What is my return on investment on property?

Binita

Sunil's Answer... 

Well which return are you talking about Yield or Equity Growth?

Yes there are two return on property … Although some people insist on ignoring one…. guess which!!

Equity Growth refers to the increases in the value of a property – so if I bought a property for 100,000 and it goes up to 150,000 – the growth has been 50,000 – Does that mean your ROI is 50% - well if you paid all cash for the property... yes.

If you borrowed 50% of the value (so your investment was 50,000 and you borrowed 50,000 from a bank) then your ROI would be 100%! 

The other return is Yield which is the yearly income derived from the property and is represented as a percentage of the property value.  So if a property that is worth 100,000 brings in 10,000 a year in rent – the yield is 10%.   Your ROI would be 10% as well if you bought the property for cash.  Of course when  you borrow money to buy the property the ROI changes, and there are lots of other factors to consider as well (EMI or mortgage payments, repairs, tax) … but that is beyond the scope of this reply.