ROI for property combines two components: rental yield (income) and capital appreciation (the change in property value over the holding period), measured against total capital invested — not just the headline purchase price, but transaction fees, service charges paid, and any financing costs.
Why It Matters
- —Off-plan ROI calculations should include the time value of staged payments — money paid in instalments over construction is not the same as paying the full price upfront.
- —Always include transaction costs (DLD fee, stamp duty, agency fees) in the denominator — leaving them out inflates apparent ROI.
- —Compare ROI across markets in a common currency and holding period before drawing conclusions — currency movement alone can swing nominal ROI by several percentage points.