Return on Investment (ROI)

Frequently asked questions

What is a good ROI for a rental property?

A total ROI of 8 to 12% per year (combining rental income and capital appreciation) is considered strong for residential investment property in most markets. In Dubai, properties in established areas like Downtown or Dubai Marina have delivered combined ROIs exceeding 10% in recent years. In US secondary markets, value-add strategies can target 15 to 20% asset ROI. The right benchmark depends on your investment strategy and risk appetite.

How do you calculate ROI on a rental property?

Asset ROI equals (Annual Net Profit divided by Purchase Price) × 100. For a property purchased at AED 1,200,000 generating AED 96,000 in annual net profit, the asset ROI is 8%. Cash-on-cash ROI uses cash invested instead of purchase price, which is more relevant if you used a mortgage. IONROI tracks both metrics and separates income-based ROI from unrealized capital gains so you get a complete view.

What is the difference between ROI and cap rate?

Cap rate is a property valuation metric based on NOI and current market value, used independently of how a property is financed. ROI is a personal return metric that depends on your specific purchase price, financing terms, and total cash invested. The same property can have a 6% cap rate but a 12% cash-on-cash ROI for a leveraged investor. Cap rate compares properties; ROI measures your personal investment performance.

Should ROI include unrealized capital gains?

This is a meaningful debate among investors. Including unrealized gains gives a fuller picture of total wealth creation but can be misleading since you cannot spend paper profits. IONROI separates income-based ROI (from rent and expenses) from unrealized gain (current market value minus purchase price) so you can report whichever is most relevant. For day-to-day financial planning, income ROI is more actionable.