5 Costs to Know When Buying a Condo to Rent Out

Buying a condo to rent out is an investment strategy that offers the potential for consistent returns or income. Renting out a condo—especially one in a prime location with convenient transportation and steady tenant demand—generates a continuous income stream. Additionally, condo prices tend to appreciate over time, offering the possibility of profit upon resale.

However, we are currently in an era where urban condos are springing up everywhere; they are visible in every direction. Consequently, investing in condos requires more careful consideration, especially given how many people are now purchasing units specifically for rental purposes.

For those looking to take out a loan to buy a condo for rental, it is recommended not to borrow more than 60% of the property's price. When calculating the financials for a rental condo, you should account for all major costs, including:

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1. Monthly Installments
A simple rule of thumb is that for every 1 million baht borrowed, the monthly installment is approximately 7,000 baht.

2. Common Area Fees
On average, these cost around 40 baht per square meter per month.

3. Brokerage Fees
If you use an agent to find tenants, the fee is typically equivalent to one month's rent for a one-year lease agreement.

4. Other Expenses
There are additional costs associated with purchasing a condo, such as transfer fees (2% of the appraised value) and mortgage registration fees (1% of the loan amount). Ongoing rental-related expenses, such as personal income tax on rental earnings, must also be considered.

For example, consider a 1-million-baht condo (25 square meters) purchased for rental, generating approximately 6,000 baht in monthly rent.

In this scenario, you should limit your bank loan to no more than 60% of the condo's price and use your own capital for the down payment. In particular, making a large down payment and borrowing less results in lower monthly installments, allowing rental income to cover both the loan payments and ongoing monthly expenses.

Condos purchased for rental purposes are typically located in prime areas—close to mass transit lines, communities, and shopping malls. While this offers tenants plenty of options and ensures steady occupancy for many properties, some units may experience periods without tenants throughout the year.

Therefore, investors should maintain a financial reserve to cover expenses—such as monthly loan installments and common area fees—during vacancies. Additionally, funds should be set aside for unit maintenance, as the security deposit collected from a tenant might not be sufficient to cover the repairs needed to re-rent the property.

5. Land and Building Tax
The fourth expense that rental condo investors should be aware of is the Land and Building Tax Act, which has been in effect since 2020. If you purchase a condo as a second residence, you are liable for tax starting from the very first baht of value, as follows:

Not exceeding 50 million baht
- Tax rate: 0.02%
- Tax payable: 200 baht per million

Over 50 million baht up to 75 million baht
- Tax rate: 0.03%
- Tax payable: 300 baht per million

Over 75 million baht up to 100 million baht
- Tax rate: 0.05%
- Tax payable: 500 baht per million

Over 100 million baht
- Tax rate: 0.10%
- Tax payable: 1,000 baht per million

Although buying a condo for rental purposes is an attractive investment... Investors have the opportunity to earn consistent returns or income from rental payments; however, this type of investment also carries risks—such as the possibility of vacancies or renting the unit out at a rate lower than the mortgage installments and other associated expenses.

Therefore, investors should thoroughly research the information and ensure they are financially prepared before investing in a condo for rental purposes.

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Special thanks to DD Property for this useful information.