Glossary
ROI: Return on investment
The total return on the cash you put in, often including capital growth.
What it means
Return on investment compares everything a deal gives back with the cash you put in. Property investors often include capital growth and mortgage repayment alongside rental profit, which makes ROI figures hard to compare unless you know what has been counted. Always ask what is in the top line before you trust an ROI.
Worked example
Example£36,000 of your cash in a buy-to-let that makes £3,000 a year after costs and rises in value by £4,000.
- Rental profit only
- £3,000 ÷ £36,000 = 8.3%
- Including growth
- (£3,000 + £4,000) ÷ £36,000 = 19.4%
Same deal, two very different ROIs. Growth is a hope, rental profit is a fact.
Information, not advice. Example figures are fictional and for illustration only.