What does return on investment (ROI) mean?
Return on investment or “ROI” is an indicator to measure the ratio between profits
and investment costs.
also, it is considered a basic tool used by investors in Turkey and the Gulf to know the
rate of efficiency and success of the investment, the higher the rate of return on
investment, the higher profits.
How is ROI calculated?
You can calculate the return on investment (ROI) through a very simple Calculation, by
dividing the net profit “Total Revenue” by the total cost of the investment “Total Cost”
and then multiplying it by (100) to get the percentage “ROI”.
To clarify this more, for example, let us assume that you work in the field of real estate
investment in Istanbul. And you want to buy an apartment in Turkey. First, you will
definitely search for apartments for sale with the help of a real estate company in
Istanbul with extensive experience to see if it is suitable for your budget.
But more important is knowing the percentage of profits that you will get from this investment,
which is what we just talked about, the percentage of return on investment,
in this case, you will find, for example, that the price of apartments in Istanbul that are
ready for housing is 100,000$ and you can rent them annually 12,000$, so to calculate
the return on investment we divide 12,000$ divided by 100,000$, and we multiply the
result of the division by 100 according to the following calculation:
ROI = (12,000 / 100,000) * 100 = 12%
So the arithmetic result of investing in an apartment in Istanbul is: 12%
It is an excellent percentage in the field of real estate investment in Turkey, and it encourages the establishment of real estate portfolios as well, as the percentage is
generally an average of 5%, so you must have now clearly understood how the return
on investment is calculated.
By the way, what is the return on real estate investment?
Since we are talking about real estate investment, let us tell you about the return
on real estate investment, it is the same idea, of course, the terms net profit and
total investment costs still accompany us, but they can be detailed as follows:
investment cost:
In real estate investment, the “investment cost” is all the costs that have been paid to
make the real estate ready for sale or lease, so it includes maintenance, repair, and
financing.
Net profit:
It is the profits obtained after starting the investment process, such as profits from
renting ready-to-move-in apartments, selling real estate under construction after it
been ready, or selling tourist villas, commercial real estate, etc. All of which are found
in the investment portfolios of your real estate.
Why is the return on investment calculated?
So far, we have understood the meaning of return on investment (ROI), and how it is
calculated, but why do investors resort to it, and what is the benefit of it?
The benefits of return on investment
First – Determining Decisions:
By studying the return on investment, clear data is provided to allow you to decide
on matters such as Are the prices of rural houses in Turkey appropriate?, will it provide
me as a real estate investor with good profits? The data tells you that the answer is
“yes”, then you continue to develop it and buy more real estate in Turkey.
Conclusion: You will be able to determine which investment projects are more
suitable, therefore your business will be stable, and you have enough information to
know exactly whether your profits are increasing or declining.
Second – Comparison between different projects:
let’s complete the previous example, after you found the prices of rural houses in
Turkey suitable and profitable, suppose that you also got irreplaceable opportunities
to buy apartments in Istanbul, then in addition you had more opportunities to buy
tourist villas overlooking the Sea of Marmara, and you know that these villas generate
ample profit in The holiday season, but you do not know which of these investment
projects offers you the greatest income. Here comes the role of return on investment
“ROI” which gives you clear, detailed percentages for each type of real estate that we
have mentioned.
Third – Monitoring the financial performance of your investment business:
In fact, the ROI rate contributes to investing your money wisely, monitoring the cash
flow, and that it is progressing with a good rise. While the rate of return on investment
advances within the time frame, it is ensured that it matches the previously planned
value and that investment errors are detected and corrected.
In all the examples, we talked about real estate investment in Istanbul, the reason
is that we are experts in this field, but of course, you can apply the above to any
project in business.
so, if you decide to start real estate investment and create your real estate portfolio,
to become among the distinguished investors in Turkey, then “Hana Realestate”
company is present To help you, all you have to do is contact us!
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