Phuket, renowned for its white beaches and vibrant nightlife, remains an attractive real estate investment destination, particularly for short-term rentals. New developments on the island offer modern, tourist-friendly accommodations, creating the potential for a stable income.
However, before investing, it's important to carefully calculate the potential return, taking into account a number of key factors.
Estimate the potential rental income. This figure directly depends on the property type (studio, one-bedroom, or multi-bedroom apartment), its location (proximity to the beach, amenities, and attractions), condition, and level of comfort. Analyzing prices for similar properties in the same area on popular short-term rental platforms (Airbnb, Booking.com) will help you determine the average nightly market rate and predict occupancy. It's important to consider seasonality: high season in Phuket typically occurs between November and April, when prices and occupancy are at their highest.
Calculate all operating expenses that inevitably arise when renting out a property. These include monthly condominium maintenance fees (common area fees), utilities (electricity, water, internet), cleaning costs between guest stays, laundry of bed linen and towels, as well as possible repairs and minor maintenance. Marketing and promotion costs, including booking platform commissions, and possibly management company fees if the owner does not plan to manage the property themselves, should also be factored in.
Net yield is calculated by subtracting all expenses from the total rental income. The resulting figure, expressed as a percentage of the initial investment, will show the true profitability of the investment. It is important to remember that short-term rental yields in Phuket can be quite high, but they also carry certain risks associated with fluctuations in tourist flow, changes in legislation, and market competition. Careful analysis and realistic forecasts will help you make an informed investment decision.
Step-by-step calculation guide:
1. Initial data.
Property value: e.g., $100,000. Vacancy rate: e.g., 20% (this is the time the apartment is not rented). Average nightly rate: e.g., $100 per night. Number of days in a year: 365.
2. Calculate potential income.
Total number of days in a year: 365 days. Number of rental days: 365 - (365 * 0.20) = 292 days (if 20% of the time is vacant). Potential income: 292 days * $100/night = $29,200.
3. Calculate expenses.
We consider expenses, which may include: Utilities: e.g., $150 per month, or $1,800 per year. Management expenses: For example, 20% of revenue (i.e., $5,840). Taxes: Depends on local laws (for example, $500 per year). Maintenance and repair expenses: Let's say $1,000 per year.
4. Total expenses per year.
Add up all expenses: Utilities: $1,800 Management expenses: $5,840 Taxes: $500 Maintenance: $1,000 Total expenses: $1,800 + $5,840 + $500 + $1,000 = $9,140.
5. Net income.
Now subtract expenses from potential income: Net income Potential income Total expenses Net income dollars
6. Calculate profitability.
Next, the yield can be calculated as: Yield / Net Income / Property Value Yield
Result:
Thus, in this example, the yield from short-term rentals of a new building in Phuket will be approximately 20.06% per annum.
Notes:
Income Variability: Prices may vary depending on season, demand, etc.
Taxation: Local tax rates on rental income should be taken into account.
Marketing Costs: Don't forget to factor in promotional costs if you plan to manage the rental yourself.
Risk Assessment: It's always helpful to consider risks, such as rental price fluctuations and possible changes in legislation.
Of course, actual figures may vary depending on specific conditions, location, and factors affecting the Phuket real estate market. You can explore the best investment opportunities on our website.
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