Why Your Phnom Penh Rental Yield Is Overstated

A gross yield of eight percent and a net yield below five can describe the same apartment, in the same building, in the same month. Nothing has to go wrong for that gap to appear. A rental yield quoted in a listing is almost always gross, calculated on the headline purchase price, and both halves of that fraction are wrong before a tenant signs anything. The correction is simple. It is just rarely done, because gross is the number that sells and net is the number that gets paid.

The denominator is wrong first

Yield is rent divided by capital, and most quotes divide by the purchase price, not the capital you actually deployed. Transfer tax adds four percent, applied to the government-assessed value rather than the contract price. Registration and legal work add more. A furnished let needs a furniture package, which is capital, not decoration. Handover usually brings a sinking-fund contribution and a first-year service charge. None of these is large alone. Together they lift true capital several points above the contract price, and a yield built on the smaller number overstates itself in every year of the hold.

Twelve months is a target, not a term

The numerator has its own problem. Gross yield assumes a full twelve months at the asking rent, collected in full, at no cost of collection. Real rent is what survives four deductions. Vacancy between tenants, which is recurring in a market with a mobile tenant base. Incentives, since one month free on a one-year lease is an 8.3 percent cut whatever the headline says. Management, charged as a share of collections. And maintenance, trivial in year one and no longer trivial around year four, when air conditioning and finishes start consuming replacement capital rather than a repair budget.

What tax takes

Two tax lines sit between collected rent and deposited rent. Rental income is withheld at ten percent for a resident taxpayer and fourteen percent for a non-resident, where residency is a tax status set by days present, not by passport. That spread applies to gross rent every year of the hold. The second line is the annual tax on immovable property at 0.1 percent, charged on 80 percent of the committee-assessed value after a threshold of roughly 25,000 dollars. On most Phnom Penh condominiums the sum is small, but it is annual, and it is one of the first items a gross figure omits.

Recalculating is not pessimism. A net figure near five percent, on a hard-title asset in a dollarised economy with a foreign-ownership framework written into statute, is a defensible outcome. It becomes indefensible only when it was underwritten as nine. As an illustration, an ordinary unit quoted at nine percent gross can land below five net once these deductions are made, with nothing unusual happening to it. Gross yield describes a building. Net yield describes an owner. We build the net model before a unit is recommended, not after a client asks why the numbers moved.