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Case - calculations of income from an apartment purchase

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Let's delve into the profitability case of investing in apartments in Phuket based on data from our property management company, Apart Homes Hospitality.

Capitalization

Most investors opt for purchasing apartments during the construction phase, benefitting from 0% installment plans with an initial payment of 25-50%. The value typically increases by 30-40% before completion, with an average annual rental yield of 8-10%.

Now, let's consider an existing project with two-bedroom apartments covering 61.25 square meters:

  • Purchase cost: 6,702,918 THB
  • Post-completion capitalization: 30% or 2,614,138 THB
  • Final market value: 8,713,793 THB

Rental Income and Expenses

The key aspect of profitability in this project is its rental program.

  • Actual occupancy for 2022: 77%, equivalent to 277 days or 40 weeks per year.
  • Gross revenue for 2022: 1,890,000 THB

For a more objective calculation, profitability is assessed considering expenses:

  • Check-in/check-out expenses, including welcome kits and post-check-out cleaning: 66,500 THB annually
  • Ongoing apartment expenses: maintenance of air conditioning, insect treatment, towel/linen replacement, Wi-Fi costs, and cleaning during guest stays, totaling 215,000 THB per year

The total expenses related to rental and maintenance amount to 281,500 THB, resulting in net income after deducting expenses of 1,608,500 THB.

Deductions from this amount include:

  • Management company commission: 20% or 321,700 THB
  • Individual income tax: 15% or 193,020 THB
  • Annual maintenance fee in the project: 44,100 THB (60 THB per square meter per month, paid annually)

The final net profit at the end of the year, after deducting all expenses, is 1,049,680 THB. This represents 12.0% of the market value of the completed apartments (8,713,793 THB).

Overall

Investing in Phuket apartments can offer potentially high returns, reaching 12.0% annually. However, it's crucial to consider all expenses related to rental and maintenance, as well as taxes and commissions. While this case provides a glimpse of the potential, conducting a more detailed analysis or consulting with experts before deciding on a specific project is advisable.

Any remaining questions?

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