ROE vs ROI – An Important Factor that Property Investors Often Overlook

ROE vs ROI Important factor that Property Investors overlook
If you're not comparing apples with apples, then you might be missing the point.

When it comes to property investments, one of the critical things you have to understand is the difference between ROI (Returns on Investment) and ROE (Returns on Equity).

That’s because property investments allow you to borrow money from the bank which increases your returns dramatically.

Often, when we hear about investors talking about Singapore properties’ rental returns such as 3% to 4% rental yield, what they are referring to is the ROI.

Return on Investments basically takes into account the value of the property rather than the cash you actually put in.

Returns on Equity vs Returns on Investment – Understand the Difference

Sam bought a $2m condominium which gives him a monthly rental of $6K.

The formula (Rental x 12 months / $2,000,000) shows us a rental return of 3.6% annually.