Return on Investment (ROI)
Returns & Analysis
The total return from an investment property expressed as a percentage of the money you actually invested.
Full Explanation
ROI combines rental income, tax benefits, and capital growth relative to your initial cash outlay (deposit, stamp duty, legal fees). Because property is leveraged, your ROI can be significantly higher than the property's standalone return. For example, a 5% increase in a property's value represents a 25% return on a 20% deposit. ROI gives a more complete picture than yield alone.
Example
You invested $120,000 in cash (deposit plus costs) and after one year earned $8,000 net rent and $30,000 in capital growth, giving an ROI of approximately 32%.
Frequently Asked Questions
How is ROI different from rental yield?
Rental yield only measures income relative to the property value. ROI includes capital growth and tax benefits relative to your actual cash invested. ROI provides a more complete picture of your total investment performance.
What is a good ROI for property investment?
A total ROI of 10 to 15% per year (combining yield, tax benefits, and capital growth) is considered strong for Australian residential property. However, returns vary significantly by location, property type, and market cycle.