Why is the true property return lower than the ROI this calculator shows?

This calculator does not include mortgage interest paid over the holding period, which for a $500,000 loan over 7 years at 6% is approximately $175,000. Subtracting total interest paid from total return gives the true net return on the investment. The calculator is designed to show the gross return on the property, not the net return after financing.

How does leverage affect property returns?

Leverage (borrowing to invest) amplifies both gains and losses. If you buy a $750,000 property with a $150,000 deposit and the property grows 10% to $825,000, your capital gain of $75,000 is a 50% return on your $150,000 equity -- not just 10%. This is why property returns on equity are often much higher than the headline property growth rate suggests. Leverage works in reverse too -- a 10% fall in property value wipes out 50% of your equity.

Should I compare property ROI to my superannuation returns?

You can, but be careful about the comparison. Property ROI from this calculator is a gross figure before financing costs, CGT and land tax. Superannuation returns are typically net of investment management fees but before personal tax. For a fair comparison, calculate property return after all costs including interest, and compare both after accounting for the tax treatment. A financial planner can help structure this comparison properly.

Property Investment ROI — Free Real Estate Calculator

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Investor has held a property for 7 years. Before deciding whether to sell or hold, they want to know what the actual annualised return has been -- combining rental income and capital growth.

Property Investment ROI

Investment

Purchase price ($)

Current / estimated value ($)

Weekly rent ($)

Annual costs ($)

Rates + insurance + maintenance + mgmt

Years held

Acquisition costs ($)

Stamp duty + legal + inspection

Total return includes capital growth + net rental income. This is the full picture.
Cash-on-cash return = annual after-cost rent ÷ cash invested (your deposit + costs). This measures the return on your actual cash outlay — useful when comparing leveraged vs unleveraged investments.

Reference: ATO — Rental Properties Guide

ℹ️ Results are estimates for planning purposes. Verify with current standards and a qualified professional.

1 What this calculator does

Calculates total return, total ROI and annualised ROI on an investment property held over a defined period. Combines capital gain and cumulative net rental income. Outputs cash-on-cash return on the equity invested.

2 Formula & professional reasoning

Capital gain = Current value - Purchase price
Net annual rental income = (Weekly rent x 52) - Annual costs
Total net rental (held period) = Net annual rental x Years held
Total return = Capital gain + Total net rental
Total ROI (%) = Total return / (Purchase price + Acquisition costs) x 100
Annualised ROI (%) = Total ROI / Years held

Total property return combines capital growth (the change in property value) with net rental income (the cash the property generates after expenses). The combined figure is the total wealth generated by the property. Annualised ROI divides this by the holding period to give a comparable annual return -- important for comparing property performance against shares, superannuation or other assets over the same period.

3 Worked examples

⚠️ Illustrative example only — not clinical or professional instruction.

Basic

7-year hold -- capital growth focused

Working:

Capital gain: $840K - $520K = $320,000 | Net annual rent: $350x52 - $12,000 = $6,200 | Total net rent (7yrs): $6,200 x 7 = $43,400 | Total return: $320,000 + $43,400 = $363,400 | Total invested: $520,000 + $25,000 = $545,000 | Total ROI: $363,400/$545,000 x 100 | Annualised: / 7

Answer: Total return: $363,400 | Total ROI: 66.7% | Annualised ROI: 9.5%

💡 9.5% annualised return compares favourably with the ASX All Ordinaries at approximately 9-10%/yr over the same period, but this calculation excludes CGT on sale and does not account for leverage effects.

Standard

High-yield regional property -- income focused

Working:

Capital gain: $80,000 | Net annual rent: $420x52-$9,000 = $12,840 | Total net rent: $64,200 | Total return: $144,200 | Total invested: $355,000 | Total ROI: 40.6% | Annualised: 8.1%

Answer: Total return: $144,200 | Annualised ROI: 8.1%

💡 Strong income component (almost half the total return from rent) compared to the capital growth focused example above. Different risk profile -- regional properties carry higher vacancy and liquidity risk.

Advanced

Underperforming property -- should I have sold earlier?

Working:

Capital gain: $40,000 | Net annual rent: $420x52-$18,000 = $3,840 | Total net rent: $30,720 | Total return: $70,720 | Total invested: $785,000 | Total ROI: 9.0% | Annualised: 1.1%

Answer: Annualised ROI: 1.1% -- well below inflation and market alternatives

💡 This property has underperformed significantly. At 1.1% annualised, the investor would have been better served by shares or superannuation. The analysis should trigger a hold vs sell review.

4 Sanity check

Long-run property return benchmarks (AU)

Total return (capital + income): 9-11%/yr long-run major capitals | Capital growth alone: 6-8%/yr | Net rental yield: 2.5-4.5%

Comparison benchmarks

ASX All Ordinaries (including dividends): approx 9-10%/yr | Super balanced funds: 7-9%/yr | 10-yr government bonds: 3-5%/yr

Property should be compared to alternatives on a risk-adjusted basis.

This calculation excludes

Mortgage interest paid (significant cost) | CGT on sale | Depreciation benefits | Land tax | Stamp duty (included in acquisition costs)

For a true after-cost return, deduct all interest paid over the holding period from total return.

Leverage effect

A 10% return on a $750,000 property bought with $150,000 deposit is a 50% return on equity -- positive leverage magnifies returns when property grows

Leverage also magnifies losses if property falls.

5 Common errors

Error	Cause	Consequence	Fix
Not including acquisition costs in the denominator	Using purchase price only	ROI overstated -- stamp duty, conveyancing and inspection costs are part of the true investment	Always include stamp duty, legal fees and other acquisition costs in the total invested amount.
Using gross rental income instead of net	Not subtracting annual expenses from rental income	Rental return component overstated -- total return appears higher than it is	Subtract all annual holding costs (rates, insurance, management, maintenance) from gross rental income before calculating net rental contribution to return.
Not accounting for mortgage interest paid	Omitting the financing cost	Return appears very strong but the interest paid over 7 years may be $200,000+ -- dramatically reducing true net return	For a complete return analysis, deduct total interest paid (from your loan statements) from the total return. This gives the true return on all capital employed including debt.
Treating an annualised ROI of 5% as a direct comparison to a managed fund returning 5%	Not adjusting for different risk profiles and leverage	Misleading comparison -- property return includes leverage (borrowed money) while managed fund return is typically unleveraged	To compare property and shares on a like-for-like basis, either compare both on an unleveraged basis or account for the interest cost of the leverage on the property side.

6 Reference & regulatory links

🇦🇺 Australia

🇺🇸 United States

7 Professional workflow

Common tools used alongside this one:

📈

Rental Yield Calculator

Rental Yield gives the income component -- feed net annual rental into ROI for the full picture

→

📊

Capital Gains Tax Calculator

If considering selling, Capital Gains Tax Calculator shows the after-tax net proceeds

→

📉

Negative Gearing Calculator

Negative Gearing shows the annual tax benefit -- add this to net rental income for a more complete after-tax return

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Input	Result
Long-run AU property return	9-11%/yr total (capital + income)
ASX comparison	~9-10%/yr including dividends
This calculation excludes	Mortgage interest, CGT, depreciation