{"id":1468,"date":"2025-07-01T19:12:24","date_gmt":"2025-07-01T19:12:24","guid":{"rendered":"https:\/\/propertyfinder.bg\/return-on-investment-roi-the-overall-performance-of-your-property-investment\/"},"modified":"2025-07-28T07:10:31","modified_gmt":"2025-07-28T07:10:31","slug":"return-on-investment-roi-the-overall-performance-of-your-property-investment","status":"publish","type":"post","link":"https:\/\/propertyfinder.bg\/en\/return-on-investment-roi-the-overall-performance-of-your-property-investment\/","title":{"rendered":"Return on Investment (ROI): the overall performance of your property investment"},"content":{"rendered":"\n<div class=\"wp-block-rank-math-toc-block\" id=\"rank-math-toc\"><h2>Contents<\/h2><nav><ul><li class=\"\"><a href=\"#%D0%BA%D0%B0%D0%BA%D0%B2%D0%BE-%D0%B5-%D0%B2%D1%8A%D0%B7%D0%B2%D1%80%D1%8A%D1%89%D0%B0%D0%B5%D0%BC%D0%BE%D1%81%D1%82-%D0%BD%D0%B0-%D0%B8%D0%BD%D0%B2%D0%B5%D1%81%D1%82%D0%B8%D1%86%D0%B8%D1%8F%D1%82%D0%B0-roi\">What is return on investment (ROI)?<\/a><\/li><li class=\"\"><a href=\"#%D0%BE%D1%81%D0%BD%D0%BE%D0%B2%D0%BD%D0%B8-%D0%BA%D0%BE%D0%BC%D0%BF%D0%BE%D0%BD%D0%B5%D0%BD%D1%82%D0%B8-%D0%BD%D0%B0-roi\">Main components of ROI<\/a><ul><li class=\"\"><a href=\"#1-%D0%BD%D0%B5%D1%82%D0%BD%D0%B0-%D0%BF%D0%B5%D1%87%D0%B0%D0%BB%D0%B1%D0%B0-%D0%BE%D1%82-%D0%B8%D0%BD%D0%B2%D0%B5%D1%81%D1%82%D0%B8%D1%86%D0%B8%D1%8F%D1%82%D0%B0\">1. Net profit on investment<\/a><\/li><li class=\"\"><a href=\"#2-%D1%86%D0%B5%D0%BD%D0%B0-%D0%BD%D0%B0-%D0%B8%D0%BD%D0%B2%D0%B5%D1%81%D1%82%D0%B8%D1%86%D0%B8%D1%8F%D1%82%D0%B0\">2. Price of the investment<\/a><\/li><\/ul><\/li><li class=\"\"><a href=\"#roi-%D0%BF%D1%80%D0%B8-%D1%80%D0%B0%D0%B7%D0%BB%D0%B8%D1%87%D0%BD%D0%B8-%D0%B2%D0%B8%D0%B4%D0%BE%D0%B2%D0%B5-%D0%BF%D0%BE%D0%BA%D1%83%D0%BF%D0%BA%D0%B8\">ROI for different types of purchases<\/a><ul><li class=\"\"><a href=\"#%D0%BF%D0%BE%D0%BA%D1%83%D0%BF%D0%BA%D0%B0-%D1%81%D1%8A%D1%81-%D1%81%D0%BE%D0%B1%D1%81%D1%82%D0%B2%D0%B5%D0%BD%D0%B8-%D1%81%D1%80%D0%B5%D0%B4%D1%81%D1%82%D0%B2%D0%B0-%D0%B2-%D0%B1%D1%80%D0%BE%D0%B9\">1. Purchase with own funds (cash)<\/a><\/li><li class=\"\"><a href=\"#%D1%84%D0%B8%D0%BD%D0%B0%D0%BD%D1%81%D0%B8%D1%80%D0%B0%D0%BD%D0%B0-%D0%BF%D0%BE%D0%BA%D1%83%D0%BF%D0%BA%D0%B0-%D1%81-%D0%B8%D0%BF%D0%BE%D1%82%D0%B5%D1%87%D0%B5%D0%BD-%D0%BA%D1%80%D0%B5%D0%B4%D0%B8%D1%82\">2. Financed purchase (with mortgage loan)<\/a><\/li><\/ul><\/li><li class=\"\"><a href=\"#%D0%BF%D1%80%D0%B8%D0%BC%D0%B5%D1%80-%D0%B7%D0%B0-%D0%B8%D0%B7%D1%87%D0%B8%D1%81%D0%BB%D0%B5%D0%BD%D0%B8%D0%B5-%D0%BD%D0%B0-roi\">Example of ROI calculation for a purchase with a mortgage loan<\/a><\/li><li class=\"\"><a href=\"#%D0%BA%D0%B0%D0%BA-%D1%81%D0%B5-%D0%BF%D1%80%D0%BE%D0%BC%D0%B5%D0%BD%D1%8F-roi-%D0%BF%D1%80%D0%B8-%D0%BF%D1%80%D0%BE%D0%B4%D0%B0%D0%B6%D0%B1%D0%B0-%D0%BD%D0%B0-%D0%B8%D0%BC%D0%BE%D1%82%D0%B0\">How ROI changes when selling the property<\/a><\/li><li class=\"\"><a