Koh Samui Holidays- a good time to think about the future and Your future life on this Paradise island of Koh Samui….
Why Invest in Samui?
Warum gerade auf Koh Samui investieren?
Investment growth & property values in Koh Samui are adhering to the proven worldwide trend for idyllic resort locations. It starts with the discovery by back – packers & the building of simple budget bungalows several decades ago.
As infrastructure improves rapidly , larger hotels follow until the island is meanwhile a recognized tourist destination bringing in international hotel chains, theme pubs & restaurants. Once these are established the development of an industry in weekend homes / holidayhomes and resort – managed apartments is the next natural progression.
To summarize, as a location grows from tropical beach resort to a fully serviced community with international standard hospitals, schools, shopping, communications, marina and leisure facilities, longer term foreign residences become feasible.
Residential investors such as retirees, regional managers and small business owners will start to build more substantial and permanent homes. Astute, successful, international businessmen know that the right timing in property investment will bring them generous returns.
Koh Samui is surging forward accordingly but it is yet to reach its peak. Considering all the investment opportunities available to you at present, house and land outstrips them all in terms of performance. Buying in now will ensure that once the metamorphosis from back – packer to high end travel destination is complete, substantial yields will be generated from managed rental returns and/ or the resale value of your property
There are several routes to obtaining residency in Thailand. The exact qualification requirements tend to change on a regular basis but typically involve inward remittances invested in bank deposits or approved businesses.
Retirement visas are more simply acquired based upon age requirements ( of 50 years) and demonstration of relatively modest local deposits and/or sources of offshore pension income being remitted to Thailand. Overall, Thailand is a relatively easy place to live and do business in.
Please note that the visa gives you the right to enter and remain in Thailand, it does not give you the right to work in Thailand. The work permit on the other hand, gives you the right to work in Thailand but does not give you the right to remain. If you plan to working Thailand, you would require both a visa and a work permit.
Property development is a booming industry in southern Thailand.
If you are in the market for an Asian retreat then there is probably no better place than Koh Samui.
Samui has a charm unlike any other island destination in Thailand. A true island getaway with warm azure waters, white sandy beaches, rugged granite rock formations, swaying palm trees, verdant jungle clad mountains and cool tropical waterfalls.
Samui is also a place where most of the discerning amongst us fall in love with the feel and primitive ambience but we are not quiet ready to get back to basics, hence rather than east meeting west in a culinary sense, east meets west in the form of a lifestyle development.
For those of you that want the best of both worlds then Samui’ s property developers have the options that will allow you to bask in luxury, surrounded by pools, man made waterfalls, landscaping, gentle streams, ferns, palms all in a safe secure environment.
The benefits of a development are far ranging. They include community property such as gyms, pools and clubhouse. There is also utility support through backup generators, water supply, communications and maintenance. Added to this there is onsite security as well as the ability of the developer to generate rental returns through property management when you are not resident.
The exclusive designs, zoning and location offer protection against any adjacent unwelcome property owners putting up a bar, supermarket or some form of industrial business.
Most home owners within a development will be successful businessmen, retirees, company regional managers or CEO’s who want the security of the complete infrastructure provided by professionals who are experienced in the running and management of such operations.
When buying into a development you are buying into a complete project and as such you should concern yourself with the developers solvency.
The best protection against developer insolvency/ bankruptcy is to pay for what you get & to minimize any advances or deposits with the critical component in all cases being the land.
Once you have paid a deposit to buy the land it is not advisable to make further substantial payments until such time that the transfer of ownership of the land is registered at the land office. If would also be prudent not to commence major building works until you have legally acquired or leased the land.
With respect to the common property in the development financial institutions would be unlikely to foreclose because the nature of the land renders it relatively valueless. Even in the unlikely event that the bank or financial institution were to insist on foreclosure, they may be restricted by the presence of a registered servitude or rights of way arising by necessity.
If you do not intend to reside or retire within the first few years of buying a property then rental income is going to be a major factor in your plans to purchase in Koh Samui. If so, we strongly recommend that you choose a development that offers property management services including some possible rental return guarantees.
