How to Calculate a Simple Property Investment Return
A simple return model can help investors compare properties more rationally. Learn which numbers to include and which assumptions to test.
Start With Total Acquisition Cost
Use the actual purchase cost plus transaction expenses and immediate setup or renovation costs.
Estimate Annual Net Income
Start with expected rent, then subtract vacancy, maintenance, taxes, management and other recurring expenses.
Consider Financing
Include interest and principal obligations when assessing your personal cash flow and investment return.
Model Appreciation Carefully
Create multiple scenarios rather than assuming a fixed annual price increase. Property values are uncertain.
Compare Alternatives
A property should be evaluated against other investment opportunities after considering risk, liquidity and time horizon.
