Glossary, investment

Net yield in Thai property

Net yield is annual rental income after all running costs, divided by the total cost of acquiring the property and expressed as a percentage. It shows what an investment property actually earns for its owner.

Start with the rent actually collected in a year, allowing for empty periods. Deduct:

common-area fees and any sinking fund top-up
letting and management fees, or the operator's share in a rental programme
utilities and internet where the owner pays them
insurance, repairs and periodic replacement of furniture and air conditioning
land and building tax
income tax on the rent, including the 15% withheld from rent paid to a non-resident owner

Divide the result by what the property really cost: the price plus transfer fees, legal fees and furnishing.

As an illustration, a unit that cost THB 10.4 million including buying costs and collects THB 600,000 in rent, with THB 180,000 of annual costs and tax, has a net yield of about 4%. The same unit would be advertised at a gross yield of 6%.

Net yield is still not the whole return. It ignores changes in the property's value and in the exchange rate between the baht and your home currency. See rental yields in Thailand and the rental yield calculator.

General guidance, not legal or tax advice. Take independent legal advice before you commit to a purchase.

Terms related to net yield

Gross yield: Gross yield is a property's annual rental income before any costs, divided by its purchase price and expressed as a percentage. A unit bought for THB 10 million that earns THB 600,000 a year in rent has a gross yield of 6%.
Common-area fee (CAM fee): The common-area fee, or CAM fee, is the recurring charge each condominium owner pays towards running the building: staff, security, lifts, pool, insurance and cleaning. It is set in baht per square metre of unit area per month and is often billed a year in advance.
Withholding tax: Withholding tax is income tax deducted from a payment before it reaches the person who earned it. On a Thai property sale the land office collects it from the seller at transfer: 1% for a company and a sliding-scale amount for an individual. Rent paid from Thailand to a non-resident owner carries 15% withholding.
Capital appreciation: Capital appreciation is the rise in a property's market value between purchase and sale. Together with net rental income, it makes up the total return on an investment property.