If you’re not comparing apples with apples, then you might be missing the point.
When evaluating property investments, one concept that investors often misunderstand — or overlook entirely — is the difference between ROI (Return on Investment) and ROE (Return on Equity).
Understanding this distinction is crucial because property is one of the few asset classes that allows you to leverage bank financing, which can significantly amplify your actual returns.
ROI vs ROE: What’s the Difference?
When people discuss rental yields of 3% to 4% for Singapore properties, they are usually referring to ROI.
Return on Investment (ROI) measures returns based on the total property value, not the amount of cash you personally invested.
This metric is useful, but it doesn’t tell the full story — especially in a leveraged investment like real estate.
A Simple ROI Example
Sam purchases a condominium priced at $2 million and rents it out for $6,000 per month.
Using the standard ROI formula:
($6,000 × 12) ÷ $2,000,000 = 3.6% annual rental yield…
