The Best Place to Invest in Thailand

Well it is a fact, Koh Samui is one of the most sought-after destinations in Thailand. The sun-soaked island attracts visitors and expats from all over the world, due to its stunning beaches, wide range of activities, cultural possibilities and growing real estate.

Thailand’s Ministry of Finance noted that in the first quarter of 2017 the economy grew by 1.3%, which was stronger than market estimates of a 1.2 percent growth.

These advantages, as well as many others, have helped to turn Samui into one of the best places in Thailand to make a property investment. So if you’ve been considering where the best place in Thailand would be to make a wise and profitable luxury property investment, then we would highly recommend Koh Samui.

The increasing number of tourists to the island and the growing business ventures undertaken are but two of the factors helping to boost the real estate market in Koh Samui.

It’s able to offer the perfect blend between unspoiled nature, relaxed beachside restaurants and extravagant accommodation, such as new luxury koh samui villas, new 5 star resorts such as The Ritz Calton Koh Samui, which is quickly turning it into the number-one chic destination in Thailand.

Koh Samui Property Investment Opportunities

Did you know? Samui attracts some of the highest rental yields in Thailand, with longer high seasons and less rainfall than other parts of Thailand. Investors can receive rental yields at approximately 8-10%, with some featured villa properties producing up to 30% yields per year!

Many other alternative destinations offer only 4-6% yields, mainly due to their rapid price increases, making Samui a competitive choice.

The new environmental building laws, infrastructure and mature market, means investing in real estate here is more secure than before. When purchasing Real Estate in Thailand, it is important to be aware there are different ownership options, so be careful to choose the most appropriate option to suit your personal buying needs, depending on your age, nationality, marital or family status or inheritance issues?

In all these ways, Samui presents an immense appeal to the international holiday-makers and an increasing new influx of affluent investors from Hong Kong, China, Australia & United Kingdom seeking a secure holiday investment and a relaxing lifestyle destination to repatriate or retire in paradise island.

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Real Estate Investment Outlook

Although it appears to have been mainly technical factors that triggered the correction in the stock market, inflation concerns have been the major cause for plummeting stock market prices. We have outlined such a scenario of inflation and its impact on real estate investments.

Indeed, the difference between current and trend economic growth is moving close to zero, rising labor demand is putting upward pressure on wages and salaries, but it is still far from a strong acceleration in inflation rates. Meanwhile, the recommendation by the US Department of Commerce in its investigation to restrict aluminum and steel imports on national security grounds is a reminder that the risk of escalating trade tension has a significant impact on real estate investments.

We are not suggesting that the probabilities of risks have risen substantially in light of these events. However, we argue that higher volatility combined with uncertainties about the future uncertain outlook for US trade policy is not an environment where we should risk everything on one endeavor, but rather seek returns by pursuing opportunities in the real estate market.

It would be more than natural that unjustified price appreciations will be corrected over time. Some observers believe that rising inflation may have played a prominent role in the recent stock market sell-off. However, higher inflation points to an overheating economy and rising wages could lower profit margins. Neither case obviously applies at the current time. However, historical evidence shows that periods when inflation begins to rise often create volatility in real estate markets and, on average, returns are meager. Finally yet importantly, higher interest rates could hit real estate prices if they reflect rising risk. Higher interest rates should be less relevant if they result from higher growth.

For now, we expect the implications of rising interest rates on the real estate outlook to be limited. A more persistent significant decline in real estate prices could, however, be associated with somewhat slower growth, either because the economy anticipates a slowdown, or because economic decline itself dampens growth.

The impact of rising interest rates on growth also depends on the factors that pushed up interest rates. The rise in interest rates could be the consequence of stronger growth momentum, in which case the economic fallout is understandably limited. However, if higher interest rates reflect rising risks, for instance, then growth may well suffer more significantly. Financial conditions remain very loose and interest rates relatively low. This should continue to support economic growth.

Therefore, we are keeping our scenario of sustained economic growth: (1) higher world economic activity, (2) rising fixed capital formation, (3) a very gradual adjustment of monetary policy in the US. We acknowledge the risks from higher protectionism, as recent announcements are a reminder that trade frictions could escalate significantly. At this point, it remains to be seen what action the US will take and how other countries may respond.

Since the beginning of the Great Recession in 2008, most have averted the specter of deflation by deploying conventional and – even more importantly – unconventional measures of monetary policy. Inflation in the US averaged around 1.5%, with a dispersion of -2% in mid 2009 to approximately 3.8% in late 2011. Currently, US consumer price inflation stands at 2.1%.

In the US, the government is embarking on a path of fiscal stimulus, and more trade tariffs and trade friction may push inflation higher. However, several factors are keeping underlying inflationary pressure contained for now, including still-cautious wage bargaining behavior by households, price setting by firms and compositional changes in the labor market. In addition, the recent readings have likely overstated current price trends,( the surprising weakness in inflation in 2017). Outside the US, wage and price trends have not changed much in recent months.

