Leasehold vs Freehold

Leasehold and Freehold condominiums, real estate ownership formats that many investors are interested in, are a significant investment. These investments require considerable capital investment, and knowledge and understanding are essential to plan and decide which type of condominium investment is most suitable. Let's take a look at which types of condominiums are more suitable.

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What is a condo investment? What are the different types?

Before starting a condo investment, the first thing a new real estate investor needs to know and understand is the investment channels and types of condos available. Let's first look at the different types of condo investment.

Starting with condo purchases: There are three main channels: buying directly from the developer, buying second-hand condos, and buying from auctions. Details of each type are as follows:

1. Buying directly from the developer: Investors purchase condos directly from the developer or developer. The property they are buying will be brand new. They should prioritize investing in projects with a certain level of reputation and credibility.

Investors can begin by researching multiple projects and reviewing each developer's past projects. If possible, they may visit the actual project. This will help you gain more informed decision-making.

2. Buying a Pre-Owned Condo
Investing in a condo through this method transfers ownership of the property from another party. Condos that have been built for a long time will have a lower price per square meter. Some may be located in prime locations, and the size and layout of the units will suit the target group you want to rent out.

Investing in a condo through this method requires choosing units that are in good condition and affordable, so you can capitalize on your investment and make a profit.

3. Buying through an auction
Investing in a condo through an auction, such as an auction from the Department of Enforcement, involves a competitive bidding process to acquire the condo. Investors must offer the highest price to receive ownership. Once ownership is transferred, investors can renovate, decorate, and add on to the property.

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What are the differences between Leasehold and Freehold Condos?

Now that you know how to buy a condo, let's take a look at the different types of condos. Condo investment is generally divided into two types: Leasehold and Freehold. Both types have their own characteristics, as follows:

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1. What is a Leasehold Condo?

A Leasehold condo is a condo where ownership is held for a specified period of time. The owner of such property must pay the specified rental rate on a monthly basis. Upon expiration of the lease, ownership of the property reverts to the lessor immediately. Leasehold condos are characterized by the following:

The owner must enter into a contract with the lessor, which provides for a 30-year legal ownership period.
The owner may request the lessor to manage construction, additions, or decorations as appropriate.
The owner must pay maintenance fees, annual service fees, and building insurance.
The owner must pay rent to the lessor as specified in the contract.
The owner must obtain permission from the lessor to manage the property.
The owner may be restricted by the lessor's rights under the lease agreement.
The owner's lease may be terminated if the lease agreement is not complied with.

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2. What is a Freehold Condo?

A Freehold Condo is a condo in which ownership is held in perpetuity. This means that investors who purchase this type of condo have permanent ownership rights, with no expiration date. Investors who purchase this type of condo receive the following:

No rental payments are required as specified in the contract.
The owner is responsible for maintaining the building.
The ownership is held in their own name.

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Investing in a Leasehold or Freehold Condo: Which is Right for You?

Actually, there's no set formula for investing in a condo. It's simply the most suitable and best option. Comparing various aspects of Leasehold and Freehold condos can reveal the differences that best meet the needs of each investor, as follows:

1. Ownership

Leasehold condos hold ownership of the property for a specified period of time, up to 30 years under Thai law. The contract can be renewed by agreement with the lessor under specified laws. A second lease renewal may not be possible until 90 days before the expiration of the previous contract.

Freehold condos: Ownership is absolute immediately after the transfer of ownership. This means the owner can sell, mortgage, or transfer the property to his or her heir at his or her discretion.

2. Foreign Ownership

Leasehold condos have unlimited ownership.
Freehold condos hold ownership of up to 49% of the total units.

3. Asset Value
Freehold condos tend to appreciate in value in the future, in line with rising land prices. This is higher than leasehold condos.

3. Purchase Price

Leasehold condos offer lower investment costs, typically 30-40% lower than freehold condos. This makes them ideal for investors seeking rental income.
Freehold condos are more expensive than leasehold condos and also incur ownership transfer fees, including a 2% transfer fee, 0.5% stamp duty, and a 3.3% specific business tax.
Investment is a way to maximize your wealth. Therefore, investing in condos is more than just using your money to buy what you want. It also requires analysis, planning, and selecting the right property that meets your needs at the time.

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Thank you for the great information from REIC.