href=\"#%D0%BA%D0%B0%D0%BA%D0%B2%D0%BE-%D1%82%D1%80%D1%8F%D0%B1%D0%B2%D0%B0-%D0%B4%D0%B0-%D0%B7%D0%BD%D0%B0%D0%B5%D1%82%D0%B5-%D0%B7%D0%B0-roi\">What you need to know about ROI<\/a><\/li><li class=\"\"><a href=\"#%D0%BE%D0%B3%D1%80%D0%B0%D0%BD%D0%B8%D1%87%D0%B5%D0%BD%D0%B8%D1%8F-%D0%BD%D0%B0-%D0%BF%D0%BE%D0%BA%D0%B0%D0%B7%D0%B0%D1%82%D0%B5%D0%BB%D1%8F-roi\">Limitations of the ROI indicator<\/a><ul><li class=\"\"><a href=\"#1-%D0%BD%D0%B5-%D0%BE%D1%82%D1%87%D0%B8%D1%82%D0%B0-%D0%B2%D1%80%D0%B5%D0%BC%D0%B5%D0%B2%D0%B8%D1%8F-%D1%84%D0%B0%D0%BA%D1%82%D0%BE%D1%80\">1. Does not consider the time factor<\/a><\/li><li class=\"\"><a href=\"#2-%D0%BA%D0%B0%D0%BF%D0%B8%D1%82%D0%B0%D0%BB%D0%BE%D0%B2%D0%B0%D1%82%D0%B0-%D0%BF%D0%B5%D1%87%D0%B0%D0%BB%D0%B1%D0%B0-%D0%B5-%D1%83%D1%81%D0%BB%D0%BE%D0%B2%D0%BD%D0%B0\">2. Capital gain is notional<\/a><\/li><li class=\"\"><a href=\"#3-roi-%D0%B5-%D0%B4%D0%B8%D0%BD%D0%B0%D0%BC%D0%B8%D1%87%D0%B5%D0%BD\">3. ROI is dynamic<\/a><\/li><\/ul><\/li><li class=\"\"><a href=\"#%D0%B7%D0%B0%D0%BA%D0%BB%D1%8E%D1%87%D0%B5%D0%BD%D0%B8%D0%B5\">Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n\n\n\n<p>Having already looked at gross and <a href=\"\/en\/?p=1467\" data-type=\"post\" data-id=\"529\">net rental yields<\/a>, it&#8217;s time to turn our attention to a more holistic and important indicator of the profitability of your real estate investment &#8211; the return on investment ( <strong>ROI<\/strong>).<\/p>\n\n\n\n<p>In this article you will learn what ROI is, how it is calculated and why it is so important in property investment.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"\u043a\u0430\u043a\u0432\u043e-\u0435-\u0432\u044a\u0437\u0432\u0440\u044a\u0449\u0430\u0435\u043c\u043e\u0441\u0442-\u043d\u0430-\u0438\u043d\u0432\u0435\u0441\u0442\u0438\u0446\u0438\u044f\u0442\u0430-roi\">What is return on investment (ROI)?<\/h2>\n\n\n\n<p><strong>ROI (Return on Investment)<\/strong> is a financial indicator that measures the effectiveness of an investment. It makes it easy to understand what percentage of profit or loss you have generated in relation to your investment. <\/p>\n\n\n\n<p><strong>The formula is:<\/strong><\/p>\n\n\n\n<p><code>ROI (%) = (Net Profit from Investment \/ Cost of Investment) \u00d7 100<\/code><\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"\u043e\u0441\u043d\u043e\u0432\u043d\u0438-\u043a\u043e\u043c\u043f\u043e\u043d\u0435\u043d\u0442\u0438-\u043d\u0430-roi\">Main components of ROI<\/h2>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"1-\u043d\u0435\u0442\u043d\u0430-\u043f\u0435\u0447\u0430\u043b\u0431\u0430-\u043e\u0442-\u0438\u043d\u0432\u0435\u0441\u0442\u0438\u0446\u0438\u044f\u0442\u0430\">1. Net profit on investment<\/h3>\n\n\n\n<p>May include:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Annual net rental income (NOI), after operating expenses;<\/li>\n\n\n\n<li>Cash flow after debt service (for a mortgage loan);<\/li>\n\n\n\n<li>Capital gain or loss on the eventual sale of the property.