Calculate the full return on any property investment — capital gain, rental income, mortgage costs and expenses — to see your actual annualised ROI. Find out whether your property is genuinely outperforming other investments.
Property ROI is more complex than most investors realise. Unlike stocks, property generates returns from two sources simultaneously — capital appreciation and rental income — while carrying costs from two sources — mortgage interest and running expenses. True ROI is calculated on the equity invested (deposit), not the total property value, which creates leverage effects that magnify both gains and losses.
If you invest a £40,000 deposit on a £200,000 property and it appreciates 3.5%/year for 10 years, the property increases in value by £81,694. Your return on the £40,000 equity invested is 204% — not 40.8% (which would be the unleveraged return). Leverage amplifies returns in rising markets but amplifies losses in falling markets. This is why comparing property ROI to stock returns requires using the equity-on-equity return, not the property return.
Property ROI has four components: capital appreciation (property value increase), rental income received, mortgage interest paid (negative), and running costs (negative). Missing any component produces a misleading ROI figure. Our calculator includes all four for the complete picture.
Higher-rate taxpayer landlords can no longer deduct mortgage interest from rental income before calculating tax. Instead, they receive a 20% tax credit on mortgage interest. At 40% tax, this costs a higher-rate landlord approximately 20% of their annual mortgage interest cost in additional tax. This significantly reduces net ROI for higher-rate taxpayers compared to pre-2020 calculations.
A leveraged buy-to-let returning 8–12% annualised on equity (deposit) is considered good in the UK. This combines capital appreciation (3–4%), net rental income (3–5% gross yield minus costs), and leverage effects. The key metric is return on cash invested (the deposit), not return on total property value. At current mortgage rates, many properties that worked at 2% now deliver only 4–6% total return on equity.
Over the long term (20+ years), UK residential property and global equities have delivered broadly similar total returns of 7–9% annually. Property offers leverage (mortgage), lower volatility in reported values, and tangibility. Equities offer liquidity, no management burden, and ISA tax shelter. Property loses to equities on transaction costs, illiquidity and landlord obligations. Diversification across both is generally superior to concentration in either.
Section 24 (since April 2020) restricts mortgage interest relief for individual landlords to a 20% tax credit, regardless of their tax rate. Higher-rate (40%) taxpayers previously deducted mortgage interest before calculating taxable rental income. Now they pay tax on gross rent and receive a 20% credit. On a £600/month mortgage at 40% tax, the Section 24 cost is approximately £1,440/year compared to the old system. This has significantly reduced buy-to-let ROI for higher-rate taxpayers.