Retiring on the sunny, sandy beaches of Thailand may sound like a dream come true at first, but would your attitude about it change if it came time to consider the realities of financing such a leisurely life without an income?
The idea might naturally fall by the wayside if you assume that your only option is to carry on living in the property you’ve already paid off. However, if you are less than a decade away from retirement there’s a growing trend in Thailand you should be aware of which can make the idea not only a feasible option, but a profitable one at that; it’s investing in rent-guaranteed properties.
What is a Rental Guarantee?
The rental guarantee plan is a simple concept; one that allows property buyers to see immediate returns on their investment with virtually no effort. This is a specifically useful method of investing for soon-to-be retirees who won’t need to use the property for a few years. In simple terms, the investor will purchase a property (often paying in installments), and for a specified number of years the investor is guaranteed to receive a percentage of the selling price back each year.
As an example, a pre-sale development in Phuket called Rawai VIP Villas offers a 6% rental guarantee to their investors. In this situation, an investor may put down THB 10 million on one of the starting-price villas. For the following five years, the investor will receive THB 600k per year, with quarterly payments of THB 150k while the development management team rents out the villa and takes care of all property maintenance and bill-paying. Throughout those five years, the investor can have the property for their personal use one month of the year. At the end of the contract, the investor can either take full-time use of the villa, or continue on with a similar agreement if they prefer to keep their low-maintenance, consistent income coming in.
Rental Guarantee for Retirement
Andrey Kozhushny, CEO of Phuket 9, the development company responsible for building Rawai VIP Villas says that over 50% of his rental-guarantee customers are those with retirement in mind.
“It is a convenient and smart option for people who will retire in two, five or even seven years,” Andrey said. “It’s a particularly good option for people who live outside of Thailand and can’t maintain the property themselves. They receive regular rental income with virtually no effort and can come enjoy the property for holidays while they wait to retire by the beach.”
Strategic Selection
Rental guarantees are in the best interest of the buyer if the property will continue to appreciate after the rental contract ends. This this helps to ensure that (1) the property will make the investor a strong capital gain when it comes time to sell, and (2) the investor will easily be able to rent out the property themselves should they want to take over landlord responsibilities.
Not all rental guarantee options are created equal. The best developers who offer a rental guarantee option understand that their customers are looking for eventual capital investment, and thus build strategically on land that is expected to appreciate quickly.
Using Rawai VIP Villas again as an example, the estate is being built on a very large plot of land within walking distance to one of Southern Phuket’s beautiful yet lesser-known beaches. The area’s current underdeveloped status allows for very reasonable prices at the moment, however as the development will contain 37 villas by 2016, the area will naturally grow to be a desirable place to establish businesses and restaurants, with the possibility of a marina and other attractions. In the meantime, the Rawai VIP Villas available for rent will be marketed on holiday-booking sites, positioned as a “quiet, modern beachside resort” complete with massive swimming pool, a park and clubhouse. 
Andrey predicts that within two-to-three years the land Rawai VIP Villas sits on will have appreciated by 30%, a fairly conservative estimate considering the 60% increase it has already seen since 2008. This appreciation rate is an extremely promising situation for not just retirement-expectants but for investors in general; especially those who purchase the villas freehold. Freehold purchasing, Andrey said, is an option even for both Thai’s and foreigners alike.
Investing as a Foreigner
Technically speaking, foreigners are not allowed to purchase freehold land outright, however freehold purchasing is a perfectly legal option for business owners that are foreign. Legally establishing a business in order to purchase one of their villas is a service that Phuket 9 assists foreign customers with, free of charge. It’s a simple process, Andrey says; one that allows his customers to make stress-free, legitimate investments in the most profitable way possible.
Whether a rental guarantee purchase is eventually used as a permanent residence for retirees or is simply made to build up a large nest-egg of savings, a strategically-made investment can be a quick, effortless and fruitful opportunity.