Most developments in Koh Samui are reasonable at providing flexible rental solution so that the owner is entitled to stay for as long or as short as desired and still put a property into or take out of a rental pool at short notice.
Please Note: It is within our experience that the best rental performers are those where the developers have an ongoing operational relationship with a development.
In such cases they give greater care to the management of the development and it’s facilities being focused on maximizing rental returns for their and the owners benefit.
When buying into a well maintained and managed development expect to pay monthly maintenance fees.
These fees are used in the preservation & upkeep of any common property, common facilities, and backup utilities s and in providing security. What they do is allow the developers Management Company to maintain the look and feel of the development protecting your financial investment.
Maintenance fees will vary between developments and the services and costs that are included. So be sure to compare the projects.
Look before you leap!
High end island developments definitely have their advantages but they are primarily targeted at those who want the security, services and conveniences of a first world neighborhood in an Asian environment.
They are also a plus if one of your prime concerns is to earn high end yields through rental returns. The property management teams at any of the major developments have worked this into their long term business planning.
There are many people, however, who would rather assimilate into the local environment by buying an established stand-alone house or price of land and building themselves.
If you are one of these then it becomes imperative that you secure the services of a reputable real estate agent or property consultant that will help you avoid many of the pitfalls that have beseeched the less informed or naive.
Buying an established premise or just the land and building is a very rewarding experience especially since it will not break the bank.
Setting up a Thai company property to control your property or registering a renewable 30 year lease to secure it is paramount.
Ensuring that you are buying the right type of land title, verifying vehicle & utility access, checking out the residential zone & planning codes of the area, making sure there are no unfavorable caveats attached to the property & that the person selling you the property is indeed who they say they are: can all be handled by an experienced real estate agent.
Furthermore, all reputable estate agents have databases of the best current local listings, investment opportunities & bona fide land for sale. They will work closely with you, to your available budget, to find exactly the house and land package that suits your needs.
Remember: Use the services of a professional Real Estate Agent or property Consultant to verify ownership, title, identity of parties, building permits, utility supplies and development plans in the surrounding areas that might have future impact on your proposed new property.
If Building Yourself
If you have decided to build then it is important to secure the services of a reputable builder. Real Estate Agents have the experience and knowledge within the local building industry and are best able to advise on the services of builder renowned for the integrity and quality of their work.
The reason you need this advice is that whilst most western building companies grant various forms of assurances to their clients in the form of performance bonds, retentions and warranties – they are not typical in Samui. A Performance Bond for those of you who don’t know is a guarantee issued by the Contractor’s Bank to secure any advance payment that you make to the Builder.
In Koh Samui the client will generally pay a deposit to enable the builder to start work and then progress payments are made along the way that are work and material related. The deposit, which is usually substantial, leaves your down payment unsecured if no performance bond is issued.
As well as requesting a bond within your contract you should insist on a 12 month warranty from project completion.
For a residential building this is usually long enough for significant construction defects to become apparent.
Foreign Ownership Rights
One of the most frequently asked questions a developer or estate agent receives is:
Can a Foreign National own land outright? The answer is No. Furthermore, they cannot own more than 49% of the shares in a Thai company that owns freehold land but there are legal ways, within the Thai company structure, that will allow a foreigner to exercise sole control over the Thai company and their investment.
A Foreigner is, however, allowed to own a building distinct from the land, which coupled together with renewable registered 30 year leasehold, is regarded by many as being as good as owning the freehold.
Freehold vs. Leasehold
Now, there are many questions asked as to which method is better and there are relevant arguments made for both cases. Since foreigners cannot own land outright, registered leaseholds with appropriate extensions 30-30-30-30… are equivalent to freehold. Registered Leaseholds are safe, uncomplicated and easy to setup. For those of you who are not comfortable with Leasehold, the Freehold method of ownership means that the Thai company that you control owns the property.
The Land Code of Thailand along with the Foreign Business Act (FBA) does not prohibit foreign control (voting and management)
Of a Thai majority owned company that owns land in Thailand.
Given the above, it is of paramount importance that a proper legal structure is adopted to retain effective control over a Thai majority owned company whilst at the same time avoiding anti- agency and anti- nominee provisions.
