How do you calculate the return on real estate investment in Syria?

Two properties may generate similar rental income, but their actual returns can be completely different after accounting for the purchase price, expenses, and operating costs. Therefore, looking at the rental value alone is not enough to evaluate the investment. In this guide, we practically explain how to calculate the return on real estate investment in Syria, and what numbers should be included in the calculation to reach a result closer to reality.

What is the return on real estate investment?

The return on real estate investment is an indicator that measures the relationship between the income generated by the property and the amount paid to acquire it, usually expressed as an annual percentage. The important difference here is between the absolute rental income and the return on the invested capital; a property with a high absolute rent does not necessarily have the best yield, since the percentage is measured against the original purchase amount. This percentage allows for comparing properties of different prices on a unified basis, instead of just comparing rental figures alone.

How do you calculate the return on real estate investment?

There are two main indicators commonly used to calculate property yield, each serving a different role in the evaluation process.

Calculating the gross rental yield

This ratio is calculated as follows:

Gross rental yield = Annual rent ÷ Property purchase cost × 100

The annual rent here is the total expected rental income over a full year, and the property purchase cost is the basic purchase price. This indicator is often used in the initial evaluation stage or for quick comparisons between several properties, as it is easy to calculate. However, it does not deduct any expenses, so it is more suitable for preliminary estimation than as an accurate reflection of the actual yield.

Calculating the net property yield

To get a more realistic picture, the net yield formula is used:

Net yield = Net annual income ÷ Total investment cost × 100

Net annual income results from deducting expenses related to the property, such as maintenance or management, from the annual rental income. The total investment cost may be higher than just the purchase price, as it sometimes includes additional costs like purchase procedures or necessary preparations before renting. For this reason, the net yield is considered a more accurate indicator when evaluating the actual performance of the property.

Read more about: How to determine the budget for buying a property

Practical example of calculating property yield in Syria

To clarify, let's assume the following hypothetical example in US dollars. This is for illustration only and does not represent an actual price or yield in the Syrian market:

The gross rental yield is obtained by dividing 3,600 by 40,000 and multiplying by 100. The net yield is obtained by dividing the net income of 3,000 by the total investment of 44,000 and multiplying by 100. In the same way, any investor can enter their own numbers for any other property and reach a similar result. Again, these numbers are entirely hypothetical for illustration purposes and do not reflect an official average of property yields in Syria.

What costs should be included when calculating the yield?

The accuracy of the yield calculation depends largely on including all costs associated with the property, such as:

• Property purchase price, which is the basis for all other calculations.

• Purchase and registration costs and procedures, which are usually added to the total investment cost.

• Preparation or finishing if needed before renting or use.

• Regular or emergency maintenance and repairs during the ownership period.

• Property management costs if there is an entity handling this task.

• Vacancy periods when the property is without a tenant, which reduces the actual income compared to the expected.

Neglecting any of these items leads to showing a higher yield than the actual one, because the calculation in this case is based on full income against incomplete costs. This explains the importance of using net yield and not just the gross yield when making a decision.

Before calculating the expected yield, it is useful to compare the purchase cost of the property itself within the targeted category; you can check out apartments for sale in Syria to learn about the available options, then estimate preparation and operating costs to reach a more realistic estimate of the net yield.

The difference between gross yield and net property yield

Accordingly, the net yield is more useful when evaluating the actual performance of the property, as it reflects what actually remains for the investor after covering costs, while the gross yield remains a helpful tool only in the initial stages of comparison.

Does property appreciation count in the yield calculation?

It is important to distinguish between two different concepts. Rental yield is the income generated from renting out the property over a specific period. Total return on investment takes into account this income along with the potential profit or loss in the property's value itself, when measuring the overall performance of the investment in the long term. However, any expected increase in property value in the future should not be treated as realized profit before the actual sale process, as property prices can rise or fall depending on market conditions.

Read more about: How to choose the right property for investment in Syria?

How to compare the yield of two properties before buying?

To clarify the importance of the percentage rather than the absolute value, let's assume two hypothetical examples:

Property A: Purchase price $60,000, total investment $65,000, annual rent $4,800, annual expenses $800, net income $4,000, and thus a net yield of about 6.15%.

Property B: Purchase price $35,000, total investment $38,000, annual rent $3,000, annual expenses $500, net income $2,500, and thus a net yield of about 6.58%.

This clearly shows that the property with the higher absolute rent (Property A) does not necessarily have the better yield, as Property B achieved a higher yield percentage even though its rental income is lower. The yield percentage is therefore a very important indicator when comparing properties, but it is not the only factor to consider when making a choice, as other factors such as the type, location, and condition of the property also come into play. For more details on how to balance multiple options, you can refer to the article "How to compare real estate projects before buying a property in Syria?".

Invest in the right property for your goals with Imtilak Real Estate

Knowing the expected yield percentage helps you evaluate the property more realistically before buying, but the accuracy of the decision depends on having clear data about the property price, expected rental income, and costs associated with ownership and operation. The Imtilak Real Estate team helps you study and compare available options according to your goals and budget, to find a property that fits your investment plan. You can contact us for a consultation and discuss the real estate options suitable for you in Syria.