NovReturn metrics: gross, net, ROI, IRR and cash-on-cash
The same property can honestly be described as "8.8% a year" and as "4.2% a year" — the difference is not deception but which metric was computed and what went into the denominator. Below we run one illustrative property through gross and net yield, ROI, IRR, cash-on-cash and total return so that you can see exactly where the numbers diverge. The example is invented and exists only for the arithmetic: it is not market data and not a forecast.
The inputs of the example
Every figure below is illustrative and deliberately round. It does not reflect the prices, rents or costs of any real project and is not a forecast of returns.
| Input | Value in the example |
|---|---|
| Purchase price | $150,000 |
| Transaction, registration and furnishing costs | $12,000 |
| Total invested | $162,000 |
| Rent | $1,100 per month |
| Potential annual rent (100% occupancy) | $13,200 |
| Occupancy | 85% |
| Rent actually collected in the year | $11,220 |
| Service charge, insurance, minor repairs | $2,300 a year |
| Management, 10% of collections | $1,122 a year |
| Total operating costs | $3,422 a year |
| Operating income after costs | $7,798 a year |
Taxes are not modelled in the example: the rates and the mechanics depend on your status and how you hold the property, and an invented tax line would distort the comparison between metrics more than its absence does. In your own calculation it has to be added — with figures from a tax adviser.
Gross yield
Gross yield is annual rent divided by the value of the property, before any costs. It is the headline metric: quick, comparable between properties, and almost always the prettiest.
In our example: $13,200 ÷ $150,000 = 8.8%.
The same metric against the full amount invested: $13,200 ÷ $162,000 = 8.15%. Nothing changed except the denominator. So when you compare listings, the first question is what sits in the denominator — the price or everything invested — and whether the rent is taken for 12 months or only for the months actually let. What makes an honest price base is covered in effective net price.
Net yield
Net yield is the same division, but the numerator is income after operating costs and after real occupancy.
In the example: $7,798 ÷ $162,000 = 4.81%. Against the purchase price alone it would be $7,798 ÷ $150,000 = 5.2%.
The gap against gross is almost a factor of two, and it comes from two things: vacancy ate $1,980 of potential rent, and costs took another $3,422. This is where expectation and reality diverge most often, because marketing calculations tend to assume 100% occupancy and to keep only the service charge on the cost side. The rent in the numerator is an assumption too: how to justify it with comparables and adjustments for floor, size and furnishing is set out in underwriting the rent.
The minor-repair allowance is not a reserve for large, irregular replacements. To avoid overstating spendable cash, separate operating income and net yield from cash flow after a replacement reserve. Fannie Mae's replacement-reserve approach requires anticipated capital replacements and major maintenance to be covered through a condition assessment and cost schedule. For an individual unit, the practical equivalent is an inventory of air conditioners, water heater, appliances, furniture, repainting and other major items, each with an expected replacement date and evidenced cost — not a generic repair percentage. The reserve may not be a current-year accounting expense, but it reduces the amount that can safely be treated as distributable cash.
Occupancy and vacancy
Occupancy is the share of time the unit is let and earning; vacancy is the mirror image. The 85% in the example means roughly 1.8 months of an empty apartment per year: tenant turnover, the make-good between tenants, and the search period.
Occupancy is the most sensitive input in the whole model, because it multiplies revenue while barely reducing costs. Check what happens at 70%: collections fall to $9,240, management to $924, total costs to $3,224, operating income to $6,016, and net yield on the amount invested to 3.71%. One assumption, and the result moves by a quarter. It is worth running the other assumptions the same way — rent, costs, handover date, exit price: the deal stress test works through each of them.
Break-even occupancy
Break-even occupancy is the occupancy at which collected rent exactly covers costs. Anything above it is income; anything below it is money out of your own pocket.
With no debt in our example you have to cover $2,300 of fixed costs, while 10% of collections goes to the manager. Required collections: $2,300 ÷ 0.9 = $2,556, which is $2,556 ÷ $13,200 = about 19% occupancy. A wide margin.
Now add debt: say $60,000 of the purchase is financed at 8% a year, i.e. $4,800 of interest annually (simplified: interest only). Now $7,100 must be covered, required collections are $7,889, and that is about 60% occupancy. Same property, same market — but the threshold below which you start topping up has tripled. The mechanics are set out in rental break-even.
