Investment Strategy · 2026
How to calculate the true ROI of a property investment
By Winfred Quek · 11-minute read · Last reviewed May 2026
Facts verified: May 2026 · Sources linked below
Key Takeaways
- • Gross yield overstates returns because it ignores all holding costs. It is a marketing figure, not an ROI measure.
- • Cash-on-cash return divides net annual cash flow by the actual cash invested, downpayment plus Buyer's Stamp Duty plus legal and other fees.
- • Buyer's Stamp Duty on a $1.5M property is $44,600; Additional Buyer's Stamp Duty depends on profile (SC 0/20/30 percent, PR 5/30 percent, foreigner 60 percent).
- • Leverage at the bank mortgage rate of around 1.5 percent amplifies both gains and losses; total return must account for it honestly.
- • Any capital-gain component of return depends on actual market movement, which is only knowable from URA caveat data, never assume a growth rate.
Ask an investor what return their property makes and most will quote a yield figure, and most of the time it is gross yield. Gross yield is rent divided by price, with not a single cost subtracted. It is the easiest number to compute and the least honest one to rely on. The true return on a property is lower, often materially, once you account for what it actually costs to buy, hold, and sell.
This piece sets out how to calculate property ROI properly. It is framework-based: the formulas and the cost list, not invented return numbers. The point is that you should be able to run your own property through this and get an honest figure.
Why does gross yield overstate the return?
Gross yield is annual rent divided by purchase price. A $1.5 million property renting at $5,000 a month collects $60,000 a year, a gross yield of 4 percent. The figure looks clean, and that is the problem, it has been cleaned of every cost.
Gross yield ignores property tax, maintenance fees, vacancy between tenants, agent commission, repairs, and the interest cost of the mortgage. It also ignores the upfront costs of acquiring the property, which are real cash you committed. Quoting gross yield as your return is like quoting revenue as profit. The genuine ROI measures start by stripping that illusion out.
What is cash-on-cash return, and how do I calculate it?
Cash-on-cash return is the most useful annual ROI measure for a leveraged property. It answers a precise question: for the actual cash I put into this deal, how much net cash does it generate each year?
The formula:
Net annual cash flow is the annual rent, minus every recurring cost: the mortgage instalment, property tax, maintenance, a vacancy allowance, agent commission, and repairs.
Total cash invested is all the cash you actually committed to acquire the property, not the price. It includes:
- The cash portion of the downpayment (the loan-to-value limit on a first housing loan is 75 percent, so the downpayment is at least 25 percent of price, part cash and part CPF)
- Buyer's Stamp Duty
- Additional Buyer's Stamp Duty, if it applies to your profile
- Legal and conveyancing fees
- Valuation and other transaction costs
Cash-on-cash return gives you a clean, comparable measure of how hard your committed cash is working from rent. It deliberately excludes capital gain, because capital gain is uncertain. It measures the realised, recurring part of the return.
The stamp duty figures you must include
According to IRAS, Buyer's Stamp Duty is tiered on price, and on a $1.5 million property it amounts to $44,600. Additional Buyer's Stamp Duty depends on your profile: a Singapore Citizen pays 0 percent on a first residential property, 20 percent on a second, and 30 percent on a third or subsequent; a PR pays 5 percent on a first and 30 percent on subsequent; a foreigner pays 60 percent. These are large numbers, and they sit in your "total cash invested" denominator. Leaving them out inflates the cash-on-cash return and misrepresents the investment.
How does leverage change the return?
Leverage, using a mortgage, is central to property ROI, and it cuts both ways.
Because you only commit part of the price in cash (the rest is the loan), your return is calculated against a smaller base, which amplifies the percentage return when things go well. If the property's value rises, the gain accrues to you, the owner, even though the bank funded most of the purchase. That is the upside of leverage.
The downside is symmetric. If the property's value falls, the loss is also amplified against your smaller cash base. And leverage carries a cost: the mortgage interest. At the bank mortgage rate of around 1.5 percent in 2026, that cost is lower than during the higher-rate period, but it is still a real, ongoing drag on net cash flow. Honest ROI accounts for the interest cost and recognises that leverage magnifies outcomes in both directions. Singapore's TDSR caps total monthly debt repayments at 55 percent of gross income, which limits how much leverage you can take.
