Phuket rental yield: why 10% in the brochure becomes 5% in your account

What the developer's number actually measures

When a presentation says 10% a year, it almost always means gross yield: the rent the unit is expected to collect over a year, divided by its price. It is a property of the building and the location. It is not a forecast of your bank balance.

Net yield is what remains after the costs of collecting that rent. That one is a property of your specific deal: your management agreement, your unit's real occupancy, your fixed costs.

Neither number lies. The trouble starts where you read the first one and plan your life on the second.

So when someone shows you 12% a year, there is one first question: is that before deductions or after.

What stands between the gross number and your account

None of these deductions is exotic. All of them are routinely missing from the sales deck.

Occupancy. The gross figure is built on an assumed occupancy. Ask which one. If the deck says 80% and the building has no history yet, you are looking at a hope, not a measurement. On an existing building you can ask for the real bookings of comparable units last year, month by month.

The management company's share. It takes around 30-40% of collected rent for sourcing guests, check-in, cleaning and maintenance. That is the first number to find in the management agreement. The second is what that share covers and what you pay on top of it.

Booking platform fees. Guests arrive mostly through platforms, and the platform takes its cut on every booking. This is a separate line from the management fee, and it is usually folded into an optimistic occupancy assumption.

Fixed costs. Common area fees, the sinking fund, utilities during empty months, insurance, and the furniture package that quietly wears out over a few years of guests.

The low season. Phuket has one, and it is half the year. That deserves its own section, because it is where most models break.

What the low season does to the number

High season on Phuket runs November to April, low season May to October. The deepest part is June, July and August, and September is usually the wettest month of the year.

It splits almost exactly in half: 181 days of high season against 184 days of low. Half the year runs on a different rate, and that is not small print, it is half your model.

For a decent one-bedroom inside a resort development near the water, the rates look like this:

• December and January: 120,000 to 150,000 baht a month
• the rest of the high season: around 90,000 to 95,000 baht
• low season: 45,000 to 50,000 baht

Roughly a threefold difference between peak and trough. And it is not only the price that falls: in winter the unit sits empty for a handful of days, in summer the gaps become normal.

Now the standard mistake. Someone takes the January rate, multiplies by twelve and arrives at a handsome annual figure. An honest month-by-month calculation gives roughly half of that. Nobody lied along the way: the January number was simply stretched over July.

Seasonality is not a defect of the island. It is a measured characteristic. The problem appears where the number was sold without explaining what it is made of.

Working it through

What follows is an illustration on her typical numbers, not an offer on a specific unit.

Take a finished, furnished unit near the sea in a project quoting gross yield in the 8-10% band.

I will be straight about this: I quote 5-6% where the presentation says 10%, and I know that sells badly. But I live and work here. In a couple of years my client calls to tell me how their apartment turned out, and I want to pick up that phone without flinching.

And tax

The 5-6% in this article is income before tax. Rental income in Thailand is taxable, and the outcome depends on whose name the unit is in, how the management agreement is structured, and whether you hold Thai tax residency.

I am not going to quote rates here, because they depend on your specific structure. Tax and visa specifics I always hand to people who do only that: I will explain the shape of it, but the numbers for your situation should be run by a specialist lawyer.

If you are modelling yield and have not put this line in, your calculation is not finished yet.

Why price growth matters more than yield

Yield is one of two engines, and on Phuket usually the smaller one.

Units bought early in strong locations have added something like 25-30% by completion. After completion, liquid units in modern developments have appreciated around 3.5-5% a year. I take the lower end: the figure moves between projects and between posts, and it is better to count on the modest one.

The land near the water is gone. New projects are being pushed inland, and demand has not moved.

Which is why the location question matters more than the yield question. The test is simple and unsentimental:

I always ask myself one question: who buys this apartment in five years, and why. If there is no answer, there is no point looking further.

You will have to sell in the end. A handsome yield on paper is worth nothing if you cannot get out of the asset. There is no universal figure for how long an exit takes or what it costs: in a strong location a buyer turns up, and deep inland a unit can sit in the listings for years. That is exactly why the five-year question gets asked before the purchase, not at the exit.

Cheap projects inland are easy to enter and close to impossible to leave. And in an unsaturated location the building continues around you: in two years your unit competes with a dozen newer ones on the empty land next door.

What to ask before you sign

Five questions remove most of the uncertainty. Ask them in writing.

1. What occupancy is this yield figure built on, and is that measured or assumed?
2. What exactly does the management company take, what is inside its share and what do I pay on top?
3. Are platform fees, common area charges and utilities in empty months inside this number or outside it?
4. What did comparable units in this building actually book last year, month by month?
5. Is this gross or net, and is it before tax or after?

A developer who is comfortable with their product will answer all five. How fast and how precisely someone answers the fifth tells you most of what you need to know.

What to do with all this

Phuket works. A finished, furnished unit near the sea returning 5-6% net in baht while appreciating is a solid asset, and income in a hard currency matters if you earn in a softer one.

There is no magic button. The low season is real and it occupies 184 days of the year. Exchange rates move, and your yield will look different in your home currency than it does in baht. The difference between freehold and leasehold has to be understood before the deal, not after.

And the main thing about the construction stage. In Thailand the money goes to the developer directly; there is no separate escrow protecting the buyer. Which makes a developer's record of completed projects not a nice bonus in the presentation but the only real guarantee you have.

Count on the bottom of the range. If it comes in higher, that is a pleasant surprise.