Against this backdrop, we do not foresee any surprises over the course of 2018. The Fed is expected to gradually lift rates with caution depending on the tightness of the US labor market, the evidence of accelerating wage dynamics and the potential impact of higher financial market volatility on economic growth.

In addition, a tax policy that fosters the competitiveness of Corporate America and attracts direct foreign investments, helping to raise the potential growth rate of US, should also be supportive for the greenback. At the same time, there are as many factors pointing to a glorious future for real estate markets

According to the Federal Reserve Bank of New York, the current probability of recession for the US economy stands at around 4%, moving to approximately 10% at the end of 2018. In our view, the gradual tightening of monetary policy, limited inflation expectations and cautious investment demand, will keep real interest rates relatively low. Therefore, we prefer real estate investments in 2018.

Working With Hard Money Lenders

In this strong seller’s market, many investors are turning to rehabbing houses since you can sell them quickly – and usually at slightly above market prices.

It’s a great strategy to maximize the profit from each deal that you find. Wholesaling is fantastic, but if deals are limited, you want to pull as much profit as you can from each deal.

I am seeing more and more of my private mentoring clients switching to this strategy. As they work to get loans through Hard Money Lenders they are finding that the terms of the loans are a bit confusing. I thought that I’d share with you what I have been sharing with them.

Here are some of the different terms that show up in these loans offers and it is important that you understand the implication of each and how it affects the funding of your project.

Interest: This one is pretty straight forward – it is the price you pay for the use of the money for just the time you use the funds.

Points: A fee charged at the inception of the loan as a cost of getting the loan. Each point is 1% of the loan. So a $100,000 loan at 3 points equates to a $3,000 fee. Points are fully earned at the beginning of the loan. In other words, unlike interest, points are not based on how long you have the loan. So whether you keep the loan for 1 month or 1 year, the fee remains the same.

Something to consider… if your loan will be outstanding less than a year, it is better to pay an additional percent in interest than an additional point.

Amount of Loan: Lenders base their total loan amount using Loan-To-Value (LTV) ratios. Most Hard Money Lenders (HMLs) will loan between 65%-75% LTV. The difference is that they typically utilize the After Repair Value (ARV) versus current market value or purchase price.

However, a new trend if for HML is to also add these ratios as well – Percent of Purchase Price and Percent of Rehab. For example, they will say that they will loan 90% of Purchase Price and 100% of Rehab up to a total of 75% ARV. What this means is that they will never loan more than the 75% ARV, but even if the LTV is under that mark, they still want you to come up with a percentage of the Purchase Price and the Rehab Costs.

Prepayment Penalty: It’s a good idea to make sure that your loan does not have a prepayment penalty – which is a penalty the lenders adds to the payoff amount if the loan is paid prior to a certain date. Sometimes this penalty is just during the first three months of the loan which is generally fine for a rehab project. Other lenders assess the penalty unless you pay on the exact day it is due. It is a sneaky way for them to increase fees.

Prepaid Interest: Many HML require that you set up an escrow account and prepay some of the interest. Typically none of this escrow can be used towards the actual monthly interest payments. It is just a security for the lender and will reimbursed to you when you pay off the loan.

Term of loan: The length of time until the loan is due. Rehab loans are usually one year or less. Sometimes a lender will offer a 6 month loan with an automatic 3 month extension for a specified fee. It is important to know the term of the loan to ensure it fits in with your rehab plan.

Rolled In Costs: Some HMLs will allow you to roll in the cost of the points into the loan – although most will not for a first time borrower – as long as the total loan does not exceed the LTV cap.

Repair Escrow: What many first time borrowers don’t realize with HMLs is that they do not release the rehab funds at closing. Instead these are placed in escrow and released as the project work is completed. It is important to know how often draws will be released and what is the fee for each draw. Remember, you have to front the money for repairs until the next draw. You will not be made whole until the entire project work is completed.

Out of Pocket Cash Requirements: It is important to consider your total out-of-pocket cash requirements which include: the percentage of purchase and rehab not covered in the loan; closing costs; points; prepaid interest; and working capital for the project between draws. The sum of these is the additional cash you’ll need to fully fund the deal.

Subordinate Mortgages: A great way to fund this difference is with smaller private loans. HMLs will always require their loan to be in first position. Some also add the requirement to be First and Only – meaning that you cannot place subordinate mortgages on the property, thus eliminating your ability to secure

Time to Close: Press the Lender form the beginning to understand the entire close process and how long it will take to close from the time the application is submitted. You’ll want to know how long it takes to obtain approval, and then how long before they are ready to close and fund the deal.

Armed with this better understanding of the loan process you should be able to consider multiple lenders and make an informed decision about the ones who best meet your needs. There is far more to consider than just which provides the cheapest interest rate.