<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"2-\u0446\u0435\u043d\u0430-\u043d\u0430-\u0438\u043d\u0432\u0435\u0441\u0442\u0438\u0446\u0438\u044f\u0442\u0430\">2. Price of the investment<\/h3>\n\n\n\n<p>Covers all actual inputs:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Purchase price of the property;<\/li>\n\n\n\n<li>Acquisition costs (taxes, notary fees, commissions);<\/li>\n\n\n\n<li>Improvements and repairs made.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"roi-\u043f\u0440\u0438-\u0440\u0430\u0437\u043b\u0438\u0447\u043d\u0438-\u0432\u0438\u0434\u043e\u0432\u0435-\u043f\u043e\u043a\u0443\u043f\u043a\u0438\">ROI for different types of purchases<\/h2>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"\u043f\u043e\u043a\u0443\u043f\u043a\u0430-\u0441\u044a\u0441-\u0441\u043e\u0431\u0441\u0442\u0432\u0435\u043d\u0438-\u0441\u0440\u0435\u0434\u0441\u0442\u0432\u0430-\u0432-\u0431\u0440\u043e\u0439\">1. Purchase with own funds (cash)<\/h3>\n\n\n\n<p>When buying a property entirely with your own funds, the calculation is simple:<\/p>\n\n\n\n<p><code>ROI (%) = (Annual Net Rental Income \/ Total Acquisition Cost) \u00d7 100<\/code><\/p>\n\n\n\n<p>In this case, the ROI often matches or is close to the <strong>net rental yield (NRY)<\/strong> metric.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"\u0444\u0438\u043d\u0430\u043d\u0441\u0438\u0440\u0430\u043d\u0430-\u043f\u043e\u043a\u0443\u043f\u043a\u0430-\u0441-\u0438\u043f\u043e\u0442\u0435\u0447\u0435\u043d-\u043a\u0440\u0435\u0434\u0438\u0442\">2. Financed purchase (with mortgage loan)<\/h3>\n\n\n\n<p>When using a loan, ROI is calculated against the <strong>equity<\/strong> invested, not the entire value of the property.<\/p>\n\n\n\n<p>The formula is:<\/p>\n\n\n\n<p><code><strong>ROI (%) = (Annual Cash Flow After Debt Service \/ Total Equity Invested) \u00d7 100<\/strong><\/code><\/p>\n\n\n\n<p><strong>Important:<\/strong> This indicator is very similar to the so-called <strong>Cash-on-Cash Return<\/strong>, which we will also discuss in a separate article.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"\u043f\u0440\u0438\u043c\u0435\u0440-\u0437\u0430-\u0438\u0437\u0447\u0438\u0441\u043b\u0435\u043d\u0438\u0435-\u043d\u0430-roi\">Example of ROI calculation for a purchase with a mortgage loan<\/h2>\n\n\n\n<p>In this example, we consider a situation where the property was purchased with partial mortgage financing.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Property acquisition price:<\/strong> \u20ac100,000<\/li>\n\n\n\n<li><strong>Down payment (20%):<\/strong> \u20ac20,000<\/li>\n\n\n\n<li><strong>Acquisition costs:<\/strong> \u20ac10,000<\/li>\n\n\n\n<li><strong>Total equity invested:<\/strong> \u20ac30,000<\/li>\n\n\n\n<li><strong>Annual rental income:<\/strong> \u20ac12,000<\/li>\n\n\n\n<li><strong>Annual operating costs (excluding mortgage):<\/strong> \u20ac3,600<\/li>\n\n\n\n<li><strong>NOI (Net Operating