How to Calculate Expected Returns


When looking at investing in property, expected returns on the investment is something that any investor would want to know. It can be difficult, however, to know how to calculate returns before choosing to invest. In this video, Johnsy covers how to calculate your investment returns and what can affect this result.

The most accurate way of measuring this is through your return on investment, or ROI. So, how you do calculate your ROI?

'Annual NET return' divided by 'total capital you've put in to purchase the property'.


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If you have any questions, please email askjohnsy@residential-estates.co.uk.

Read the video transcript below:

Hi and welcome to the latest Ask Johnsy where we look at what returns I can expect by investing in property.

Well, that would all really depend on how much your spending, what your budget is, how you’re buying the property, you’re buying it with cash or buying it with a mortgage, and what type of transaction it is, what type of property you are buying. The best way of measuring this is, and the most accurate way of measuring it really is what’s called ROI, which is return on investment, which more accurately should be really return on cash invested which is obviously how much money you put in. You know, your investment is a much larger thing, but cash invested, how much money do you have to take out of your bank account to actually buy that property in total.

So, how do I calculate my ROI. That would be your total annual NET return, so how much your rent is and your total return, divided by the total capital that you put in to actually purchase the property. An ROI of over 10% is considered good, but really you can earn well over this, particularly if you get creative with your rents such as using serviced accommodation, short term lets, corporate lets or HMOs is another example. The only problem with the ROI really is that it doesn’t have a time frame, it’s only based on your year, so the first year really will give you an idea of what your ROI is. So, there’s no real time frame there.

Whenever you’re looking at what returns you can get, it’s really important to be realistic in what you can achieve. Do your own projections, do your own due diligence, and draw your projections from that. Your returns should be your capital appreciation, so what you’ve gained on the value of your property, and your rental returns, so you should really consider both of these things. In a really good location, well you can expect NET yields of, standard NET yields of 4% - 6% and so on a property of £100,000, getting a NET return of £4,000 - £6,000 would be a fairly decent return at the moment. Again, you can make more by getting creative.

Growth really, you should look to exceed the national average which is around 2% - 3%. Just to give you some realistic, real-time examples of these, in London at the moment you’d be looking at in prime areas of rental yields of less than 1% whereas in Manchester, if we’re looking at growth, Manchester has received double-digit growth over the last 5 years. So, we’re talking about 10% per year over 5 years, so 50% growth over the last 5 years. So, there’s some extreme examples. And thank for you listening to the latest Ask Johnsy.

Thank you for watching Ask Johnsy. Feel free to ask any questions in the comments box below, or email us at askjohnsy@residential-estates.co.uk. If you find this video useful, click on the like and subscribe buttons below. You will also find our contact details below. See you on the next Ask Johnsy.

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