Is Phuket the island of scams?
With powdery white-sand beaches and sparkling blue ocean stretching as far as the eye can see, it’s easy to fall in love with Phuket. For many years, the island has been attracting holiday-goers seeking tropical gateways, as well as digital nomads, remote workers, and retirees looking for cost-efficient places of living.
Hundreds of thousands of foreigners have settled and made property purchases in Phuket. Many are able to live in the property, rent it out to get some passive income, or even sell it to get some sort of return on their investment. But the dream ended up as a nightmare for some. Here are some people that bitterly regret their purchase.
Beyond its beauty, Phuket is also notorious for its scams. As Thailand’s most popular tourism destination, the island, unfortunately, attracts some cunning people eager for quick and feckless access to foreigners’ money. Purchasing a property on the island can seem like a dream investment but if you’re not careful, it can turn into your worst nightmare. Lots of people are left almost penniless after falling into the traps.
So, what do these property scams look like, and how can you avoid them? Here are a list of property scams to keep an eye out for and the steps to avoid them.
Please note that the pictures appearing in this article do not implicate anyone in this story.
Phuket property scams
People buy property in Phuket for numerous reasons. However, the buyers can be categorised into two main categories: those looking for a property to live in and those looking for a return of investment — the latter are the most common types of buyers. These people buy property in the hopes of making a decent profit, which is sometimes based on advertising or estate agent claims.
If you’ve been looking around for the right property in Phuket, chances are, you’ve seen lots of property developments offering guaranteed rental returns. Developers may promise rental returns that will make you believe that you’ll get a steady cash flow.
Offering guaranteed returns is a good way to attract buyers. A rental guarantee is almost always appealing to buyers who prefer to minimise risk whenever possible. It provides peace of mind and confidence that the defined rate of return is tied to the sale of the property and guaranteed for a specified period. It’s easy to think you’re signing up for a secure investment. In many cases, however, there isn’t any security to back up the developer’s claims and guarantees. Some developers also finance the so-called guaranteed returns when they receive new deposits from the newest buyers. A classic Ponzi scheme.
Of course, not all developers are trying to scam you. Some are actually offering legitimate rental returns. But remember – if something sounds too good to be true, you should be very, very careful.
Many developers sell properties off glossy brochures featuring pretty property photos, often boasting beautiful design and awe-inspiring sea views. They may even rent space in upscale shopping centres and have pretty girls with perfect sales pitches show you the model of the property. However, dodgy developers sometimes do this to lure buyers, and only a few can actually deliver their promises. Some developers don’t even legally own the land they are building on!
One of the primary issues that Phuket property buyers have experienced is that these developers retained contractual rights to a unit that has not yet been built instead of a completed property. This means that there is no tangible asset to protect their investment if the developer goes bankrupt. Therefore, a project can fail for various reasons – most developers have blamed the Covid-19 pandemic. However, this has been going on for at least a decade before the pandemic.
There are developers who try to ‘clone’ leading developers’ businesses and websites. They trick buyers into paying deposits and other up-front payments on homes that seem exactly like those on the legitimate developer’s website. This is straight out deception and theft.
The pressure to make quick decisions
With all the promises they offer, the developers may encourage you to make quick decisions and buy as fast as possible. They may gloat about how many units were sold and how there are only a few remaining units available. These developers might even show reviews or testimonials by “people who have bought their property and made lots of money”. But these are often made-up reviews. There’s no way you can confirm their stories. All they’re trying to do is make you feel pressured. Thus, you’ll commit now without having fully researched the offer or talked to an expert.
How to to avoid them
“Guaranteed rental returns”, “only a few remaining units available”, “limited time to sign up”, stunning photos of the property, and the promise of unobstructed views of the sparkling ocean… sounds a lot like a great investment opportunity, right? Well, it might be. However, it’s important that you do proper research and talk to a good lawyer.
One key to avoiding property scams is to take time to research the offer. Find out who the developer is and whether or not they have a proven track record. It’s also important to know if they have legal security over the land they were building on and if they have the financial capacity to fulfil their obligations.
Keep in mind that no one can guarantee a specific amount of return on investment. Developers may claim that their property can make thousands of dollars per month for the rest of your life. However, they don’t tell you the risks as well. They may even try to dodge your questions by focusing only on how much money you’ll supposedly make. Therefore, it’s also important to get legal and financial advice from experts, such as legal advisors and lawyers. They’ll show you the right way to invest in Phuket’s real estate and help you handle the transaction. Be sure to ask plenty of questions until you’re 100% sure you understand.
One of the worst things you can do when buying a property in Phuket is not checking the property yourself or consulting a lawyer. It has happened before, and it will happen again: confident buyers relying on agents instead of doing their homework. Keep in mind that some agents don’t have your best interests at heart – they’re only in it to get a quick commission.
With all the promises these developers offer, it’s easy to fall into their traps. After all, who doesn’t want to own a stunning property on Thailand’s most popular island?
If you need more information about property scams and how to avoid them, be sure to read our article on the top 10 best ways to avoid condo-hotel rip-offs.
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