Investing & renting out
How guaranteed rental returns on Koh Samui developments work, who really pays for them, the questions to ask, the contract terms that protect you, and how to judge what a property earns after the guarantee ends.
In short
- A rental guarantee is only as good as the contract and the party paying it.
- Ask whether it’s paid from real rental income, or effectively from your purchase price.
- Compare the price with similar properties without a guarantee.
- Check the term, payment dates, owner-use rules, costs and exit terms.
- Judge the property on what it will earn after the guarantee ends.
Many new developments on Koh Samui offer a “guaranteed rental return”: for example, a fixed percentage of the price paid to you every year for three to five years. Some are sound. Others are a marketing tool, funded by a higher purchase price, that ends just as the property’s real income becomes clear. This guide explains how to tell the difference. For the wider picture, see our property investment guide and buying off-plan property.
General information, not financial or legal advice. Have any guarantee agreement reviewed by your own lawyer before you commit.
How rental guarantees usually work
| Type | How it works |
|---|---|
| Fixed guarantee | The developer or operator pays a fixed percentage of the price each year, whatever the property earns |
| Minimum guarantee plus share | A guaranteed minimum, plus a share of income above it |
| Leaseback | You lease the property to an operator for a fixed rent over a term |
| Rental pool | Income from all units is pooled and shared; sometimes with a minimum |
Who really pays for the guarantee?
A guarantee has to be funded from somewhere:
- Real rental income from a well-run, licensed operation, with the operator’s own funds covering any shortfall, or
- The purchase price, set higher than the property would otherwise sell for, so that the “return” is partly your own money paid back.
Questions to ask
- Who exactly is guaranteeing the payments: the developer, an operator, or a related company?
- Does that company have the money to pay if bookings are low? Is there a bank guarantee or other security?
- Is the guarantee in the sale contract, or a separate signed agreement?
- How often are payments made, and on what date?
- Is the return calculated on the full price, or a lower figure?
- Who pays common-area fees, maintenance, furniture replacement and insurance during the guarantee?
- How many weeks can you use the property yourself?
- Is the rental operation licensed?
- What happens if the operator stops paying, or goes out of business?
- What does the property earn after the guarantee, based on real figures?
Contract terms that protect you
- A named guarantor with the means to pay, and ideally security such as a bank guarantee.
- Clear payment dates and interest on late payments.
- A right to exit the rental programme if payments are missed.
- Defined costs: what’s deducted before you’re paid.
- Owner-use rules in writing.
- Transferability: whether the guarantee passes to a buyer if you sell during the term.
- What happens at the end: whether you can leave the programme, and on what terms.
After the guarantee ends
The real test of an investment is what it earns once the guarantee stops. Ask for:
- actual occupancy and rates for similar units in the same or a comparable project;
- the operator’s costs and fees after the guarantee; and
- the net income you’d receive, after common-area fees, maintenance and tax.
If the answer is far below the guaranteed rate, the property may be overpriced.
Red flags
Watch out
- A very high guaranteed return compared with what similar properties actually earn.
- A guarantee that exists only in a brochure, not a signed contract.
- A guarantor that’s a newly formed company with no assets.
- A price well above similar properties without a guarantee.
- No information on the rental operation’s licence or track record.
Tax on guaranteed income
Guaranteed payments are generally taxable as rental or business income in Thailand, and possibly at home. See tax on rental income in Thailand.
Frequently asked questions
Some are. A guarantee is only reliable if it’s in a signed contract with a party able to pay it.
The developer, an operator or a related company. Check who it is and whether they can pay if bookings fall short.
Sometimes. Compare the price with similar properties without a guarantee.
You receive what the property actually earns. Ask for real figures before you buy.
Generally yes, in Thailand and possibly in your home country.
Weighing up a guaranteed return?
We’ll help you test the numbers and the contract before you commit.
General information only, not financial or legal advice.