What should you consider when investing in an apartment?

In today's era, buying a house is a major decision, especially in a sluggish economy with unstable jobs and finances. This is particularly difficult for young people, where the gap between income and housing prices is widening, leading to a resurgence in the rental market.

This benefits apartment and dormitory businesses, as they are low-risk investments with long-term returns, earning them the moniker of "passive income." However, success in this business isn't guaranteed for everyone. Success requires techniques and business management. This article will introduce some attractive apartment investment options.

The planning principles for investing in an apartment or dormitory business are as follows:

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1. Location Selection

The most important aspect of investing in a dormitory business is location. A good, high-potential location will consistently attract tenants. To assess a location's potential, observe the surrounding area and its key amenities. For example, is it close to educational institutions, industrial areas, business districts, tourist attractions, or does it have convenient access to amenities such as shopping malls, parks, and public transportation?

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2. Market Research and Target Group Definition

After selecting a suitable location, conduct on-site research to observe the growth of the apartment market in that area and the number of existing apartments. Consider the number of occupants and explore the advantages and disadvantages of each apartment building to adapt to your business. Furthermore, clearly define your target tenant group to set rental prices that align with their income.

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3. Things to Know Before Investing in an Apartment or Dormitory Business (There are 2 Types):

• Investing in Land to Build a New Apartment

Investing in land and building a new apartment building has the advantage of allowing you to construct a building in any style you desire, allocate space yourself, and is relatively inexpensive. However, it comes with the complexities of construction, requiring study of regulations from the Department of Public Works and Town Planning, a well-designed building with cost calculations, and sufficient time to supervise and work with the designer or contractor. Therefore, this investment model is suitable for those who are experienced in the apartment business.

• Investing in a Secondhand Apartment Building

Investing in a secondhand apartment building that is already in operation has the disadvantage of being more expensive than building one from scratch. Also, you cannot choose the location and building style to your liking. However, the advantage of this investment is that it saves time and reduces construction complexities. Furthermore, it can generate income immediately because secondhand apartments are often located in considered good locations and usually have existing tenants. This allows for calculations from the very first month regarding the expected rental income. Therefore, this investment model is suitable for beginners who want to try investing in the apartment business and those with substantial capital.

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4. Assess Profitability

Investing in a dormitory or apartment business isn't simply about building or buying a building and being done with it. A rough assessment of the costs and expenses during operation is crucial. This type of investment involves initial expenses such as land costs and construction costs, as well as ongoing expenses like income tax and loan taxes. Therefore, it's essential to consider these expenses to prevent losses in the apartment business.

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5. Apply for Permits

After obtaining the building plans, an application for a building permit (Form B.1) must be submitted to the local district office. This includes preparing the required supporting documents such as ID card, copies of ownership documents, copies of land title deeds, building plans, and letters of certification from an engineer or architect.

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6. Obtaining Investment Loans

Most often, investing in apartment or dormitory businesses involves taking out bank loans. This is because it's a high-value asset investment with several risks, such as failure to meet profit expectations, insufficient funds to cover operating expenses, or damage from natural disasters. Therefore, a high-amount investment loan can cover these expenses and mitigate future risks.

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Tips for Successful Apartment/Dormitory Business Management

While apartment or dormitory investment is considered a "passive income" business, remember that all investments carry risks. Unplanned investments can lead to failure. Here are some tips for successful apartment business investment:

• Maintain at least 40% of the investment capital in your own capital; ensure you have sufficient cash flow.
• Choose a high-potential location. A good location should have convenient transportation, be near main roads or train stations, close to educational institutions, industrial areas, or residential communities – locations with high demand.
• Invest in apartment or dormitory systems such as security systems (CCTV, security guards, key card access) and management systems (rental billing). • Providing timely payment reminders, etc., will build resident trust and prevent them from moving out.
• Create a positive environment, such as maintaining cleanliness, keeping the building new and structurally sound, and ensuring the rooms are in good condition and pleasant to live in.
• Set rental rates that are consistent with the location and income of the target group. For example, if the target group is students, you could build student dormitories near universities and set relatively low rental rates, as students have lower incomes. If the target group is working professionals, you could build dormitories in business districts and set higher rental rates, as this customer group has more stable incomes.

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Thank you for the valuable information from Thansettakij.