The Right Way To Measure The Performance Of A Real Estate Investment

Choosing a property investment entails more than just the purchase price and possible rentals. Investors have created a library of ratios and computations to help them invest intelligently and profitably. Savvy investors study these real estate investing measures from the inside out so that they can evaluate a possible investment and manage their existing properties in minutes.

Share on facebook
Share on twitter
Share on linkedin
Measuring the performance of real estate investment

Accurate and trustworthy real estate values are tough to come by. As a result, determining whether a real estate investment has proven to be lucrative is not an easy task. An investor needs to maintain track of a variety of indexes to comprehend the current state of their asset and make successful judgments. This article gives an overview of real estate performance measurement. Property valuation is more difficult than other types of asset appraisal because it lacks specific published values. Property prices are volatile, and it requires considerable work to determine both the rent and investment values of a property. When a certain property is valued, the actual assessment of that property may be acknowledged. Since all assets are unique (i.e. not homogeneous), there cannot be a market standard price that applies to all investment units. As a result, property investors must use a range of metrics to determine whether the value of their property is performing successfully!

Also Read: Net Operating Income (NIO): A Performance Metric in Real Estate

Why is Performance Evaluation Difficult?

It is simple to value liquid investment in shares and bonds. This is because they have a certain quoted price. This cost is quoted every few seconds on an exchange, and anybody can deal with the published pricing. However, that’s not the case when it comes to real estate! Property prices are obfuscated, and uncovering both the rent and investment values of property investment requires substantial work and time. Only when a property is the topic of a transaction does its actual worth become apparent.

Because all properties are different (i.e. not homogeneous), there could be a market standard price that applies to everyone’s investment units. As a result, real estate investors must use a range of metrics to determine whether the worth of their property is performing successfully! Here are some of the most prevalent methods used by investors to determine the strengths and weaknesses of their investments.


Real estate indices give a fairly dependable approach to gauging an investor’s progress. Real estate indexes take a particular year’s property values and multiply them by 100. The index value is then dynamically modified when prices rise and fall. These indices indicate the housing rates of various neighborhoods, and the index consistently covers the changes in all of them to some extent. The data given by this index is accurate and dependable since it is developed by firms that specialize in such activities. As a result, indexes are one of the most cost-effective ways for traders to perform back-of-the-envelope estimates on the increase or fall in the price of their assets.


A professional appraisal is another approach for investors to determine the worth of their property. Professional appraisers determine the worth of any given property extremely precisely and deliver a report to the owner for a charge in most countries across the world. This service has a cost associated with it. Professional investors, on the other hand, can achieve a better price when they have many properties valued. This is due to economies of scale. Companies such as REITs and financial firms would typically attach a certificate received from such assessors as proof that the value of their assets has increased.

Also Read: Everything You Need To Know About Investment Management Companies In India

Comparable Properties:

The most popular technique to determine the value of a specific property is to examine the value of similar houses. This approach is simple to use and completely free. However, the resulting findings are not particularly accurate. This is because property values within the same location can vary greatly. The price range can be influenced by factors such as the amenities provided in a specific property as well as its closeness to other facilities. As a result, each property must be adjusted individually. As just a consequence, the values produced from such an evaluation are incorrect and cannot be utilized for official purposes.

Measures to Consider

If the buyer does not want to sell the property but instead retain it for a longer period, he or she can use some of these indicators to better assess the performance of his or her investment.

Equity Appreciation Growth

The primary reason why investors buy real estate is for capital appreciation. As a result, the most crucial statistic for such investors is the equity increase that they have achieved as a result of hanging onto their property.

As a result, these investors keep track of their mortgage repayments, which include both interest and principal payments, and use the market rate to determine not whether the equity they had also built inside the house is greater than that of the expense they have incurred of holding on to the house.

Also Read: Indian Real Estate Market to Prosper as Investors flee Chinese market

Cash Flow-Driven Equity Growth

Some investors purchase homes for cash flow rather than financial appreciation. As a result, they subtract the interest charge from their working capital each month. The equilibrium is what adds to the increase of their equity. As a result, when this working capital occurs month after month, it results in a significant increase over time. Rising rents almost always assure that the property generates a considerable positive cash flow over time.

Operating Ratio

Investing in real estate is a long-term game. Both the positive cash flows generated and the operating expenditures of hanging on to a property fluctuate with time. As a result, many investors prefer to monitor the ratio between these values to determine the effectiveness of their investment.

Investing in real estate might be scary at first. Not everybody has the leisure or the aptitude to flip properties or manage tenants. The good news is that there are alternatives for every level of investment, with each catering to a distinct set of goals, skillsets, and time restrictions. The most essential thing to do is to get started right away and allow your money to begin multiplying right away.

Assetmonk is an online platform that lets you invest in Grade-A assets in Indian cities. Invest in high-yielding properties from our Growth, Growth Plus, and Yield asset categories that cater to three main financial objectives, passive income, capital appreciation, and long-term gains. Making investing in commercial real estate accessible and affordable via fractional ownership, Assetmonk has already helped more than 350 investors from across the globe and you can be next!

Performance of Real Estate Investment FAQ'S

Over the previous decade, the average annual return on real estate ownership has been 11.6 percent. The Reserve Bank of India’s House Price Index, which analyses property prices in ten Indian cities, demonstrates that the return on investment in real estate has plummeted drastically.

