05/06/2026
๐ก ๐๐๐๐ฅ ๐๐ฌ๐ญ๐๐ญ๐ ๐๐๐ซ๐ฆ: ๐๐๐๐ (๐๐จ๐ฆ๐ฉ๐จ๐ฎ๐ง๐ ๐๐ง๐ง๐ฎ๐๐ฅ ๐๐ซ๐จ๐ฐ๐ญ๐ก ๐๐๐ญ๐)
๐๐๐๐ is one of the most useful metrics for evaluating the performance of a real estate investment over time.
Rather than looking at rental income or property appreciation separately, CAGR helps you understand the ๐๐ฏ๐๐ซ๐๐ ๐ ๐๐ง๐ง๐ฎ๐๐ฅ ๐ซ๐๐ญ๐ฎ๐ซ๐ง generated by your investment by taking both into account.
๐ Property value appreciation
๐ถ Rental income generated over the holding period
This makes it easier to compare investment opportunities and assess long-term performance.
๐ ๐๐จ๐ฐ ๐ข๐ฌ ๐ข๐ญ ๐๐๐ฅ๐๐ฎ๐ฅ๐๐ญ๐๐?
In simple terms:
๐ Divide the final value of the investment (estimated property value + total rental income received) by the initial investment.
๐ Raise the result to the power of 1 รท number of years.
๐ Subtract 1 to obtain the CAGR.
๐ ๐๐ข๐ฆ๐ฉ๐ฅ๐ ๐๐ฑ๐๐ฆ๐ฉ๐ฅ๐ (๐-๐๐๐๐ซ ๐๐ง๐ฏ๐๐ฌ๐ญ๐ฆ๐๐ง๐ญ)
โข Purchase price: $200,000
โข Annual net rental income: $10,000 ($50,000 total over 5 years)
โข Estimated market value after 5 years: $250,000
๐ข CAGR โ 8.45% per year
๐ฌ ๐๐ก๐ฒ ๐๐จ๐๐ฌ ๐ข๐ญ ๐ฆ๐๐ญ๐ญ๐๐ซ?
CAGR provides a clearer view of an investment's true average annual performance by combining all sources of return into a single metric.
For real estate investors, that means looking beyond rental income alone and considering the long-term impact of property appreciation as well.