Rental Income & Cashflow
What is net rental yield?
The honest answer, first. The reasoning, second. The trade-offs, last.
The Answer
Net rental yield is annual cashflow received by the investor - after operator share, FF&E reserve, sinking fund, vacancy, FX conversion and withholding tax - divided by total invested capital (purchase price + acquisition costs + furniture pack). It is the only honest yield measure for comparing Thai property to other income assets.
Why this is the answer.
Gross yield = annual gross rental revenue ÷ purchase price. It ignores operating costs and inflates the apparent return. Most brochure figures quote gross.
Net yield = annual distributed cashflow after the full deduction stack ÷ total invested capital. The Net Yield Underwriting Method standardises the deduction stack and the capital base to produce a comparable, institutional number.
Total invested capital must include: purchase price, transfer fee and legal costs, FF&E/furniture pack (often THB 0.5–2M on resort condos), FX conversion cost, and any contingency reserve.
What to do about it.
- Use net yield only when comparing across deals and asset classes.
- Include FF&E and acquisition costs in the capital base.
- Apply withholding-tax assumption appropriate to the investor's home-country tax treaty.
What can break the thesis.
- Confusing gross with net yield is the single most common first-time-investor error.
- Excluding FF&E and acquisition costs from the capital base flatters yield by 5–10%.
- Operator-share misreading can make a 7% gross deal look like a 6% net deal when it is actually 4%.
Your Next Step
Review Cash Flow Property Investment Strategies and Rental Cashflow Investors Phuket.
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