A number of means can be used to ensure that the foreign minority shareholders have effective management and financial control of the company.
These include but are not limited to creating different classes of shares along with different voting and director appointment rights.
As an additional safeguard you may set up a company to control the freehold land, which you as an individual then lease from the company you control. Further, you may also have the company register a mortgage over the land in your favor.
If you choose to purchase your property freehold you should consult with professionals who will adopt the proper legal structure to protect your interests and who are able to explain the same to you in detail, in your own language or at least in a language that you understand well.
You should also be aware that there are legal responsibilities and tax implications with respect to the owning and running of a Thai company.
How to pay
If you are purchasing property in Thailand and you want to pay in Thai Baht ensure that your funds are transferred into Thailand in foreign currency and converted to Thai Baht here.
The reason for this is that are the receiving bank will issue the relevant exchange control form (formerly the Thor Tor 3 form) confirming the transaction.
The relevance of the exchange control form is that it is one of the documents you will need in the future if you wish to repatriate funds without incurring tax (15%).
Also, please be aware that Banks will only issue exchange control form for individual inward foreign currency transfers exceeding 20,000 US$ or in the case of other currencies apart from US$, exceeding the equivalent of 800,000 Baht.
Repatriation of investment funds and repayment of overseas borrowing in foreign currency can be remitted freely upon submission of supporting evidence.
One of these documents would be the exchange control form mentioned above, or in respect of a foreign currency loan, the loan contract. Remittance of funds without proper documentation will be regarded as income and become liable for tax.
Most real estate agents and property developers on Koh Samui prefer to simplify the process by allowing you to purchase your property in foreign currency. Your money in usually transferred directly into one of their offshore accounts. They will setup the freehold or leasehold for you directly on remittance of this money.
There are 2 different types of Tax levied on property in Thailand and they are called:
- Land Tax, and
- Structured Usage Tax / Proberty tax.
Land Tax is a very small tax levied on land ownership equivalent to just a few Baht per Rai per year.
This amount is so small that the land office rarely bothers to collect it and if they do may wait a few years before the amount is worth the effort of collecting. In any commercial sense this tax can be largely discount.
Structures Usage tax /Proberty tax is applicable at the rate of 12.5% on the actual (or assessed) gross rental value of the property.
Lessees are not subject to this tax but may be required by the Developer to pay an “annual ground rent” instead.
Land Title Deeds
True land title deeds are officially called Nor Sor 4 Jor or more commonly “Chanote” and are issued by the Suratthani Provincial Land Office in Koh Samui
Land held under Chanotes are accurately surveyed and GPS plotted in relation to a national survey grid and marked by unique “numbered” marker posts set in the ground.
When scouting around expect to find many land documents in the form of Nor Sor 3 or Nor Sor 3 Gor which are in the strictest interpretation of the law, certificates of land utilization.
They are to all practical purposes equivalent to land title deeds because they allow the land to be sold, leased or mortgaged in the same way as land held under a Chanote Title.
The difference lies in the fact a Nor Sor 3 certificate is less accurately surveyed than the Chanote.
Nor Sor 3 boundaries are recorded in relation to its neighboring plots and therefore there may be survey errors in length and land area.
The newer Nor Sor 3 Gor is in general a much more accurately surveyed title as each plot is crossed referenced to a master survey of the area and a corresponding aerial photograph.
Now there are a host of “land papers” which we advise all serious investors not to give any credence to. They are in essence a form of claims to possessory rights, which have been filed with the district land office and upon which a small tax fee has been paid. The land held under these papers cannot be dealt with by way of sale, lease or mortgage. Legal acts cannot be carried wart to the property and most importantly, you cannot apply for and obtain approval to build on the land.
In conclusion we recommend that any foreigner wanting to buy land should consider only those held under a Chanote or Nor Sor 3 Gor Remember, whenever in doubt, please consult a professional.
IF You enjoy Your Koh Samui Holidays and in consequence You are planning to stay here for a longer period or the rest of YOur life , than- hopefully- these comments helped You to get more clearance in the different aspects of owning a proberty here on Koh Samui.
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