Real Estate ROI Calculator

Return on investment (ROI) for property measures how much profit you make relative to your costs. It is the fundamental metric for comparing buy-to-let properties and deciding whether a rental investment makes financial sense.

Basic ROI formula: ROI = (Annual profit / Total investment) × 100%

Gross rental yield (simpler, used for quick comparisons): Gross yield = (Annual rent / Property value) × 100%

Net rental yield (more realistic): Net yield = ((Annual rent − Annual costs) / Total investment) × 100%

What to include in costs:

• Letting agent fees (8–12% of rent if managed)
• Annual maintenance allowance (1% of property value is a standard estimate)
• Insurance (buildings + landlord liability)
• Mortgage interest (if leveraged)
• Council tax if property is empty between tenancies
• Void periods (budget for 1–2 months/year without a tenant)
• Annual gas safety certificate, electrical inspection

Worked example: Property value: £200,000 Annual rent: £12,000 (£1,000/month) Annual costs: £3,200 (agent 10%, maintenance, insurance) Cash invested (20% deposit + fees): £45,000

Gross yield = £12,000 / £200,000 = 6% Net yield = (£12,000 − £3,200) / £45,000 = 19.6% (leveraged return)

Capital appreciation: Property that rises 3% per year on £200,000 = £6,000 capital gain. Total return = £8,800 net income + £6,000 capital gain = £14,800 on £45,000 invested = 32.9% total return.

Good yields by UK region (2024):

• North of England / Scotland: 6–9% gross
• Midlands: 5–7%
• London: 3–4% gross (capital growth compensates)