Phuket rentals, are witnessing strong growth as the range of accommodation in Phuket is evolving from the traditional hotel room. Much of this can be attributed to:
- Value: Rental Property (the accommodation product) are generally superior to traditional hotel rooms;
- Privacy: The ability to be anonymous (come and go as you please) without having to see hotel staff or run into other guests;
- Flexibility: Tailor your holiday with another family in a 2, 3 or 4 bedroom property; Entertain at home; Indulge in a private massage etc... etc...
- Quality: Being privately owned and in most cases representing a high entry barrier for the owner - ensures it is well presented and professionally managed and perhaps less used. All this translates into a better quality holiday experience (at least in most cases)
Read here, the report of the rental market and prospectus prepared by our partners at Phuket Villa Rentals.
If you are a property owner or if you are looking for a villa or an apartment for rent, and would like to find out what we (Our partners - Phuket Island Property Services) can offer from an investment solution or a rentals home.
Today, with the number of new homes entering the market - the Property Rental Market is being recognized as a growth business particularly for specialty markets such as honey mooners, and (regional expat) family vacationers.
Property managers are marketing their developments and standardizing accommodation offers and rates to distinguish themselves from hotels. Yet to make sure it all goes smoothly, procedural standardization such as payment mechanisms, bookings and cancellation polices and airport transfers, are now very much aligned with hotels.
Thinking of renting out your home ?
There are a number of considerations that need to be taken into account before considering to rent your home and earn some rental income
When considering the options available to you for rental returns, it is most important that you consider what the motivations for your purchase are. If you would like to occupy the home over the Christmas / New Year holiday period, the rental prospects of the home will decrease significantly. This time of year is by far the most lucrative period for holiday rentals, which yield the best returns.
If you are purchasing the home as an investment property with the view to owning the property for a few years whilst trying to minimize the expenses and eventually sell the home for a profit, the returns under these circumstances can be extremely attractive.
Owners who are willing to maintain a level of flexibility in their occupation will do well when trying to minimize the expenses associated with a holiday home. It is important to remember that Phuket Island Property Services do not place any restrictions on the owners of the properties they represent. Should you wish to use your home, you may do so as long as the necessary notice periods are respected. Should the home be available and you would like to visit at short notice, this is possible.
Setting up your home for rent:
There are a number of important considerations when setting up your home for rental purposes. Keep in mind that you will be opening the home to total strangers and careful thought should be given before costly purchases are made. Please refer to the sample inventory and handy "PIPS tips"
Marketing holiday homes in Phuket:
Although Phuket is fast becoming recognized as a good place for holiday home rentals, one still has to do a lot of work to attract holiday makers who would normally seek their vacation home experience in the Mediterranean and Caribbean . PIPS have compiled a review of their current marketing trends, which will give you in depth information on this crucial segment.
Types of tenants:
There are two main types of tenants needing accommodation in Phuket. Those on holiday (short term and those that have come to live here for a significantly longer period but do not want to settle here permanently (long tern). By means of definition, a long-term tenant is one who stays for 3 months or longer. There are always occasional exceptions to the rule, but PIPS will only make the long term rental rates to 3 month + tenancies. Owners are always contacted in the case of an exceptional opportunity should it arise.
Owners most serious about generating income from their second home would do well not to exclude this option when it becomes available. We find that long-term tenants currently fall into two distinct categories, young professionals with or without spouses or families.
Most young professionals come to Phuket to either work on a defined contract or plan on settling here and need a place to rent until the home they have purchased is completed. In most cases, the requirements are for an apartment of either one or two bedrooms depending on whether there is a spouse or young children. In most cases, there is a requirement for the apartment to be fully furnished as the time spent here before moving on is finite and the tenant does not want the expense of setting up from scratch.
If the tenant is intending to move into a purchased home the fully furnished option is again attractive as this allows for existing furniture to be shipped direct into the new home from the country of origin. It also allows a suitable time for comparative shopping for the new home without having to make rushed and possibly inappropriate choices.
