📊 Calculating ROI: Gross Yield vs Net Operating Income

To measure the profitability of a commercial property, investors often use two core metrics:

1. Gross Rental Yield
This is the simplest form of ROI:

Gross Yield = (Annual Rent / Property Purchase Price) × 100

For example:
If you buy a shop for PKR 1 crore and rent it for PKR 70,000/month:

Gross Yield = (840,000 / 10,000,000) × 100 = 8.4%

2. Net Operating Income (NOI)
This accounts for operating expenses:

NOI = Annual Rent – Operating Costs (maintenance, tax, management fees)

You can then calculate:

Cap Rate = (NOI / Property Value) × 100

Investor Tip: Use gross yield for quick comparisons, but rely on NOI for a more accurate picture of profitability.