Understanding Rental Yield
Rental yield is the annual rental income expressed as a percentage of the property's purchase price. It's the single most important metric for property investors, yet it's also the most commonly misrepresented. Here's how to calculate it accurately and avoid the pitfalls.
Gross Yield vs Net Yield
Gross Yield
Gross yield = (Annual Rental Income / Purchase Price) x 100. This is the headline number developers often quote. A condo purchased for ฿5M generating ฿400,000 per year in rent has a gross yield of 8%. Simple — but incomplete.
Net Yield
Net yield = ((Annual Rental Income - Annual Costs) / Purchase Price) x 100. This is the number that matters. Annual costs include property management (typically 20-30% of rental income), common area maintenance fees, insurance, repairs, and marketing. A property with 8% gross yield often delivers 5-6% net yield.
Realistic Occupancy Rates
Phuket's high season runs November through April, with peak demand in December-January. Low season (May-October) sees reduced but still meaningful occupancy due to the growing long-stay market.
- Well-managed branded residences: 65-80% annual occupancy
- Independent condos with good management: 55-70%
- Self-managed properties: 40-55%
- Villas (3+ bedrooms): 45-65% depending on location and quality
Costs Most Buyers Overlook
- Furnishing and fit-out: ฿200,000–800,000 to rental-ready a bare unit
- Platform commissions: Airbnb/Booking.com take 15-20%
- Linen, cleaning, turnover costs: ฿500–1,500 per guest changeover
- Annual maintenance fees: ฿400–800 per sqm per year
- Void periods: Budget for 2-4 weeks per year with no bookings
A Practical Example
Purchase: ฿6M condo in Bang Tao. Average nightly rate: ฿2,500. Occupancy: 70% (256 nights). Gross income: ฿640,000. Management (25%): -฿160,000. Maintenance: -฿30,000. Other costs: -฿50,000. Net income: ฿400,000. Net yield: 6.7%.
This is a realistic, achievable return for a well-located and professionally managed property. Be cautious of any projection above 10% net — it likely involves aggressive assumptions.