Cash-on-cash return
Cash-on-cash is the annual cash flow divided by your own cash invested. It answers "how much cash comes back on the cash I put in", which is what distinguishes it from a yield measured against the full value of the asset.
With no debt: $7,798 ÷ $162,000 = 4.81% — exactly the net yield. When 100% of the money is your own, the two metrics coincide, and confusing them costs nothing.
With the debt from the previous section: own cash is $102,000, cash flow is $7,798 − $4,800 = $2,998, so cash-on-cash = $2,998 ÷ $102,000 = 2.94%. Here borrowing worsened the current cash flow, because the cost of debt is above the operating return of the asset. Had the return exceeded the cost of debt, the effect would have been the opposite — leverage works both ways.
An interest-only line is not enough for an amortising loan. DSCR is net cash flow divided by the full debt service — principal and interest; Fannie Mae's definition also includes applicable mandatory payments on specified subordinate instruments. In the page's simplified case, interest-only coverage is $7,798 ÷ $4,800 = 1.62×. That is not the DSCR of an amortising facility: its denominator must contain the actual principal and interest due over the same period. A result below 1.0× means the property's cash flow does not fully cover debt service.
Total return and profit
Profit is an amount of money. Total return is the same result expressed as a percentage of what was invested, and it includes both halves of the outcome: rental cash flow and the change in value at exit. Showing one in place of the other is the most common way to flatter a picture.
Continue the example over five years, assuming (illustratively) that rent, costs and occupancy do not change:
- Cash flow: $7,798 × 5 = $38,990.
- Sale after five years at $165,000, selling costs of 5% = $8,250, net proceeds $156,750.
- Capital result: $156,750 − $162,000 = −$5,250. The price rose, but not enough to cover entry and exit costs.
- Profit over five years: $38,990 − $5,250 = $33,740.
Total return: $33,740 ÷ $162,000 = 20.8% over five years. Notice how easily that figure is quoted without the period attached — "a 20.8% return" sounds entirely unlike "20.8% over five years". Here five years are collapsed into a single line; to see how the purchase year differs from the handover year and the sale year, and where the one-off costs sit, spread it out as a cash flow by year of ownership.
ROI
ROI is profit divided by investment. In our example it is exactly the same calculation: $33,740 ÷ $162,000 = 20.8% for the period, or roughly 4.2% a year if you simply divide by five.
ROI contains no time inside it — its single but serious weakness. 20.8% over five years and 20.8% over two years are the same ROI and completely different investments. So ROI without a stated period is meaningless, and it cannot be used to compare properties held over different horizons.
A simple annual average is not CAGR
Dividing a multi-year ROI by the number of years produces only an arithmetic average. It ignores compounding and the timing of the cash received. When a result is reduced to one opening value and one closing value, CAGR is calculated as (1 + total return) to the power of 1/n, minus 1. Using the page's illustrative figures, a 20.8% return over five years is about 3.86% CAGR, while straight-line division gives 4.16% a year.
CAGR still does not replace IRR. It sees only the two endpoints and misses the $7,798 received in each intervening year. CAGR is useful for auditing how an advertised 'annualised' figure was produced; a property with rent, instalments and an eventual sale should be assessed with IRR or XIRR using every cash flow.
IRR
IRR is the annual rate at which all future receipts, discounted to today, equal the money invested. Put simply: it is ROI that knows when the money arrives and leaves.
XIRR and XNPV: use the actual dates
Standard IRR assumes equal intervals between cash flows. Developer instalments, a delayed handover, a partial first rental year and a sale on a specific date call for XIRR instead: every payment and receipt is paired with its actual date. Microsoft's XIRR definition expressly distinguishes a non-periodic schedule from periodic IRR and discounts subsequent flows on a 365-day basis.
A minimum auditable schedule records the date, signed amount, purpose, currency and supporting document. The reservation payment, every SPA instalment, furnishing, handover costs, net rent receipts, taxes, selling costs and net sale proceeds remain separate. Moving several transactions to an assumed year-end changes the answer. To test the same dated schedule against a required return, use XNPV.
The cash flows in our example: −$162,000 at the start, +$7,798 in each of five years, and +$156,750 from the sale in year five. The IRR of that set is about 4.2% a year, almost identical to ROI divided by the term.
