Almost every condo sales pitch eventually arrives at the same sentence: "You can just rent it out." Sometimes that is true. Often, the rent covers part of the monthly payment and you quietly make up the rest from your salary for years.
Neither outcome makes a condo a bad idea. Plenty of people buy for reasons that have nothing to do with monthly cash flow. But you should know which situation you are walking into before you sign, and it only takes one page of honest arithmetic to find out.
Gross yield is where the pitch stops. Net yield is where you start.
Gross rental yield is the number you usually see in a brochure. It compares a full year of rent with the purchase price.
Gross yield = (monthly rent × 12) ÷ purchase price × 100
Net rental yield takes out what it costs to keep the unit rentable, and compares what is left with everything you put in.
Net yield = (annual rent − operating costs − vacancy) ÷ total acquisition cost × 100
Neither figure is your return on investment. They say nothing about financing, taxes on your income or what the unit eventually sells for.
A worked example
Here is a hypothetical one-bedroom in Davao City. Every figure below is an assumption for illustration, not a quote, a forecast or a real project's numbers. Replace them with your own.
The rent is based on asking prices, not signed leases. One 2026 market estimate places Lanang and Bajada roughly between ₱22,000 and ₱35,000 a month, and current listings near SM Lanang and in Bajada ask about ₱20,000 to ₱25,000 for one-bedrooms. Landlords often settle below asking, and furnishing and floor area move the figure a lot.
| Assumption | Yearly amount |
|---|---|
| Purchase price | ₱5,500,000 (one-time) |
| Rent at ₱25,000 a month, if full all year | ₱300,000 |
| Vacancy: one empty month | −₱25,000 |
| Association dues at ₱3,500 a month | −₱42,000 |
| Property management at 8% of rent collected | −₱22,000 |
| Real property tax | −₱12,000 |
| Repairs and upkeep | −₱10,000 |
| Insurance | −₱3,000 |
| Left after costs, before income tax and loan payments | ₱186,000, or ₱15,500 a month |
On those numbers, the gross yield is 5.45% (₱300,000 ÷ ₱5.5 million).
For net yield, add what it took to get the unit ready: an assumed ₱275,000 for transfer and closing costs and ₱300,000 for furnishing, for a total of ₱6,075,000. The net yield is 3.06% (₱186,000 ÷ ₱6,075,000).
The same unit went from "over 5%" to "about 3%" without anything going wrong. That gap is normal, and it is the number worth asking about.
Now add the loan
Most buyers do not pay cash. Suppose you finance 80%, or ₱4.4 million, over 30 years. Pag-IBIG's promotional rate is 4.5% a year for loan amounts up to its ₱4.9 million low-cost ceiling, fixed for three years, and applies to applications received until December 31, 2026. After the fixed period, the loan is repriced.
| Interest rate scenario | Monthly payment | Rent left after costs | Out of your pocket each month |
|---|---|---|---|
| 4.5% (Pag-IBIG promo, first three years) | ₱22,294 | ₱15,500 | ₱6,794 |
| 6.25% (Pag-IBIG's previous rate, as a repricing scenario) | ₱27,092 | ₱15,500 | ₱11,592 |
| 8% (hypothetical stress test) | ₱32,286 | ₱15,500 | ₱16,786 |
This is the part of the conversation many buyers never get. Even at a promotional rate, this hypothetical unit does not pay for itself each month. You are making up the difference while slowly building equity, and hoping the unit holds or gains value.
That can still be a reasonable plan, as long as you choose it deliberately and the top-up fits your budget for the long haul. Check Pag-IBIG's current rules on property use too, because a loan program intended for a member's own housing may not treat a pure rental purchase the same way.
Interest rates are not standing still either. The Bangko Sentral raised its policy rate to 5.50% on October 22, 2026, its fourth straight hike, after inflation reached 7.2% in September. A rate that is fixed for three years still comes up for review eventually.
How much rent changes the picture
| Monthly rent | Gross yield | Net yield |
|---|---|---|
| ₱20,000 | 4.36% | 2.23% |
| ₱25,000 | 5.45% | 3.06% |
| ₱30,000 | 6.55% | 3.89% |
Same assumptions as above, with vacancy and management fees moving with the rent. A ₱5,000 difference in rent shifts net yield by more than three-quarters of a point, so get real evidence for your rent number. Ask what similar units in that same building actually lease for, not what they are listed at.
