BEST ASSET CLASS
2. How to Calculate Capital Growth
CAPITAL GROWTH FORMULA
CAPITAL GROWTH EXAMPLE
3. Calculating Total ROI( Return on Investment)
ROI FORMULA
BEST ASSET CLASS
2. How to Calculate Capital Growth
Capital growth is the increase in your property’ s value over time. It shows how your asset is appreciating and helps build long-term wealth.
CAPITAL GROWTH FORMULA
Capital Growth Rate =(( New Property Value- Original Purchase Price) / Original Purchase Price) × 100
CAPITAL GROWTH EXAMPLE
Original Purchase Price = R1,000,000 New Property Value( after 5 years) = R1,500,000 Capital Growth Rate =(( 1,500,000- 1,000,000) / 1,000,000) × 100 = 50 %
To calculate the annual average capital growth rate, just divide the total capital growth rate by the number of years:
Annual Capital Growth Rate = 50 % / 5 = 10 % per annum
3. Calculating Total ROI( Return on Investment)
Your Total ROI includes both rental income and capital growth over a period. It’ s the best way to evaluate your property’ s overall performance.
ROI FORMULA
Total ROI =( Capital Growth + Total Rental Income) / Property Purchase Price) × 100
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