Buyer beware on second homes

“Developers have explained how to have profit returned but we are still in doubt on these figures, because there were no examples which could act as proof of this profit,” said Nguyen Viet Hoang, a private owner of a second home villa in Nha Trang city.

Hoang said that by investing in a second home he wanted a long-term investment. However the benefit had to be guaranteed, or he would pull out.

“I am not so rich that I can have a second home and use it for a few days every year, then leave it unused and unprofitable,” Hoang said.

He said the investment could be mobilised for other purposes which had clearer benefits.

Meanwhile, some developers have clearly outlined their strategy to gain profit for their customers.

The developer of Fusion Alya Hoi An located at Cua Dai beach, Quang Nam province, said that investment in this project brought the highest profits for investors.

Under Fusion’s management, the project’s units will be leased to both tenants and tourists. The accommodation’s owners have the right to use the property for a maximum of 20 days every year with many other incentives. They will also receive profits from the operator.

“The accommodation owners will receive profit from all activities of the resort,” the company’s statement said.

When it came to profit commitment, Fusion’s developer said profits from the operation of the whole resort would be announced quarterly to all owners. That explained why owners would not have to worry about the possible unfair leasing for different units or villas.

The developer said owners would receive profits based on the total revenue of the whole resort, including room rent and all other services. The developer expected the internal return rate to be 21 per cent annually.

Meanwhile, Thai Son company, the developer of Sunshine Hill project in Mui Ne said that with the potential offered by the project’s favourable position the company had sold off 70 per cent of the uits. The remaining 30 per cent would be operated under the condotel model.

Under this model, buyers at Sunshine Hill could expect to be paid back within seven to 10 years. This was with 335 trading days per year, where the owner consumed the 30 remaining days. Room capacity would be at 55 per cent on average and rental rates were to be set at $250 to $400 per night.

But CBRE executive director Richard Leech said it was still hard to know exactly how these types of experiments would work out.

“As far as I know, only The Nam Hai in Hoi An was put into operation and its operation was successful,” Leech told VIR.

He added that second home segment in Vietnam now could bring about profits of around 10 per cent per annum.

Leech said this profit was “acceptable” on the international market and was likely to grow as tourist numbers increase and people become much more familiar with time-share and leasing options.

However Leech also warned investors to examine the details carefully when looking at buying a second home.

Those details included type of ownership, portfolio diversification, tourist figures at that property’s location, costs of payment and ownership costs.

Leech stressed that appreciation potential had to be born in mind. It was also important to consider the initial purchase price and the opportunity for gains in the short, middle and long term.

Leech also advised buyers to pay attention to key factors including location, brand, quality and property structure.

When considering the location of the second home, he said, buyers must think about the access and infrastructure of the project, the scale of the tourism market there, other activities that supported a “holiday lifestyle”, and government support through funding, initiatives investment and infrastructure projects.

Meanwhile the quality of the property and brand of developers and operators were also important. Buyers should choose well-known, prestige developers and operators who could ensure their investment profit.

Leech said last but not least, was the structure of the development. Was it a rental pool system, a timeshare arrangement or some other model which could ensure profits for buyers?