Long-term rentals of villas would be attractive to families with older children. Once again the motivation for renting the house is the same as for an apartment but it is important to recognize that the number of established families coming to Phuket is not as prolific. Traditionally, it has been our experience that holiday tenancies provide the best returns on villas, which have become very popular as a holiday accommodation alternative
The high season from November to April prove to be the most popular times for holiday tenancies with the Christmas / New Year times filling up first. The tendency is to then filter bookings either side with an end result of owners receiving good returns for those 5 - 6 weeks. Chinese New Year coincides with this and many Asian based expats use the opportunity to take a Phuket break. The Easter period also proves to be popular around March and April which coincides with the Thai "Songkran" festival. This again attracts many expats from around Thailand as well as those able to take the break.
The rates charged for holiday tenancies are dramatically higher than long-term tenancies as they include a host of added services. Please refer to the PIPS management services document to make the comparisons. The low season is indeed as such and many owners would take this time to make any planned alterations, improvements or renovations. The Island almost reverts to its quite fishing village roots and many owners take advantage of visiting during this time.
There is no fixed distinction as to what rents better over high season, villa or apartment. It all depends on the needs of the tenant. PIPS do not promote any particular home or development. As we list the individual properties individually, the clients are able to choose the home suits their personal requirements.
Average occupancies for holiday tenancies in are on the increase. PIPS have noticed a 5% increase over the past 12 months when compared to records of the past 4 years. For those owners who have made arrangements to maximize their occupancies, average figures of 30% - 35% have been attained when compared to the 25% - 30% in previous years.
There have of course been a number of international factors that have negatively affected the tourism industry in Phuket but the way forward is most encouraging.
Return on Investment: (ROI)
This is possibly the most frequently asked question by owners intent on purchasing and renting their property. This is subject to a number of factors, some of which may be beyond control. As mentioned above, global or regional events may adversely affect this as would things like the amount of maintenance required on the home. Limiting the types or frequency of tenancies must also be accounted for.
Currently, the best performing tenancies receive in excess of 12% per year return before expenses. History has shown that 2-3 bedroom apartments or townhouses with either a shared or private pool have provided returns on the upper end. This would be attributed to the preference for these property types for long-term rentals. Along with the maintenance of the property, other influencing factors would be the management fees if the home is on an estate, size of the garden and the maintenance of the pool, pest control, insurance and applicable local and government taxes. It is recommended that owners seek independent taxation advice from a tax attorney to ensure that they fully understand the legal implications of deriving income from their home.
PIPS work together with the owner to determine and advise on the rates to set for their particular home. Rates can be structured to compliment the owner's needs. Rates are derived from the current market conditions and can be adjusted by the owner to within certain parameters should their needs change. The rates provided on PIPS marketing material, with the exception of agents would be the highest rate charged unless we have the opportunity to discount on a particular property. Agents normally receive a rate discounted by 10% from the rack rate. PIPS can not ensure that rack rate will be achieved for every rental but assures the owner that no more than 30% discount will be provided without first consulting the owner.
Similarly, owners who provide clients to rent their property may discount to a maximum of 30% if they wish for the guest to still receive PIPS full range of services.
Should an owner wish to make their home available to friends for no charge, this may be done as long as there is no prior reservation from a paying guest. The owner or friend may then select the services hat they require and pay the advertised rates for cleaning or laundering of linen.
The following is a guideline for the maximum rates being achieved in Phuket over the high season up to Dec '05 :
- 1 Bedroom Apartment $100 US - $175 US
- 2 Bedroom Apartment $250 US - $330 US
- 3 Bedroom Apartment $350 US - $440 US
- 3 Bedroom House $480 US - $595 US
- 4 Bedroom House $680 US - $760 US
- 4-5 bedroom Luxury villa $950 US - $2500 US
Rental Income Management:
PIPS are able to receive and process the income from your rental home these funds can be held by PIPS as part of property management agreement to pay for the ongoing costs of the home (management fees, utilities etc), transferred into your bank account in Thailand or your bank account offshore. Please note: it is illegal to have rental income for a property in Thailand to be paid directly into an offshore account.
Please note: This information has been prepared by PIPS (Phuket Island Property Services) to assist their clients in making informed decisions regarding the rental of properties in Phuket. Whereas every effort has been made to ensure the accuracy of the information contained herein, Phuket Property Sales and or PIPS cannot be held liable for any errors and omissions. Rental services will be confirmed only after consultation with PIPS staff and upon the signing of the relevant rental contract