Leasehold or Freehold
Should I buy a leasehold or buy a freehold condo?
Are you looking to buy a property in Thailand? There are essentially two ways that you can buy, and neither option is necessarily better than the other. Depending on who you are, what your goals are for buying a property and how much initial money you can invest the best option for you will be different.
What’s the difference between buying leasehold and buying freehold?
Essentially, buying leasehold means that you will purchase the property only for a fixed amount of time and will eventually need to return the property to the original owner. Buying freehold means that you are purchasing that property forever, or until you want to sell it to someone else.
Why buy a leasehold property?
Based on the definition above, the concept of a leasehold may be confusing because if you have to eventually return it, it does sound just like renting. The difference here though is that as a leasehold owner, you do have complete rights to that property and can pay a mortgage instead of paying a landlord. Because you don’t actually own the property forever, you don’t have to pay the price for the land beneath the property thus the capital cost for you will be much lower than it would be if you bought a freehold property.
Another great reason to buy a leasehold property specifically in Thailand is that it opens up many doors for you to live exactly where you want to live and in what kind of property. As there are in many countries, there are several laws that prevent foreigners from snatching up all of the land in Thailand. While there are some loopholes, such as putting a land plot under a new business that you register or marrying a Thai person to have her or him sign the papers, the current legal system only allows foreigners to purchase condominiums freehold, and even then there are restrictions.
A condo just might not satisfy the wants and needs of a foreigner looking to buy property in Thailand, especially for those who wants to buy the property to live in it themselves. Thailand has amazing beaches and mountains, and beautiful inexpensive properties all around the country. Those who may come from a more developed country with more expensive properties might see Thailand as a land of opportunity—an opportunity to live in their dream home.
How long does a leasehold agreement in Thailand last?
Leasehold agreements in Thailand do not necessarily come in a one-size-fits-all contract. The typical contract is 30 years, but some may be shorter depending what the owner and buyer agree to. 30 years is the maximum length of time from a legal perspective, but that does not mean you will have to give up your dream home after just a few decades. In many situations, the owner will state that the contract will be reviewed at the end of the 30 years with the intention to renew the contract, which can legally be done twice. If you really want to purchase a condominium to live in for your entire lifetime, you can easily do this with a total of 90 years on your leasehold. If you don’t want to live in the home, this is also plenty of time to rent the property out and turn a profit.
Why buy a freehold condo in Thailand?
The most common property-purchasing method for foreigners in Thailand is to sign a condo freehold agreement. While buying a condo may not be as appealing as a house to some (to others, buying a condo is ideal!), it is still often the direction foreigners take because it allows them the option of eventually reselling. This makes buying a condo more of a long-term investment strategy for foreigners who want to select condos that will appreciate due to their up-and-coming location or surroundings. Being able to re-sell the property also gives the buyer a lower risk of capital loss.
So, is owning a property more important to you, or is having the flexibility to live in the kind of property and location you want? It’s not always a clear answer for every foreigner looking to live or invest in Thailand’s real estate market, which is why we recommend viewing all of your options even if you think you are leaning in one direction over another. Real estate is often the biggest investment that a person will make in their lifetime, so it’s important to do thorough research and assess all of your options before signing a contract (especially in a foreign country).