The statistic calculates the value of an investment by multiplying the gross rent a property generates in a year by the gross rent multiplier (GRM). The GRM figure is calculated using properties comparable in same market.

One of the most often used investing measures is the capitalization rate (cap rate). It is a percentage that represents a property’s predicted yield over the course of a year, presuming it was acquired in cash. The cap rate is most useful when comparing the performance of comparable properties in the same market.

Related Articles

gold saving scheme

Gold Saving Scheme

The gold saving scheme is? Do you want to find the greatest monthly savings plan with jewelers? A large number of individuals participate in gold-saving plans given by fine jewelry in India. People are particularly interested in these schemes since gold is a valuable metal and a part of our culture. Gold-saving schemes from your jeweler are helpful when you wish to acquire gold for a special occasion, such as anniversaries or weddings. Schemes like these let you receive a discount on the manufacturing charges from specific jewelers. Individual schemes must be examined to determine if they are appropriate for you. A jeweler’s gold deposit or savings program is a system in which you park your gold with the jeweler and earn more gold at the end of the year. Jewelers may also provide a monthly amount of payment and return your gold at the end of the period. The primary goal of this strategy is to mobilize gold, supply…

Read more
tax saving scheme

Tax Saving Schemes

Ugh, taxes, taxes, taxes. Isn’t it a burden? Let us not be afraid to say that none of us enjoy the word “tax.” Let alone paying for it. But did you know that you may reduce your tax burden? One can reduce one’s tax load by participating in tax-saving programs or tax-saving schemes offered by the government and private organizations. Investment in these tax-saving schemes will enable you to become qualified for tax breaks and exemptions under several sections of the Income Tax Act. Income taxes in India can be decreased slightly by investing wisely in tax-saving initiatives. There are several options to minimize an individual’s tax liability by properly utilizing the various schemes. Sections of the Income Tax Act of 1961 dealing with tax exemptions and deductions include Sections 80C, 80D, 80CCF, and others. Both government and private-sector groups provide a variety of tax-saving opportunities to Indian citizens. IT Saving Schemes Income tax savings plans and schemes are available…

Read more
Commercial real estate image

When Is The Best Time To Invest In Commercial Real Estate?

Commercial real estate (CRE) is typically seen as a long-term investment. Even when the cost of purchasing an item or owning a section or fraction of a property is included, it is still a considerable sum that cannot be overlooked. Given that real estate is a very illiquid investment, care must be taken to ensure that no unexplained obligations arise when entering or exiting a real estate transaction. Thus, time is important in CRE investments, just as it is in any other type of investment. Timing your CRE investments allows you to attain greater diversification in your portfolio without the fear of missing out on a particular opportunity completely. You’ve probably heard that real estate investments are a great way to make money. But, if you’re like most people, you may feel hesitant about putting your cash into commercial real estate. The good news is that there are plenty of opportunities for investors out there in the commercial real estate…

Read more
istockphoto 1096383602 612x612 1

UMANG App : Registration, Download, Login, Services & Benefits

The UMANG App is a mobile application that can help you with your governmental service needs. It enables you to browse and avail yourself of a variety of government services from various departments of state and local government from your smartphone while you are on the go. To use UMANG, you have to: Download the application from Google Play Store or Apple App Store. Install the app on your mobile phone. Open the application and start using it. For Apple users, the application can be downloaded from the Apple Store. Android users can download the Umang app from the Google Play Store using their Android phones or tablet. Windows users can download Umang App from the Microsoft store by using their windows based mobile phones/tablets. If you have not installed the store, go to your Android or iOS phone and search for the “UMANG App.” You will be able to see the app name on your screen. If you don’t…

Read more
istockphoto 1385940107 612x612 1

NREGA / MGNREGA – Eligibility, Benefits, Account Balance & App

The National Rural Employment Guarantee Act, or NREGA, is a scheme aimed at creating employment and livelihood security in rural areas. The scheme also seeks to increase access to productive assets like land, credit, and financial services for all rural households. The Act was passed by Parliament in 2005 and came into force on February 2, 2006. It aims to provide at least 100 days of guaranteed wage employment in every financial year to adult members of any rural household willing to do unskilled manual work. Also, read Saving Schemes in India. This scheme aims to increase livelihood security in rural areas The scheme is a demand-driven program that employs 100 days a year. It also aims at increasing the livelihood security of rural people by providing them with a regular source of income during this period. The scheme is implemented by the state governments through their respective rural development departments. These departments are responsible for employing eligible households that…

Read more
istockphoto 1372362922 612x612 1

PPF Withdrawal Rules: How to Withdraw Your Partial & Complete PPF

So, what exactly is PPF Withdrawal? Withdrawing money from your PPF account is not easy. You have to apply for it and then wait for the government to approve your request. However, there are other options available as well that can help you withdraw some money from your PPF account. Also, read PPF: Eligibility, Tax Benefits, Interest Rate, How to Open Online, Withdrawal. Is partial withdrawal possible in PPF? If you want to withdraw some money from your Public Provident Fund (PPF) account, you can. PPF is a long-term investment and not meant for daily use. Therefore, you must understand the rules regarding partial and complete withdrawals before making any decisions on whether or not to take advantage of this option. PPF is a long-term investment and not meant for daily use. Therefore, you must understand the rules regarding partial and complete withdrawals before making any decisions on whether or not to take advantage of this option. Also, read PPF…

Read more