Investing in condos for rent: 4 expenses you should know

When it comes to investing with the potential for consistent returns or income, many people think of condo rentals. If the condo is in a good location, easily accessible, and consistently rented, it can generate consistent income. Plus, condo prices tend to rise steadily, making resale profits possible.

Nowadays, condos in the city are mushrooming. Everywhere you look, you see them everywhere. Therefore, investing in condo rentals requires even more careful consideration. Nowadays, many people are buying condos to rent out.

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For those looking to buy a condo for rent, it's recommended that you don't borrow more than 60% of the condo's price. Renting a condo requires careful calculation of costs. The main ones include:

1. Monthly installments. A simple calculation is: if you borrow 1 million baht, you'll pay 7,000 baht per month.

2. Common area fees, which average around 40 baht per square meter per month.

3. Agent fees. If you use an agent to find a tenant, you'll typically pay a fee of one month's rent.

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In addition, there are other expenses associated with buying a condo, such as transfer fees (2% of the appraised value), mortgage registration fees (1% of the loan amount), and expenses incurred while renting the condo, such as personal income tax on rental income.

For example, consider a 1 million baht loan for a 25-square-meter condo to rent out, earning approximately 6,000 baht per month in rent.

As you can see, applying for a bank loan exceeding 60% of the loan amount can result in a loss of return on your rental income. Therefore, you should borrow no more than 60% of the condo's value, with the remainder used as a down payment. The larger the down payment and the smaller the loan, the lower the monthly installments. This allows rental income to cover the monthly payments and expenses.

Condominiums that are most popular for investment are typically located in prime locations, near train stations, communities, and shopping malls, offering tenants a wide range of options. Many condos have continuous tenants, while others may not have year-round tenants.

Therefore, investors should have a reserve fund to cover various expenses, including monthly mortgages and common area fees, during the absence of tenants. They should also set aside a certain amount for maintenance. This is because it's possible that the security deposit collected from tenants may not be sufficient to cover repairs and re-rent.

The fourth expense that condo investors should be aware of is the Land and Buildings Tax Act, which has been in effect since 2020. If you purchase a condo as a second residence, you will be required to pay taxes starting from the first baht as follows:

Up to 50 million baht / 0.02% / 200 baht
Over 50 million baht up to 75 million baht / 0.03% / 300 baht
Over 75 million baht up to 100 million baht / 0.05% / 500 baht
Over 100 million baht and above / 0.10% / 1,000 baht

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Although condo rentals are an attractive investment, offering investors the opportunity to earn consistent returns or income from rentals, they also carry risks, such as the risk of not having tenants and the risk of renting out at a price lower than the mortgage or other expenses.

Therefore, investors should thoroughly research and prepare their finances before investing in condos for rent.

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Thank you for the great information from DD Property.