The yield trap
International property marketing leads with yield because yield is the number that converts. "8% rental yield" feels concrete and comparable. It's neither.
A gross yield figure tells you: annual rent ÷ purchase price. It tells you nothing about whether you can sell the property within a decade, how much of that rental income you'll see after management fees and vacancies, or whether the currency you're earning in will be worth what you think it's worth when you repatriate.
Factor 1: Gross to net — what really eats your yield
| Deduction | Typical range | Notes |
|---|---|---|
| Property management | 8–15% of rent | Higher in remote or tourist markets |
| Vacancy | 5–20% of rent | Seasonal markets can hit 40% off-season |
| Maintenance | 0.5–1.5% of property value/yr | Higher for older or beach properties |
| Local property taxes | 0.1–1.5% of value/yr | Varies widely by jurisdiction |
| Income tax on rent | 0–30% | Many jurisdictions tax non-resident rental income |
| Insurance | 0.1–0.5% of value/yr | Higher in hurricane/flood zones |
A headline 8% gross yield in a managed tourist market typically nets to 3.5–5% after these deductions. That's still reasonable — but it's very different from 8%.
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Continue reading: how to measure liquidity risk in any market, FX impact framework, and how MPH applies all three factors to its market scoring.
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Factor 2: Liquidity — can you actually sell?
Liquidity in real estate is the ability to convert your asset back to cash at a predictable price within a predictable timeframe. It separates a property investment from a property speculation.
How to assess liquidity before you buy
- Transaction volume data: How many resale transactions happened in this development in the last 12 months? Low number = low liquidity. Your agent should be able to provide this; if they can't, that's the answer.
- Buyer composition: What share of buyers are domestic vs foreign? A development that's 90% foreign-sold will have a resale market vulnerable to visa policy changes and international investor sentiment.
- Price to ask vs price achieved: In Dubai it's often under 3%. In some resort markets it's 20–30% and the timeline to find a buyer is years.
- Developer reputation on resale: Off-plan projects from unknown developers often become impossible to resell once the developer's marketing machine moves on.
The liquidity test
Before signing: ask the agent to show you three comparable properties in the same development that have sold on the resale market in the last 18 months, at what price and after how long. If they can't show you three, you're buying into an illiquid market.
Factor 3: Currency — the invisible return killer
You earn rental income and capital gains in the local currency. Unless you spend in that local currency forever, you will at some point convert back. The exchange rate at that point determines your real return in your home currency.
The maths of FX erosion
Scenario: You buy a property in an emerging market for $300,000 equivalent. Over 7 years it appreciates 40% in local currency terms. But if the local currency has depreciated 25% against USD over that period, your USD return is roughly $420,000 × 0.75 = $315,000. Your "40% gain" became a $15,000 gain — 5% over 7 years.
Currency risk by market tier
| Risk level | Markets | Characteristics |
|---|---|---|
| Low | Dubai (AED/USD pegged), Eurozone (Greece, Portugal), Panama (USD) | Pegged to or IS a major reserve currency |
| Moderate | Mexico (MXN), Costa Rica (CRC), Thailand (THB) | Managed float, historical 10–30% swings vs USD over 5 years |
| High | Brazil (BRL), Colombia (COP), some frontier markets | High volatility, capital control history, political risk premium |
The combined framework
Real return = (Net yield after costs) adjusted for liquidity risk, adjusted for currency depreciation. A 7% net yield in an illiquid market denominated in a currency that historically depreciates 3%/year vs your home currency produces a real return significantly below headline. Run all three before you commit.