Property ROI Formula

Real Estate Formula • Published on July 30, 2026 • Last updated August 09, 2026

Mathematical Equation

$$\begin{aligned} \text{Total Profit} &= (\text{Current Value} - \text{Purchase Price}) + (\text{Net Annual Rent} \times \text{Years Held}) \\ \text{Annualized ROI} &= \left[\left(1 + \frac{\text{Total Profit}}{\text{Total Investment}}\right)^{1/\text{Years}} - 1\right] \times 100 \end{aligned}$$

Variable Definitions

Total Investment

Down payment + renovation + registration + stamp duty + brokerage (cash actually paid, excluding any financed loan amount)

Net Annual Rent

Annual rent minus annual maintenance and property tax

Current Value

Present-day market value of the property

Years Held

Number of years the property has been/will be held

Detailed Explanation

In-Depth Guide

Property ROI combines two sources of return — capital appreciation (the rise in property value) and rental income (cash flow after expenses) — and expresses the combined profit as a percentage of the actual cash invested. The annualized version converts multi-year total returns into a CAGR-equivalent figure so property returns can be fairly compared against other investments like stocks or mutual funds.

How to Calculate: Step-by-Step

1. Add up Total Investment: down payment + renovation + registration + stamp duty + brokerage. 2. Calculate Net Annual Rent = Annual Rent − Annual Maintenance − Annual Property Tax. 3. Calculate Capital Appreciation = Current Value − Purchase Price. 4. Calculate Total Profit = Capital Appreciation + (Net Annual Rent × Years Held). 5. Calculate Absolute ROI% = (Total Profit / Total Investment) × 100. 6. Calculate Annualized ROI% using the CAGR-style formula to normalize for holding period.

Worked Calculation Example

Purchase Price = ₹50,00,000, Down Payment = ₹15,00,000, Other upfront costs = ₹2,00,000, Current Value = ₹65,00,000, Net Annual Rent = ₹1,80,000, Years Held = 5: - Total Investment = 15,00,000 + 2,00,000 = ₹17,00,000 - Capital Appreciation = 65,00,000 − 50,00,000 = ₹15,00,000 - Total Profit = 15,00,000 + (1,80,000 × 5) = ₹24,00,000 - Absolute ROI = (24,00,000 / 17,00,000) × 100 ≈ 141% - Annualized ROI = [(1 + 24,00,000/17,00,000)^(1/5) − 1] × 100 ≈ 19.2%

Common Use Cases

  • Evaluating whether a rental property investment is outperforming other asset classes
  • Comparing ROI across multiple property options before purchase
  • Tracking actual investment performance over a multi-year holding period

Frequently Asked Questions

This ROI formula measures cash-on-cash return — how hard your actual out-of-pocket money worked — not the full property value, since the loan portion is repaid separately through EMIs, not from your invested capital.

Generally, 8-12% annualized ROI is considered good for Indian residential real estate; above 15% is excellent, while below 5% suggests the investment is underperforming relative to alternatives like index funds.

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