The pros and cons of buying a tenant occupied condo
For real estate investors looking for immediate cash flow in Thailand, buying a condo with a tenant might seem ideal. After all, it saves you the time, money, and stress of looking for a new tenant. However, buying a tenant-occupied condo in Thailand has both advantages and disadvantages. If you’re not careful, you could end up purchasing a costly problem from the seller. That’s why it’s essential to weigh the risks against the benefits and be sure you fully understand the implications.
Before you buy a tenant-occupied investment property, here are some pros and cons to consider.
Pros of buying a tenant-occupied condo
1. No need to find new tenants
Finding a tenant for your condo in Thailand can be a time-consuming and expensive process. This is especially true for foreigners who are just getting started investing in Thailand’s real estate. The rental process in the country can be a little bit confusing for a lot of people since there is no fixed standard. However, purchasing a condo that already has tenants saves you time and energy by not having to find new ones yourself. Furthermore, you have some time to prepare even if the current tenants leave when their lease expires.
2. Get instant cash flow
When you close on a tenant-occupied condo, you can start getting the rental payments right after you close on the property. One drawback of owning a rental condo is that if the property remains vacant, there will be no rental income to help you cover the mortgage. With condos that already have tenants, you don’t have to worry about that right away. You can even end up with extra income after covering mortgage payments and other expenses.
3. Condo up to code
Another convenience of buying a condo that already has tenants is that it already meets all the legal requisites. Property owners in Thailand have to meet legal requirements set by local law. Thailand currently doesn’t have a landlord-tenant regulation nor a system that regulates this need. The laws that govern this field are, therefore, at best, ad hoc, with contract laws providing the best protection for both parties to the agreement. Landlords usually hold some legal superiority in contract agreements, but they typically make the contract as fair as possible.
Still, it’s a good idea to familiarise yourself with the general laws of Thailand regarding landlords and tenants. Moreover, make sure you understand the contract that the current owners and the tenants have agreed to before you purchase the property.
4. No extra investment needed
Buying a condo with tenants in Thailand means no extra investment is involved. You don’t have to worry about refurbishing the condo since it’s already furnished and rented out. Thus, it’s a lucrative opportunity for those on tight budgets.
Cons of buying a tenant-occupied condo
1. Lease terms have to be honoured
It’s crucial to remember that a lease is a property right attached to the condo, not the condo’s owner. Thus, buying a condo with existing leases means you must continue honouring those lease terms. Depending on how the prior lease terms were constructed, this might not be favourable to you as the new owner. It could be challenging for you as a landlord because the previous owner didn’t write the lease in a way that was advantageous to the owner. Be sure to review all lease terms before purchasing the property.
2. Complicated and costly process of evicting a bad tenant
If you need to evict a tenant, the process can be complicated and costly. Keep in mind that you cannot evict tenants just because you bought the condo with the intention of living there. You’ll have to hold off till the end of their lease. Make sure you abide by any rules that may be in force that demands that renters be informed when their leases won’t be renewed.
3. Inherited legal risk
One of the risks of buying a tenant-occupied condo in Thailand is the possibility that the condo is not in compliance with the local laws. When you purchase a condo in the country, you’re liable for anything on the condo that doesn’t meet the legal requirements. Therefore, you must conduct due diligence and have a thorough property inspection. You should also make sure that the previous owners’ met all legal requirements for purchasing a property in Thailand. Additionally, you’ll also have a legal responsibility to the tenants. If the previous owner didn’t fulfil their responsibility, you could end up facing the consequences.
4. Problematic tenants
Not all tenants are good, and having terrible tenants as soon as you purchase a condo in Thailand can be challenging. Some tenants may pay rent late every month, while others may damage your condo. If you don’t want to deal with difficult tenants, review the tenants’ payment history and credit reports before purchasing the condo.
If you decide to move forward with purchasing a tenant-occupied condo, it’s essential that you perform thorough research and due diligence to ensure that it’s a wise investment.
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