Monthly rent alone does not show whether a house or condominium is a good investment. Compare rental income with the purchase price and ownership costs, including vacancy periods and maintenance.
Gross yield and net rental cash flow
Annual gross rental yield = monthly rent × 12 ÷ total purchase price × 100. This figure excludes expenses and assumes the property is rented for the full year.
Net cash from renting should start with rent actually collected, then account for vacancy, common-area fees, repairs, tax, insurance, agent fees, and other owner-paid costs. If there is a mortgage, show instalments and interest separately: property yield and the owner’s cash flow are different measures.
A simple example
Suppose a unit costs ฿2,000,000 and the expected rent is ฿10,000 per month. The formula gives a gross yield of 6% a year (฿120,000 ÷ ฿2,000,000), before vacancy, expenses, and tax. This is not a net return and does not predict that the unit will find a tenant.
Check market information before setting rent
- Compare units with similar locations, size, condition, and amenities.
- Look for rent supported by actual tenancies or signed leases, rather than relying only on asking prices.
- Estimate the time needed to find a tenant and the costs during vacancy.
- Check the condominium juristic person’s rules and any limits on property use.
Do not confuse direct property ownership with a REIT
A real estate investment trust (REIT) raises funds to invest in property or leasehold rights. Investors buy trust units; they do not directly own an individual room or building. The Stock Exchange of Thailand explains that rental income and distributions depend on the REIT’s assets and management. Read its REIT overview. Unit prices and returns are not guaranteed.
Use a calculation as one input, alongside liquidity, debt, tax, and location risk.
Example with a vacancy and expenses
Suppose the purchase price is ฿2,000,000, rent is ฿10,000 a month, and the unit is occupied for the full year. Gross rent is ฿120,000, or 6% of the purchase price before costs. If the unit is vacant for one month, collected rent falls to ฿110,000. If annual operating expenses are another ฿30,000, the illustrative rental cash flow after those items is ฿80,000, or 4% of the purchase price. This is before interest, income tax, and transaction costs. The figures illustrate the calculation only; they are not current market prices or returns.
Separate the property’s operating return from the owner’s remaining cash after mortgage payments. A payment includes both principal and interest and depends on the borrower’s loan terms. Before deciding whether a property is worthwhile, model a full year of occupancy, a vacancy period, and a major repair.
The Securities and Exchange Commission (SEC) describes REITs as investments in real estate or leasehold rights, managed under a trust structure. They are not direct ownership of a unit. Review each REIT’s documents for assets, liabilities, fees, and risks before comparing it with direct property ownership.
Sources: SEC: REIT structure and asset review and Bank of Thailand: planning for large expenses.
About the referenced video: The linked video is about dividend funds, not rental yield. It is retained as a video reference and is not evidence for the formulas or examples in this article.