Calculating ROI in real estate is crucial for assessing the profitability of property investments. It involves subtracting expenses from net income and dividing the result by the total investment cost. This provides valuable insights into financial performance and helps in making informed decisions.
Formula: ROI= Net Profit / Total Investment) ×100
Factors to consider: Include rental income, property appreciation, taxes, and maintenance costs to ensure accurate ROI calculations.
For example, if you invest Rs 10 lakh in a property and generate a net income of Rs 1 lakh annually, your ROI would be 10%. Understanding and tracking ROI enables better financial planning and optimisation of real estate investments.