No matter what we are buying we want a good deal with high returns at a low cost and at minimal risks. Investing in pre-construction or Off Plan properties in Phuket are a way to achieve all three of those conditions, granted you do your due diligence and make the right investment.
For a list of recommended off-plan investment real estate on Phuket, take a look at our list of Investment Properties in Phuket. Now, let’s dig into what steps you should take in order to maximize your off-plan property investment in Phuket, minimizing the risks of buying a property in Thailand and turning your property into a hassle-free moneymaker.
Don’t be too discouraged by the negatives, instead, look at what you can do to minimize the downsides and safeguard your investment as much as possible. We’d be happy to answer all your questions and give a personal consultation free of charge or obligations.
The contracts in Thailand are very different from those with which we are accustomed in Western society. Whereas in the West we put a great deal of focus on having everything written down, the Thai culture focuses more upon the relationship between the parties involved.
Western contracts tend to be extremely detailed, iron-clad documents, which can often end up in a large document comparable to ‘War and Peace’. However, these do tend to be fair and balanced documents, with both party's interests being assured equally.
These tend to be much smaller 2-3 page documents outlining the main points or principles of the contract, but on the whole, tend to be biased against the buyer.
Having said this, as Thailand gains more experience of dealing with foreign investors we are seeing a shift in their approach to contracts, and a developer with foreign management is likely to use a more comprehensive contract.
Timescales – details of the start and completion date for the development.
Price – There should be a schedule that clearly lays out the price, as well as payment terms and methods. The price should be calculated by meter squared or meter wah (1 sq. wah = 4 sq. m). Be vigilant about additional charges which have not been discussed with you.
Building Specification – Materials should be listed including the amount, the quality, and the model where appropriate. This is a case of the more detail the better should substitutions prove necessary later. (see clauses below)
Floor Plan – A floor plan should be attached to the contract.
Payment Penalties – Research the penalties for non-payment and what kind of window the developer allows for you to remedy matters. It is not uncommon for the contract to be rescinded and money paid thus far retained.
Late Completion – On the other hand, compensation should also be paid to you if the developer is late with completion. The daily minimum for these is 0.01% and they are generally deducted from the final payment.
Developer’s Default – Should the developer fail to complete the project completely, ensure there is an option for a full refund.
Extension Clause – this will contain the length of grace period allowed to the developer before incurring late penalties.
Substitution Clauses – these relate to the developer's right to substitute materials for ones of similar or better value or modify floor plans if deemed necessary. Make sure this clause reflects that you as the buyer have the final say and wish to be kept informed regarding any deviations.
Assignment – this is an ‘exit clause’ and given that we don’t know what the future may bring it is advisable to have one. This can allow for the transfer to a third party of the obligations or allow you to ‘flip’ the property if the market is agreeable. Ensure you check the administration fees for this.
Recitals – precede the main text of a contract and provide a general idea about the contract to its reader such as, what the contract is about, who the parties are, why they are signing a contract. Ensure that this states that the developer is the rightful owner of the land. If they don’t this should be addressed in an addendum to ensure that you, as the buyer have the right to rescind and receive a full refund if the developer does not hold the title.
Alternative Dispute Resolution – this is an arbitration clause in case things do go wrong. Arbitration is generally less costly than more formal court proceedings.
As always seek the advice of a lawyer with regard to contracts and documents before signing, as there is no replacement for a legal expert in safeguarding your investment.
And remember, the earlier in the construction process you purchase a property, the better the deal you’ll get.
Do not hesitate to get in touch with us at phuketcondo.net if you have any further questions regarding off-plan property investments in Phuket.