Leasehold vs Freehold: 3 Ways to Choose a Condo for Investment

When talking about real estate investment, it must be admitted that buying a condo for investment is another matter that many people are interested in. Such investment requires a considerable amount of capital. In addition, knowledge and understanding of the matter are required to plan and decide which type of condo to invest in to grow your capital. Let’s see which type of condo investment is more suitable for investment, Leasehold or Freehold.

What is condo investment? What are the types?

Before starting to invest in condos, the first thing that new real estate investors need to know and understand as a basis is the investment channels and types of condos to invest in. Let’s first look at the types of condo investment channels.
Starting with buying a condo, there are generally 3 main channels: buying from the project owner, buying a second-hand condo, and buying from an auction. The details of each type of purchase are as follows:

1. Buy from the project owner
   Investors buy condos directly from the project owner or developer. The assets that we will buy will be brand new. Therefore, we should give importance to choosing to invest in projects that have a reputation and are somewhat reliable.
   Investors may start by finding information from many projects, including considering the past real estate projects of each entrepreneur. If there is an opportunity, they may ask to visit the actual project. This will help to provide information to make a decision more easily.
2. Buy a second-hand condo
   Investing in buying a condo in this way will transfer the ownership of the asset from another person. Condos that have been built for a long time will have a cheaper price per square meter. Some may be located in prime locations. The size and characteristics of the room meet the target group that we want to rent out.
   Investing in buying a condo in this way must choose a room that is in good condition and not expensive to use to make a profit that is worth the investment.
3. Buy from auction
   Investing in buying a condo through an auction, such as an auction from the Department of Enforcement, is a bidding competition to get that condo. Investors must offer the highest price to receive the transfer of ownership. Once the ownership is transferred, investors can renovate, decorate, and extend it.

What is the difference between Leasehold and Freehold condos?

Now that you know how to buy a condo, let’s take a look at how each type of condo differs. Generally, condo investment is divided into 2 types: Leasehold condos and Freehold condos, which both have different characteristics as follows:

1. What is a Leasehold Condo?
   A Leasehold condo is a condo that has ownership for a specified period. The owner of the asset must pay the rent at the specified rental rate periodically. When the condo contract expires, ownership will immediately return to the lessor. Leasehold condos have the following characteristics:

• The owner must enter into a contract with the lessor, which has a 30-year ownership period according to the law.
• The owner may request to manage construction, extension, or decoration with the lessor as appropriate.
• The owner must pay maintenance fees, annual service fees, and building insurance.
• The owner must pay rent to the lessor according to the contract.
• The owner will receive permission from the lessor to manage related to the asset.
• The owner may be limited by the lessor’s regulations.
• The owner will be terminated from the contract if he does not comply with the terms of the condo lease contract.

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

There is no fixed formula for investing in a condo, which type is better or the best. There is only what is most suitable and meets our needs. Comparing various aspects of Leasehold and Freehold condos may reveal the differences that meet the needs of each investor, as follows:

1. Ownership
   – Leasehold condos hold ownership of the property for a specified period, up to 30 years under Thai law, and may be renewed by agreement with the lessor under specified laws. However, a second lease may not be renewed until 90 days before the expiration of the old lease.
   – Freehold condos Ownership is absolute immediately after the transfer of ownership is complete. This means that the owner of this type of condo can sell, mortgage, or transfer the property to an heir as desired.
2. Foreign Ownership
   – Leasehold condos have unlimited ownership
   – Freehold condos have 49% ownership of all units
3. Asset Value
   Freehold condos will tend to have higher asset values ​​in the future, following the increasing land prices, which is more than Leasehold condos.
4. Purchase price
   – Leasehold condos The price of condos to invest in is lower, mostly around 30-40% cheaper than Freehold condos. Suitable for those who want to invest in renting out.
   – Freehold condos are higher priced than Leasehold condos and also have ownership transfer fees, including a 2% transfer fee, 0.5% stamp duty, and 3.3% specific business tax.
   Investment is a way to help expand what you already have. Therefore, investing in condos is more than just using our money to buy what we want. It also requires analysis, planning, and selecting what is appropriate and meets our needs at that time.