A presentation states a clear increase in value between the purchase and a later valuation date. That can be mathematically correct as a total change and still be misleading if the figure is shown next to an annual rental metric. For your comparison you therefore need the period and the method of calculation.
This own learning case uses freely assumed values. It does not forecast any property price and does not determine a complete investment return. Rents, financing, taxes, purchase and sale costs are explicitly omitted in the isolated consideration of value.
Set two values and a period
In the example an assumed property valuation rises from 100.000 to 121.000 euros within exactly two years. The total change is 21,000 euros or 21 percent of the starting value.
That does not mean that the valuation increased by 21 percent in each year. Nor is a uniform actual development within the period proven by the start and end values alone. There could have been a different course in between.
Define an annual comparison rate separately
For a comprehension test we look for the constant annual rate which, applied twice in succession to the respective value, gives the same end value. With ten percent the calculation is 100.000 times 1,10 times 1,10 equals 121.000 euros. The geometric annual comparison rate in this case is therefore ten percent.
The simple division of 21 percent by two does yield 10,5 percent. However, if one were to apply these 10,5 percent in both years to the carried-forward value, a different end amount would result. Different calculation methods must therefore not be equated without specification.
Do not treat an increase in valuation as a payout
The assumed added value is not yet a gain received in your account. In an actual sale the achievable price, outstanding debt and other concrete consequences would have to be considered. A valuation can also deviate from an actually realised price. The article makes no claim about the magnitude of this difference.
If a presentation combines rental income and value change, their timings and the underlying amounts must also be traceable. Two isolated percentage figures cannot automatically be added together into a complete annual equity return.
Ask the right follow-up question
For every figure shown, please ask for the start and end dates, the start value, the end value and the formula used. Also ask whether real payments, valuations or assumptions are involved.
Your result does not need to be a complicated set of metrics. It is sufficient if the total change, any separately calculated annual comparison rate and actually received money are no longer confused with one another. For a real investment decision a significantly more comprehensive individual review is required.