Most Thai property investors are taught one number: rental yield, annual rent divided by purchase price. It is useful for initial screening but has important limits. It doesn't tell you what the cash actually leaving your pocket earns when you buy with a loan, and it ignores gains or losses at sale — often the largest component of return. This guide introduces two measures professionals use and shows how to calculate them yourself in a spreadsheet.
| Measure | Simple formula | Answers |
|---|---|---|
| Gross yield | Annual rent ÷ purchase price | How much income the asset produces relative to price |
| Net yield | (Rent − running costs) ÷ (price + purchase costs) | The asset's return after costs |
| Cash-on-cash | Annual net cash flow after debt service ÷ cash invested | What your own cash earns each year |
| IRR | The rate at which the present value of all cash flows, including sale proceeds, equals zero | Average annual return over the whole investment |
When you buy with a loan, the cash you actually commit is the down payment, your share of transfer and mortgage fees, and furnishing; the rest is the bank's money. Cash-on-cash measures what remains each year after collecting rent and paying common fees, tax, repairs and the full instalment, relative to that cash.
Note that the principal portion of instalments isn't lost; it builds your equity. Some investors therefore include principal reduction, calling it total annual return, which is higher than pure cash return. Both are valid — just know which you are measuring.
Leverage raises return on cash when the property's net return (net yield plus price growth) exceeds the cost of borrowing, because you earn on the whole asset while funding only part of it. When the property's net return is below the interest rate, leverage eats into returns and produces negative monthly cash flow — a situation many city-condo investors face when floating rates exceed a unit's net yield.
Buy a THB 3,000,000 condo with 10% down (THB 300,000) plus THB 200,000 in fees and furnishing: THB 500,000 cash invested. Borrow THB 2,700,000 at an average 5% over 30 years — roughly THB 14,500 a month, THB 174,000 a year. Rent is THB 16,000 a month with one vacant month a year on average, THB 176,000 annually, less THB 30,000 for common fees, tax, insurance and repairs.
Annual net cash flow: 176,000 − 30,000 − 174,000 = −THB 28,000. Pure cash-on-cash is about −5.6%. That sounds bad, but year-one principal reduction is roughly THB 40,000; including it, total annual return is slightly positive — before any change in the unit's price.
Now take the whole holding period. Hold 10 years with rent rising 2% a year and the price rising 2% a year (to about THB 3.66 million). After selling costs and the remaining loan, cash returned at sale is around THB 1.3 million. Feeding every year's cash flow plus sale proceeds into an IRR calculation gives roughly 8% a year, even though you topped up cash annually along the way. With zero price growth, IRR drops to a very low level. Price growth and keeping the unit continuously let are the variables that decide the outcome.
Compare IRR with expected returns on alternatives of similar risk — REITs, dividend stocks, bonds — remembering that direct property is less liquid and takes management time, so it should earn a premium for both. Cash-on-cash answers the practical question of whether you have enough reserves to top up in negative cash-flow years. If not, even a good-IRR deal may not suit you.
There's no fixed number, but it should clearly exceed returns from more liquid investments, judged across scenarios rather than a single best-case figure.
All-cash gives positive cash flow and lower risk, but potentially lower return on capital, and that lump sum isn't working elsewhere. It depends on the loan rate versus alternative returns and your comfort with debt.
Yes. If you find tenants and maintain the unit yourself, price that time against a management company's fee for a more honest return.
Rental yield is a good starting point but not enough for leveraged decisions. Use cash-on-cash to see whether you top up or take out cash each year, and IRR to measure the full-period return including the sale. Run scenarios and compare honestly with alternatives. Browse investment condos at MyProperty listings and read more on the MyProperty blog.
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