ROI vs Yield: Which Metric Tells the Truth?

When Percentages Tell Different Stories

Two investors look at the same property. One says it’s a 6% yield; the other calls it a 20% ROI. Both are right — but they’re measuring different things.

In property investing, yield and return on investment (ROI) are often confused, yet they tell two very different stories about your performance. One measures income; the other measures total return.

At the Genius Academy, we help investors master both—because understanding the differences is what separates average landlords from true strategists.

Why These Metrics Matter

• Yield shows how much income a property generates compared to its value.

• ROI shows how efficiently your cash is working — factoring in leverage, refurb costs, and value growth.

Together, they reveal not just how much your property earns, but how hard your money is working for you.

Understanding Yield — The Income Snapshot

Yield focuses on the rental income your property generates relative to its price.

Formula: Yield = (Annual Rent ÷ Property Value) × 100

Example: A flat purchased for £200,000 with £12,000 annual rent = (12,000 ÷ 200,000) × 100 = 6% yield

It’s a simple way to compare different investments — but it doesn’t show the full picture.

Yield ignores your financing method, renovation spending, or how much cash you’ve personally invested.

Understanding ROI — The True Return

ROI focuses on your actual cash investment, not the property’s price. It reflects your total gain — rental profit, capital growth, and how much money you personally put in.

Formula: ROI = (Annual Profit ÷ Total Cash Invested) × 100

Example: you buy the same £200,000 flat with:

• £50,000 deposit

• £5,000 purchase costs

• £10,000 refurbishment

Your total cash invested = £65,000

If your net profit (after costs and mortgage interest) is £13,000, then ROI = (13,000 ÷ 65,000) × 100 = 20%

This is why ROI often looks higher— because it accounts for leverage (borrowing). You used £65,000, not £200,000, to control the asset and generate returns.

Comparing the Two — A Worked Example

Let’s look at how yield and ROI can tell different stories about the same property.

Metric	What It Measures	Example Result	What It Misses
Yield	Income vs Property Value	6%	Ignores how much cash you actually invested
ROI	Profit vs Cash Invested	20%	Can’t compare properties without full financial data

In short:

• Yield tells you how well the property performs.

• ROI tells you how well you perform as an investor.

When to Use Each Metric

Use Yield when:

• You should use Yield when comparing similar rental properties located in the same area.

• Estimating rental performance quickly.

• Filtering listings before deeper analysis.

Use ROI when:

• When evaluating projects that involve refurbishment, refinancing, or leverage, use the BRRR strategy.

• You should measure the long-term return on your actual capital.

• You should monitor the efficiency with which your portfolio generates wealth.

  

Why ROI Tells the Whole Truth

Yield shows what your property earns. ROI shows what you earn—based on your capital, effort, and strategy.

Two investors could own identical houses but achieve entirely different ROIs, depending on how they financed or improved them. That’s why professional investors track both but rely on ROI to assess real performance.

Reflection: Numbers Are Only the Start

Understanding yield and ROI gives you clarity — but success comes from applying these numbers strategically.

A property with a 5% yield could outperform one with a 10% yield if its ROI is higher due to smart financing or value uplift.

At Genius Academy, we teach investors to combine both metrics to make intelligent, evidence-based decisions — not emotional ones.