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[ 2015-06-08 ]



Many property owners in Phuket purchase here with the intention of renting out their property. Historically Phuket has provided owners with very attractive rental returns on their investment, which is likely to continue as the island’s appeal to tourists and long term expats continues to grow.

Preparing a property for rent starts at the purchasing stage: A buyer must decide whether they are looking to maximise rental income or just cover maintenance costs? Do they want to rent their property on a holiday rental basis or long term? Different guest types will have different demands, for example: guests who are using the property for a two week holiday will want the location to be as convenient as possible, they may not wish to drive whilst here and are likely to want to be able to walk to the beach, restaurants and some shops. Whereas tenants who are renting a property for a year or more will most likely have a car so the location does not need to be as convenient. These types of tenants are generally looking for a more functional property for living, a home, often near schools and at a competitive rental price.

Before looking at buying a property a buyer must consider whether they want a managed property with or without guaranteed returns or whether they will manage the property and their own rentals themselves. If the property is not part of a managed development the owner will need to market their rental property through local brokers and/or international booking websites. An overseas owner will also need a property management company to handle maintenance issues which may arise. There are numerous property management companies all over Phuket so this is really not an issue although some owners prefer the additional peace of mind being part of a managed development.

A buyer may not be buying with the intention to maximise rental return / occupancy as they may want to use the property as frequently as they wish. Some property developments will set a maximum limit for owner usage otherwise owners must opt out of the rental pool, whilst other developments offer much more flexibility. Once the property has been purchased the process of marketing the property for rent begins.

Pricing: owners must ensure their property is priced competitively whilst leaving some room for negotiation, all tenants expect to be able to negotiate a better deal. It is very easy for prospect tenants to compare your property with similar ones by simply going online. Local agents can assist with advice regarding pricing as they know the market best.
What is included in the price? Owners must to be very clear what is included in the rental price. Holiday rental rates will usually include all utility costs whereas long term prices normally exclude utilities such as electric, water, TV, maid and internet (pool and garden costs are negotiable for long term rentals).

Property Maintenance: owners must ensure the property is being maintained to a good standard. Regular maintenance and redecorating is essential to ensure your property is maximizing its rental returns. Property damage must be fixed promptly and decoration and furnishings must be kept up to a good standard and reflect what is being advertised.

Professional Photos: nearly all prospect tenants will begin their search by looking at property advertised on the internet. Those properties with very attractive photos will get the most attention and generate the most enquiries.

Guest Reviews: for holiday rental properties this is vital, guests will be booking without viewing the property. Everyone knows that a property can look good in the photos online, however once you check into the property it can look very different! So guest reviews will back up photos and will get you more rental bookings!

Calendar: Keeping an availability calendar is a great way to increase rentals and SRE can provide a “calendar plugin” for your own web site to avoid receiving new enquiries for periods that are already booked. If your calendar is showing blank with no booking this will not look like a popular property to book.
Whether marketing through booking websites or local brokers, owners should ensure there is a detailed description of their property. This should include the local neighbourhood, nearby attractions such as beaches and other activities and amenities such as restaurants, hospitals, shopping and schools. A lot of people who book your property online will not be familiar with Phuket so the more details the better!

Preparing the property for holiday rentals: A holiday rental property will require a different level of preparation than a long term rental property. Holiday rental properties: The property should be fully furnished including extra bed sheets, towels, cooking and dinner ware etc. A safety deposit box should be installed in the property for the guest to keep valuables. When preparing the property the owner should have in the back of their mind that all guests should need to bring is their suitcase and tooth brush, all else will be provided.

Internet is essential for holiday rental guests, in today’s world it is expected and for a lot of guests it will be a necessity. There will need to be somebody to check in and check out the tenant and handle any maintenance issues which arise during the tenants stay. A lot of the time (especially for high priced rentals) tenants will expect airport collection, a full time maid and possibly cook and driver services.

Generally for long term rental properties the preparation requirements for the owner are less. Longer term tenants staying one year or more will often have their own towels, bed linen, dish ware etc. or be prepared to purchase it as they are long term residents of Phuket. These guests will normally arrange their own internet and TV packages and will not expect a maid service or airport collection to be included in the rental price.

Rental Terms: when agreeing to let out your property you must ensure that the tenant has signed a lease agreement (which we can provide to owners) or agreed to terms and conditions which clearly cover all eventualities i.e. booking policy, cancellation terms, security deposits, payment terms, check-in and check-out, services included, misuse of the property. Security deposits: for long term rental the standard deposit is equal to 2 months rent and the rent is paid 1 month in advance. The security deposit covers the tenant departing prematurely as well as any damage or unpaid bills on tenant’s departure, giving the owner some security. Holiday rental security deposits are a bit vaguer as tenants are not always willing to pay a large security deposit upfront. Many online booking websites now allow tenants to leave a credit card as a security deposit as if you were checking into a hotel. If this is not possible then owners need to consider a security deposit which doesn’t make the rental unattractive to prospective tenants.

When using a local agent it should be standard practice for the agent to take copies of passport and home address. In our own lease agreement we also include a clause that should a tenant leave early they remain liable to pay the entire rent for the remainder of the lease period. If the property owner is trying to sell their property whilst there is a tenant living there, the lease should contain clauses regarding property viewing's and a notice period in the event the property is sold. It is also advisable to offer the tenant some compensation for early departure, this will help avoid any disagreements and assist with selling the property. If using an online booking agent it is wise to check that the agent’s terms fully cover you and your asset.

Insurance and Inventory: It is recommended that owners take out full insurance cover prior to occupation to cover all eventualities. On checking in the owner should provide guests with an inventory list (which includes photos) to check, agree and sign to avoid any disputes on check out.

As mentioned at the start, historically rental returns on properties in Phuket have proved to be very attractive. In Siam Real Estate’s Residential Market Report we found villa rental returns in Phuket averaged 5% per annum last year, with gross rental returns ranging from 3% up to 9% in some cases. These returns are very attractive when compared globally.
Income returns are an important part of any investment: they supplement capital gains of an asset giving greater returns. Rental income can cover the cost of maintaining the property including renovations, redecorating, management fees and more. They can provide owners with additional income or form part of a retirement plan. It is therefore very important that when you decide to rent out your property you are able to maximise its rental potential through occupancy and or rental rates.

Asia Gross Rental Yields (Source: Global Property Guide)

For more information about this article contact Kevin Hodges, the North Branch and Investments Manager for Siam Real Estate (SRE) in Phuket and author of SRE’s Phuket Residential Market Research Report. He has more than six years’ experience in Phuket’s real estate market.

Tel: 076-324042 Email: ;


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