What is ROI?

Return on Investment (ROI) measures the profit relative to the initial capital outlay. Often expressed as a percentage, it helps compare the effectiveness of multiple ventures—be it property purchases, renovations, or other asset holdings. ROI incorporates revenue generated minus operational or financing costs, divided by the original investment.

Key Points:

• Profit Indicator: Simplifies checking net gains or losses against outlays.
• Time Component: Some prefer annualized ROI for clarity over multi-year holdings.
• Comparative Value: A quick metric for deciding if a project’s returns justify risk.
• Exclusions: May ignore intangible factors like occupant satisfaction or brand benefits.

Effective ROI tracking reveals whether capital usage is optimal, guiding resource reallocation if yields prove inferior compared to other opportunities.