Lifestyle investments and its reliance on rental options and ongoing yields is quickly becoming a hot topic in the Phuket property market.
From hotel-managed residential units connected to hotels to short- and long-term rentals there are a variety of schemes out chasing the real-estate investors' money. How do you get to the bottom-line return and make an intelligent decision before dipping you feet into the market.
Once upon a time in Phuket, property buyers were primarily interested in buying a second home either for holidays or as a place to retire in later years. In the past few years there has been a dramatic shift and a flood of overseas buyers are now looking at property as an alternative investment vehicle, thus lowering their horizons to ongoing returns versus the more traditional capital appreciation model.
Enter the hotel managed mixed use projects – while other developers introduced guaranteed returns and estate management companies started to focus on villas and condo rentals products.
Each of these has its various merits and a certain degree of risk and reward that requires more than a superficial glance by the buyer.Let's look at the different products currently in the market. For hotel-managed projects there are rental pools or, in certain instances, lease-back arrangements. Typically, owners receive a cut of top-line revenue based on the rent paid, excluding sales from food and beverage, spa and income items. Though there is no set standard, most offer between 30% to 50% of rental revenue on a "pooled" basis (pooled being all the units rented divided by the number of units.
For international brand managed projects, most require mandatory entry into the rent pool versus either living in the unit renting it out independently. The owners receive annual usage from 30 to 60 days and in many cases a charge is applied to cover the cost of occupying the unit (electricity, linen, hotel amenities, daily cleaning and so on).
In most cases there are often other deductions that apply against the owner's return. Generally these relate to a capital reserve for repair and replacement of furniture, fixtures and equipment (often 3 % to 5 % of revenue), credit card and travel agents' commissions and reservation expenses.
When looking at thecontract and calculating your return it's important to look at all of these other deductions in order to better