB40,000 a month.
In some cases, the development will have its own rental program and handle this for you. But in our example, we will say you have hired a property management company that takes care of rentals. We will also be conservative with our estimates and say the company could only find a person to rent the villa eight months out of the year. Two months it is empty and one month you are using It for your holiday.
9 months X THB40,000 = THB360,000 annual income
Now the property management company will take a 15 percent cut that brings your estimated annual income to THB300,000. Over the course of the 30-year lease, you will make THB9 million before paying the tax on the rental income and other costs such as the development’s facilities fee.
After all that, you are probably coming in slightly below the breakeven point in the highly unlikely event villa rental rates in Phuket stagnate during the next 30 years. But if rental prices grow, even marginally, or you are able to rent the villa out for ten months instead of nine, there is a path to the leasehold villa also being a profitable investment.