Income):<\/strong> \u20ac12,000 &#8211; \u20ac3,600 = \u20ac8,400<\/li>\n\n\n\n<li><strong>Annual mortgage payments:<\/strong> \u20ac5,153.52<\/li>\n\n\n\n<li><strong>Annual cash flow after debt service:<\/strong> \u20ac8,400 &#8211; \u20ac5,153.52 = \u20ac3,246.48<\/li>\n<\/ul>\n\n\n\n<p><strong>ROI calculation:<\/strong><\/p>\n\n\n\n<p><code>ROI (%) = (\u20ac3,246.48 \/ \u20ac30,000) \u00d7 100 = 10.82%<\/code><\/p>\n\n\n\n<p><\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"\u043a\u0430\u043a-\u0441\u0435-\u043f\u0440\u043e\u043c\u0435\u043d\u044f-roi-\u043f\u0440\u0438-\u043f\u0440\u043e\u0434\u0430\u0436\u0431\u0430-\u043d\u0430-\u0438\u043c\u043e\u0442\u0430\">How ROI changes when selling the property<\/h2>\n\n\n\n<p>When selling the property, the ROI is calculated as follows:<\/p>\n\n\n\n<p><code>ROI (%) = [(Sale Price - Selling Costs - Original Investment Cost) \/ Original Investment Cost] \u00d7 100<\/code><\/p>\n\n\n\n<p>This formula includes capital gain and gives a complete picture of the return on investment.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"\u043a\u0430\u043a\u0432\u043e-\u0442\u0440\u044f\u0431\u0432\u0430-\u0434\u0430-\u0437\u043d\u0430\u0435\u0442\u0435-\u0437\u0430-roi\">What you need to know about ROI<\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The use of a loan can significantly increase ROI if the return on the property exceeds the cost of financing.<\/li>\n\n\n\n<li>The ROI on a financed purchase is often higher compared to an all equity purchase.<\/li>\n\n\n\n<li>Higher ROI comes with greater risk &#8211; loan obligations must be serviced regardless of rental income.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"\u043e\u0433\u0440\u0430\u043d\u0438\u0447\u0435\u043d\u0438\u044f-\u043d\u0430-\u043f\u043e\u043a\u0430\u0437\u0430\u0442\u0435\u043b\u044f-roi\">Limitations of the ROI indicator<\/h2>\n\n\n\n<p>It is important to keep in mind that ROI is not universal and has its limitations:<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"1-\u043d\u0435-\u043e\u0442\u0447\u0438\u0442\u0430-\u0432\u0440\u0435\u043c\u0435\u0432\u0438\u044f-\u0444\u0430\u043a\u0442\u043e\u0440\">1. Does not consider the time factor<\/h3>\n\n\n\n<p>ROI shows the total return, but does not say how long it has been achieved. Therefore, when comparing different investments, it is advisable to use indicators such as: <\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>IRR<\/strong> &#8211; Internal Rate of Return;<\/li>\n\n\n\n<li><strong>NPV<\/strong> &#8211; Net Present Value.<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"2-\u043a\u0430\u043f\u0438\u0442\u0430\u043b\u043e\u0432\u0430\u0442\u0430-\u043f\u0435\u0447\u0430\u043b\u0431\u0430-\u0435-\u0443\u0441\u043b\u043e\u0432\u043d\u0430\">2. Capital gain is notional<\/h3>\n\n\n\n<p>The capital gain is accounted for only when the property is actually sold. Until then, ROI primarily reflects current rental income. <\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"3-roi-\u0435-\u0434\u0438\u043d\u0430\u043c\u0438\u0447\u0435\u043d\">3. ROI is dynamic<\/h3>\n\n\n\n<p>Over time ROI may change depending on:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The market value of the property;<\/li>\n\n\n\n<li>Rent levels;<\/li>\n\n\n\n<li>Operating costs;<\/li>\n\n\n\n<li>Credit terms.