How to Calculate Your ROI Before Buying a Property

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How to Calculate Your ROI Before Buying a Property • Many investors buy property without knowing if it will actually make them money. They assume prices will go up or that rent will cover expenses. But real estate is a business, and like any business, you need to calculate your return on investment (ROI) before you buy. In this video, I’ll show you exactly how to do it! • The 3 Types of Real Estate ROI • 1. Rental Yield (For Monthly Income) • “Rental yield tells you how much income you earn compared to your investment. A good yield is usually 4%–6% per year.” • Formula: (Annual Rental Income ÷ Property Price) × 100 • Example: • Property price: ₹1 Cr • Monthly rent: ₹40,000 • Annual rent: ₹4,80,000 • Rental yield = (4,80,000 ÷ 1,00,00,000) × 100 = 4.8% • 2. Capital Appreciation (For Long-Term Growth) • “This measures how much your property value increases over time. High-growth areas see 8%-12% appreciation annually.” • Formula: (New Property Value – Purchase Price) ÷ Purchase Price × 100 • Example: • Bought for: ₹50 Lakhs • After 5 years: ₹75 Lakhs • Capital appreciation = (75L – 50L) ÷ 50L × 100 = 50% growth • 3. Total ROI (Best for Overall Profitability) • “To calculate your total returns, combine both rental yield and capital appreciation.” • Formula: (Rental Income + Appreciation Profit) ÷ Investment × 100 • Example: • Rental income over 5 years: ₹24L • Property appreciation: ₹25L • Total ROI = (24L + 25L) ÷ 50L × 100 = 98% ROI in 5 years! • Hidden Costs That Affect ROI • “Many investors miscalculate ROI because they forget hidden costs. Here’s what you must include:” • ✔ Registration Stamp Duty – Can add 6%-10% to your cost. • ✔ Loan Interest – If you take a loan, include EMI interest in expenses. • ✔ Maintenance Costs – Annual maintenance, society fees, and repairs reduce profit. • ✔ Vacancy Periods – Factor in months where the property might not be rented out. • ✔ Tax on Rental Income – Rental earnings are taxable; plan accordingly. • “Ignoring these costs can make a ‘profitable’ property turn into a loss-making one!” • Pro Tips to Maximize ROI • ✔ Tip 1: Invest in locations with high rental demand and growing job markets. • ✔ Tip 2: Choose properties where appreciation is backed by infrastructure projects. • ✔ Tip 3: Negotiate your purchase price to maximize future gains. • ✔ Tip 4: Opt for under-construction projects at lower rates for higher appreciation. • ✔ Tip 5: If taking a loan, ensure EMI is covered by rent for stress-free cash flow. • “Real estate is one of the best wealth-building tools—but only if you invest smartly. Always calculate your ROI before buying!” • Want help analyzing your next real estate investment? At RoyalNest Realty, we guide investors to profitable properties with data-driven insights. DM us today! • #RealEstateROI #SmartInvesting #ProfitableInvestments #PassiveIncome #RentalYield #CapitalAppreciation #WealthBuilding #InvestmentTips #FinancialFreedom #RealEstateSuccess #PropertyInvestment #ROI #MoneyMatters #RealEstateGrowth

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