Return on Investment
Property investors use a range of Key Performance Indicators (KPIs) to check the viability and health of investments. The trouble is, one can use all sorts of financial engineering to make the % return look favourable.
Investment property is often marketed on the strength of it's yield, but if taken on it's own, yield can mask more important factors, such as long term growth, ongoing maintenance, rental security etc. Cheaper properties (like small flats) can often have high yields but low monthly income which puts the investor at risk if there are interest rate rises, void periods or maintenance costs.
Some methods are better for calculating performance than others. Net rental yield is a common KPI but it doesn't take into account 'gearing' or 'leverage'.
Return on Investment (ROI) is perhaps the best overall metric to use and is the method preferred by many investors for calculating property investment performance. ROI gives an indication of how much income an investment generates in relation to the initial investment amount, whilst factoring in any leveraging on the property.
Franchisees learn how to assess a deal in order to achieve a very high ROI as well as minimize financial exposure on their portfolio.