How do I calculate the return on investment for a rental property?

Introduction

Calculating the return on investment (ROI) for a rental property is one of the most important steps for any landlord or real estate investor. Whether you own an apartment in London, a villa in Dubai, or a holiday home in Portugal, understanding the real profitability of your rental is essential. ROI helps you evaluate whether your property is generating stable income, covering expenses, and building long-term value.

Why ROI matters in real estate

The property market is dynamic, and simply collecting rent is not enough. To succeed as an investor, you need to measure performance. A well-calculated ROI shows:

• The percentage of your investment you earn back each year.
  
  
• Whether your rental strategy (short-term, mid-term, or long-term) is effective.
  
  
• How your property compares to other opportunities in the same city or country.
  
  
• If it’s time to refinance, sell, or expand your portfolio.
  

How to calculate rental ROI

The simplest formula is:

ROI = (Annual Net Income ÷ Total Investment) × 100

• Annual Net Income = rental income – expenses (taxes, maintenance, management fees).
  
  
• Total Investment = purchase price + closing costs + renovation.
  

For example:

If you buy a property in London for £500,000, spend £20,000 on setup, and generate £30,000 in net income per year, your ROI = 30,000 ÷ 520,000 × 100 = 5.7%.

Beyond simple ROI

Investors should also consider:

• Cash-on-Cash Return (how much actual cash flow you get compared to cash invested).
  
  
• Cap Rate (net operating income ÷ property value).
  
  
• Long-term appreciation in markets like Dubai, Lisbon, or Istanbul.
  

Tools for investors

Manual calculations can be time-consuming. That’s why many landlords use online calculators to project income and expenses quickly. Try the Imperia Broker Rental ROI Calculator to estimate profitability and compare international markets instantly.

Benefits of understanding ROI

• Make smarter buying decisions.
  
  
• Compare properties across different countries.
  
  
• Maximise returns by adjusting rental strategies.
  
  
• Reduce risk and avoid underperforming assets.
  

Why choose Imperia Broker?

At Imperia Broker, we specialise in guiding investors through the entire process — from purchase to management. With global expertise in London, Dubai, Turkey, Portugal, Cyprus, and Thailand, we help you identify opportunities with strong ROI and lasting value.

Ready to calculate your property’s ROI? Start with our free calculator and discover how much your investment can grow.