Rental Income & Cashflow
What is the difference between gross and net yield in Thailand?
The honest answer, first. The reasoning, second. The trade-offs, last.
The Answer
Gross yield is annual rental revenue divided by purchase price - the figure on brochures. Net yield is annual distributed cashflow to the investor after operator share, FF&E, sinking fund, vacancy, FX and withholding, divided by total invested capital. In Thai resort product, 8% gross commonly converts to 4–5% net.
Why this is the answer.
The gap between gross and net is dominated by operator share (30–50% of gross room revenue in managed product) and the small-but-recurring building-level and tax deductions. Bangkok long-term-lease product has a smaller gap because there is no hotel operator taking a share.
Investors comparing Thai property to home-country property must compare net to net - home-market gross yields commonly exclude property management fees, vacancy and tax that are pre-baked into Thai net.
The Net Yield Underwriting Method exists specifically because the gap is large and inconsistent across deals. Standardising the deduction stack makes deals comparable.
What to do about it.
- Reject any deal evaluated only on gross yield.
- When comparing to home-market property, compare net to net.
- Use a single standardised deduction stack across all candidate deals.
What can break the thesis.
- Gross-yield anchoring is the largest single source of investor disappointment in Thai property.
- Mixing gross and net across comparison deals biases capital allocation.
- Marketed gross figures often exclude even building-level mandatory deductions.
Your Next Step
Review Cash Flow Property Investment Strategies and Rental Cashflow Investors Phuket.
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