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How to Calculate Real Estate Return on Investment
- Thread starter Hetal
- Start date
Harshit Jain
New member
Evaluating the return on investment (ROI) for your real estate investments helps you understand their financial performance. Here's a simplified approach to calculate ROI for L&T Realty properties or any other real estate investment:
- Gather Data: Collect the purchase price (including closing costs) and the current market value of your property. Consider a recent appraisal or sales of similar properties in the area. If you're planning to sell, factor in selling costs like agent fees.
- Calculate Profit: Subtract the initial purchase price and any selling costs from the current market value. This represents the total profit generated from your investment.
- Divide by Investment: Divide the total profit by the original purchase price.
- Express as Percentage: Multiply the result by 100 to express your ROI as a percentage.
Example: Let's say you purchased a property for ₹1 crore and plan to sell it for ₹1.5 crore (after incurring ₹5 lakh in selling costs). ROI = ((₹1.5 crore - ₹5 lakh) - ₹1 crore) / ₹1 crore * 100 = 45%.