That happened because all the money went in at once and the income is even. ROI and IRR diverge in two typical situations: when you pay in instalments rather than all at once, and when income does not start on day one — for instance while the property is still under construction. In both cases your money works for less time than it appears to, and IRR shows this while ROI does not.
NPV: does the deal clear your required return?
IRR reports the deal's internal rate; NPV measures the value created or lost at the investor's chosen required return. Set the discount rate before looking at the result, using a comparable-risk alternative, the cost of capital and an allowance for uncertainty. Microsoft's NPV methodology discounts future payments and receipts at that stated rate.
Assume, purely for this page's illustration, that the investor requires 6% a year. The modelled cash flows then produce an NPV of about −$12,019. At the calculated IRR of about 4.22%, NPV is zero by definition. A negative NPV at 6% does not mean the nominal cash profit disappears; it means this model fails that particular hurdle. Any calculation should therefore disclose both the discount rate and the resulting NPV, because an unduly low rate can make a distant resale receipt look acceptable.
Every metric for one property, side by side
| Metric | Value in the example | The question it answers |
|---|---|---|
| Gross yield | 8.8% (on price) / 8.15% (on total invested) | How much rent the asset produces before costs |
| Net yield | 4.81% a year | What is left after costs and vacancy |
| Cash-on-cash, no debt | 4.81% a year | Return on your own money |
| Cash-on-cash with $60,000 of debt | 2.94% a year | The same, after servicing the debt |
| Break-even occupancy | 19% unlevered / 60% levered | The occupancy needed to avoid topping up |
| Profit over five years | $33,740 | How much money was made |
| Total return / ROI | 20.8% over five years | The same profit as a percentage of the investment |
| IRR | about 4.2% a year | An annual rate that accounts for timing |
One property, eight honest figures from 2.94% to 20.8%. The conclusion is simple: a metric quoted without its denominator, its period and its cost basis means nothing. Demand those three things from any calculation — yours or somebody else's.
What to ask of any return calculation
- What is in the denominator: the price of the asset, or all money invested including transaction and furnishing costs.
- What occupancy is assumed and where that figure came from.
- Which costs are deducted and which are not — service charge, management, repairs, insurance, taxes.
- What period the metric covers: annual, or the whole holding horizon.
- Whether exit costs and the change in value are included, or only rent is shown.
- Whether debt is modelled: levered and unlevered are different metrics.
Want the numbers run on your own inputs? We can build a calculation for a specific unit with the assumptions exposed — occupancy, costs and exit scenario — so you can see where every figure comes from.
Request a calculationTelegramFrequently asked questions
Why do gross and net yield differ so much?
Because of two things: vacancy and costs. In our illustrative example gross yield is 8.8% on price while net yield is 4.81% on the full amount invested — the gap comes from $1,980 of rent lost at 85% occupancy and $3,422 of operating costs for the year. On top of that, net yield uses a larger denominator, because it includes transaction and furnishing costs.
How does ROI differ from IRR?
ROI is profit divided by investment, with no notion of time: 20.8% over five years and 20.8% over two years give the same ROI. IRR is an annual rate that accounts for when money goes in and comes back. In our example the two nearly coincide (about 4.2% a year) because the whole sum is invested at once and income is even. They diverge when you pay in instalments and when income does not start immediately.
What is break-even occupancy and why calculate it?
It is the occupancy at which collected rent exactly covers costs. In our example the unlevered threshold is about 19%, while with $60,000 of debt at 8% it is about 60%. It is worth calculating because it shows your margin of safety: the closer the threshold sits to expected occupancy, the higher the risk of topping up from your own money in a weak year.
Are these figures the returns available in Cambodia?
No. Every number on this page is invented and chosen to be round, in order to show the arithmetic and the difference between the metrics. It is not market data, not a valuation of any project and not a forecast. Real rents, occupancy, costs and taxes have to be taken for the specific property and evidenced by documents.
Sources
Return metric methodology — standard financial practice · NovAsia research on letting and exit · checked July 2026. Every numerical value in the example is illustrative and invented: it is not confirmed by market data, does not relate to any specific project and is not a forecast. Taxes are not modelled in the example — rates and mechanics depend on your status and should be confirmed by a tax adviser. Past performance and modelled calculations do not guarantee future results. This content is for general information only and is not individual investment advice.