What is total return, and how does it differ?
Cash-on-cash return measures the annual rental return on your cash. Total return is the fuller picture over the whole holding period, and it has two components:
- Rental cash flow -- the net cash the property generated from rent across the years you held it.
- Capital gain or loss on sale -- the sale price minus the original purchase price, minus all selling costs.
Total return adds those two together and expresses the result against the cash you invested. The honest treatment of the capital component is critical here. You can only know the capital gain after you sell. You cannot assume a growth rate to make a deal look attractive. The disciplined approach is to compute cash-on-cash return from rent (which is the part you can reasonably estimate), and treat capital gain as a separate, uncertain component, informed by actual transaction history from URA caveat data, never by a projected number.
The selling costs total return must subtract
On the way out, several costs reduce the realised gain:
| Exit cost | Detail |
|---|---|
| Seller's Stamp Duty | If sold within 4 years of purchase: 16%, 12%, 8%, 4% for years 1 to 4. No SSD from year 5. Per IRAS. |
| Agent commission | The marketing and transaction fee on the sale. |
| Legal fees | Conveyancing on the sale. |
| CPF refund | If CPF was used, the principal plus accrued interest at 2.5% is returned to your CPF account, reducing cash proceeds. |
| Outstanding loan | The remaining mortgage is repaid from the sale proceeds. |
Confirm SSD applicability and current rates with IRAS. The CPF refund is not a loss, it returns to your CPF, but it does reduce cash in hand.
A worked structure for honest ROI
Here is the sequence to follow for any property, with your own real figures.
Winfred's Take
The gap between the gross yield someone is shown and the true ROI they actually earn is, in my experience, the single most common cause of disappointment in property investment. Gross yield is a clean, flattering number, and it leaves out the stamp duty, the property tax, the vacancy, the interest, and the selling costs, every one of which is real. When I sit with an investor I do the unglamorous thing: I build the total cash invested with the stamp duty in it, I net the cash flow down to what actually lands in the bank, and I keep the capital-gain assumption strictly separate and strictly conservative. The figure that comes out is lower than the brochure number. It is also the only figure worth making a decision on. An investor who knows their true ROI can compare deals honestly. One who only knows the gross yield is comparing fiction.
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Winfred Quek · CEA R073319H · Crestbrick
Frequently asked questions
Why is gross yield not a real measure of ROI?
Gross yield is annual rent divided by price, with no costs subtracted. It ignores property tax, maintenance, vacancy, mortgage interest, and acquisition costs. It is a marketing figure. True ROI measures, cash-on-cash and total return, account for those costs and are always lower.
What is cash-on-cash return?
Cash-on-cash return is net annual cash flow divided by the actual cash you invested. The cash invested includes the cash downpayment, Buyer's Stamp Duty, any Additional Buyer's Stamp Duty, and legal and transaction fees, not just the price. It measures how hard your committed cash works from rent.
How does the mortgage affect my ROI?
Leverage calculates your return against a smaller cash base, so it amplifies both gains and losses. The mortgage also carries an interest cost, around 1.5 percent at the 2026 bank rate, which reduces net cash flow. Honest ROI accounts for the interest and recognises leverage cuts both ways.
Should I include expected capital gain in my ROI calculation?
Keep it separate and conservative. Capital gain is only knowable after you sell, and assuming a growth rate to make a deal look good is forecasting, not measuring. Compute the rental return honestly first, and inform any capital-gain view with actual URA transaction data.
What costs reduce my return when I sell?
Seller's Stamp Duty if you sell within four years (16/12/8/4 percent, per IRAS), agent commission, legal fees, and repayment of the outstanding loan. If you used CPF, the principal plus 2.5 percent accrued interest returns to your CPF account, reducing cash in hand.
Winfred Quek is an Associate Marketing Consultant at Crestbrick Pte Ltd, advising Singapore upgraders, investors, and family offices. CEA R073319H. The information on this page is general and does not constitute financial, investment, or mortgage advice.