QUICK ANSWER
The supplied E.R.E guidance defines ROI as return on investment and gives the formula: (net total returns / cost of investment) × 100. Total returns include rental income plus capital gain or loss for the period.
Quick answer
The supplied E.R.E guidance defines ROI as return on investment and gives the formula: (net total returns / cost of investment) × 100. Total returns include rental income plus capital gain or loss for the period.
Why this metric or concept matters
Property investors need a consistent way to compare opportunities. Headline figures can be useful for screening, but they should be read alongside the assumptions, costs, time period, financing structure and risks behind them.
How to use it when comparing property
Use the same calculation method and assumptions across every development you compare. Check whether figures are gross or net, whether they are historic, current or projected, what costs are excluded, and whether currency movements could affect your result.
What investors often overlook
Purchase costs, taxes, legal fees, finance costs, management, maintenance, service charges, void periods and resale costs can materially change an investment outcome. A strong headline percentage does not by itself establish that an opportunity is suitable.
Due diligence before investing
Verify material figures against the development documentation and obtain appropriate legal, tax and financial advice where required. Consider the developer, contract, ownership structure, payment schedule, local market, rental assumptions and realistic exit options.
Key points to consider
- ROI means return on investment
- Basic formula: net total returns ÷ cost of investment × 100
- Returns can include rental income and capital gain or loss
- A meaningful comparison should use a consistent time period and cost basis
How to use this guide
Use this page as a starting point for your research, then check the information against the specific development, destination and transaction you are considering. Property information and rules can change, and the right decision depends on individual circumstances.
Explore related E.R.E resources
Continue your research through the E.R.E Property Knowledge Base, compare property investment destinations, or review the latest property developments. Developers who want to discuss a project can contact E.R.E Property.
This page provides general information only. It is not legal, tax, mortgage or financial advice.
Questions about Investment Fundamentals
What Is ROI in Property Investment?
The supplied E.R.E guidance defines ROI as return on investment and gives the formula: (net total returns / cost of investment) × 100. Total returns include rental income plus capital gain or loss for the period.