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"\u0437\u0430\u043a\u043b\u044e\u0447\u0435\u043d\u0438\u0435\">Conclusion<\/h2>\n\n\n\n<p>ROI is a simple and useful metric that gives a quick idea of the profitability of a real estate investment. However, it should be considered as part of a more comprehensive analysis, especially if the investment is long-term or financed with a loan. <\/p>\n\n\n\n<p>In the next article, we will take a detailed look at one of the key metrics for funded deals &#8211; <strong><a href=\"https:\/\/propertyfinder.bg\/en\/cash-on-cash-return-the-power-of-your-pocket-when-investing-in-property\/\" data-type=\"post\" data-id=\"538\">Cash-on-Cash Return<\/a><\/strong> which shows the return on invested equity.<\/p>\n\n\n\n<p><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Having already looked at gross and net rental yields, it&#8217;s time to turn our attention to a more holistic and important indicator of the profitability of your real estate investment &#8211; the return on investment ( ROI). In this article you will learn what ROI is, how it is calculated and why it is so<\/p>\n","protected":false},"author":1,"featured_media":1321,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"yes","_lmt_disable":"","footnotes":""},"categories":[319],"tags":[343,337,342,344,336],"class_list":["post-1468","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-real-estate-investing-basics","tag-how-roi-is-calculated","tag-return-on-investment","tag-roi-in-property","tag-roi-real-estate","tag-yield-on-property"],"modified_by":"Tsa Zan","_links":{"self":[{"href":"https:\/\/propertyfinder.bg\/en\/wp-json\/wp\/v2\/posts\/1468","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/propertyfinder.bg\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/propertyfinder.bg\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/propertyfinder.bg\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/propertyfinder.bg\/en\/wp-json\/wp\/v2\/comments?post=1468"}],"version-history":[{"count":0,"href":"https:\/\/propertyfinder.bg\/en\/wp-json\/wp\/v2\/posts\/1468\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/propertyfinder.bg\/en\/wp-json\/wp\/v2\/media\/1321"}],"wp:attachment":[{"href":"https:\/\/propertyfinder.bg\/en\/wp-json\/wp\/v2\/media?parent=1468"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/propertyfinder.bg\/en\/wp-json\/wp\/v2\/categories?post=1468"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/propertyfinder.bg\/en\/wp-json\/wp\/v2\/tags?post=1468"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}