A reader wrote to me about investing in a hotel project in Phuket recently. This was my reply:
Hi R,
I have a friend who bought into a similar program offered by a hotel group in Phuket.
There are actually plenty of risks in such investments and you have to be one with rather deep pockets. I cannot remember the full discussion I had with my friend but here are a few points off the top of my head:
1. Concentration risk. It is one property.
2. Prospects. You have to question why the developer does not want to take a bank loan or a syndicate of loans to fund the project? If it is lucrative, they should do it. Or is it more lucrative selling rooms in the project to private investors?
3. Management risk. If the project does poorly and the management is not getting paid adequately because ......
