Buying to Rent in Pattaya
Going into a property investment purchase in Pattaya or wherever in the world is one thing,but going in blind without any idea of what returns you are likely to get is another. Having an idea on what cash returns are going to be had will be something that you should pay close attention to. Quite simply, the return of an investment property is a measurement of its cash flow divided by the amount of capital you initially invested. It is typically expressed as a percentage. It becomes less accurate and less useful when used on future years because this calculation does not take into account the time-value of money (the principle that your money today will be worth less in the future).
Therefore, the cash-on-cash return is not a powerful measurement, but it makes for an easy and popular “quick check” on a property to compare it against other investments.
For example, a property might give you a 7% cash return in the first year versus a 2.5% return on a bank cash deposit.The return is calculated by dividing the annual cash flow by your cash invested:
(Annual Cash Flow / Cash Invested) x100 = Cash Return %
Let’s make sure we understand the two parts of this equation: The first-year cash flow (or annual cash flow) is the amount of money we expect the property to generate during its first year of operation. The initial investment (or cash invested) is generally the down payment. However, some investors include their additional costs such as transfer fees and communal fees etc. The sum of which is also referred to as the cost of acquisition.Let’s look at a simple example based on a 48 Sqm studio unit in View Talay 5. Let’s say that your property’s rental income (annual cash flow) is 240,000 Baht and let’s say that you paid 2,600,000 to purchase the property. In this example your return would be 9%. 240,000 / 2,600,000 = 9%
Property investments in Asia have proved to be better than money in the bank and why so many are looking to invest in property in Pattaya and elsewhere in Thailand.