The latest marketing tactic being offered by n increasing number of Thailand property developers, especially those with unsold completed units to sell in resort markets, appears to be to tempt investors with short-term guaranteed returns of anything up to 10 percent per annum for as many as five years. I’ve seen higher rates being offered, but they always signal my in-built alarm bell.
For anyone who has invested in overseas property these offers will be familiar, but for Thailand-based projects it’s a fairly new phenomenon that is growing by the day.
But think about it, as an investor do you really need a guarantee and will it be worth more than just the paper it’s written on? And who will actually be paying for it?
Every savvy property investor will know that a good property in a good location will generate returns without the investor really having to lift a finger. Ask yourself why would you need a guarantee if the property is rentable with good returns?
The cost of establishing the guarantee will also undoubtedly be passed on to the buyer, meaning they will end up paying more than they need to.
As an investor and you have opted for a project that offers guaranteed returns, you will also need to know what level of return to expect once the guarantee period has expired. In the case of overseas investments, the returns in some projects have as much as halved once the guarantee period has ended.
Returns, of course, could rise but in almost all cases I’ve personally witnessed the initial guarantee levels are higher, perhaps to initially tempt the investor, and then fall after expiry.
The simple way to know what to expect is to talk. Talk to property agents and locals living in the area of your investment about the market, past trends and future predictions. That’s something any investor can do and will cost nothing, but it may end up saving substantial amounts of money.
Despite the above, guaranteed returns do offer a degree of safety and security, especially to newbie investors – but you must have your lawyer conduct proper due diligence and evaluate the financial status of both the developer and the company offering the guarantee. Often they are different entities entirely.