What the market data can and cannot tell you
- Take-up is not occupancy. Colliers reports an 87% average condo take-up rate in Davao as of end-2025. That measures units sold. It does not tell you how many are rented, or at what price.
- New supply is coming. Colliers projects Davao's condo stock will rise about 51% between end-2025 and end-2029, from 27,760 to 41,870 units. Metro Cebu is expected to reach 108,900 units. Demand may keep up, but your tenant will have more choices.
- Vacancy can bite. Metro Manila shows what oversupply looks like, with Colliers projecting condo vacancy of 25.6% by end-2026. That is a different market from Davao or Cebu, but it is a useful caution.
- Published yields vary. Global Property Guide puts Cebu City apartments at roughly 4% to 6% gross, and estimates like these usually rely on asking rents. We did not find a reliable published yield figure for Davao, so treat any confident number with care.
Costs people tend to forget
- Income tax on rent. Rental income is taxable and generally means registering with the BIR. The right treatment depends on your situation, so ask a tax professional before you run final numbers. Our example leaves this out.
- VAT in the price. Residential sales above ₱3.6 million are generally subject to VAT, under rules in effect since 2024. Check whether a quoted price includes it.
- Years with no rent. A pre-selling unit earns nothing until turnover, while your equity payments are already going out. Some towers have turnover dates several years away.
- Replacing things. Aircon units, appliances and mattresses wear faster in a rental. Budget to refresh them, not just to repair them.
- Selling costs. Broker commissions and capital gains tax reduce what you take home when you exit. Selling can also take months.
- Condotel terms. If a unit is sold with a rental pool or managed program, read how income is shared, what fees come off first, and how much personal use you are allowed. Ask whether any stated return is actually guaranteed, and by whom, in writing.
Who this kind of purchase may suit
It may make sense if you plan to hold for many years, can comfortably cover the monthly top-up, and value eventually owning the unit outright. It can also suit a parent buying near a university, or an OFW who plans to use the unit on retirement and wants tenants in the meantime.
Think twice if you need the rent to cover the loan from day one, might need the money back within a few years, or would struggle through several empty months. Also think twice if the whole case rests on prices rising. Appreciation is possible, but it is never guaranteed, and it is only one part of the return.
Compare the result against your alternatives as well. A low net yield may still beat what your savings would otherwise earn after inflation, or it may not. The point is to make that comparison with your own numbers.
Eight questions to ask before you sign
- What do comparable units in this building actually lease for?
- How much are the association dues today, and how have they changed?
- Who will manage the unit, at what fee, and who finds the tenants?
- Does the condominium corporation restrict short-term rentals?
- What is my total cash outlay until turnover, including taxes and closing costs?
- What happens to my payment when the fixed interest period ends?
- How many competing units will finish nearby in the next five years?
- Can I afford this for six months with no tenant?
Start with the neighborhood
The arithmetic tells you whether a unit can work. The location decides whether it will, because tenants choose a commute, a school and a street before they choose a floor plan. Our Davao City neighborhood guide is a good place to begin.
Want to run this on a real unit? Talk with a HouselyPH advisor, and we can walk through the latest price list and your assumptions together. You can also browse projects in Davao City and Cebu.
Sources
- BusinessWorld: High condo take-up seen supporting Davao expansion, Colliers (July 14, 2026)
- BusinessWorld: Expanding residential demand beyond the Metro (October 2, 2026)
- Pag-IBIG Fund press release via Rappler BrandRap: Expanded 4PH promo rates (June 23, 2026)
- Philippine Star: Pag-IBIG Fund raises limit on housing loans to ₱10 million (May 29, 2026)
- Rappler: Bangko Sentral raises interest rates to 5.50% (October 2026)
- Grant Thornton Philippines: VAT exemption on residential properties now ₱3.6M and below (February 2024)
- Global Property Guide: Philippines residential market analysis 2026
- BambooRoutes: Davao City rent estimates (market blog)
This article is general information, not financial, tax or legal advice. All examples are hypothetical, and returns are never guaranteed. Confirm current rates, taxes, prices and contract terms with your lender, the developer and a licensed professional before deciding.
