The Developer Promises 15% Annual Returns. What 10 Lines Do I Want to See Before Believing That Figure?
A $200 000 unit with a stated 15% return should leave its owner with about $30 000 a year. I ask to see the path from bookings to that money. That is exactly where I would start a conversation on this topic.
5% in a presentation is not an answer, but an invitation to check the P&L.
What I Check First
ADR and occupancy need to be read together, not separately. For an investor, this changes the very framing of the question: instead of “like it / dislike it,” there is a parameter that can be checked before the deal. A $200 000 unit with a stated 15% return should leave its owner with about $30 000 a year. I ask to see the path from bookings to that money.
Where Presentations Often Oversimplify Reality
OTA fees, management, staff/cleaning, utilities, maintenance, reserves, and local charges are deducted from gross bookings. I would take this item out of the presentation and put it on a separate line in the model. If it is not supported by documents, actual data, or clear reasoning, it cannot quietly be left in the base case.
What This Does to the Financial Model
A new property should not automatically inherit the performance metrics of an established competitor. This is often where the gap between expected and actual results begins. 15% in a presentation is not an answer, but an invitation to check the P&L. That is why I want to see not just a single figure, but a cause-and-effect relationship.
Which Scenario I Would Test Separately
A downside scenario with lower ADR and occupancy reveals the model’s fragility. In practice, this means something simple: I adjust this parameter downward and see what happens to cash flow, the payback period, or liquidity. If the entire investment rests on one ideal assumption, that is a separate risk in itself.
What the Next Buyer Will See
A conservative 9% may be more solid than 15% resting on a single optimistic assumption. At entry, this gets less consideration than returns, but at exit, this very factor may determine how long the sale takes and what discount the next buyer asks for.
Conclusion
For me, there is no universal answer on this topic. There is a specific deal, specific documents, and a specific investor’s time horizon. 15% in a presentation is not an answer, but an invitation to check the P&L. If this can be explained in plain language and demonstrated with figures, then it makes sense to discuss expected returns.
About the Author
Vladyslava Kravchenko is the co-founder and managing partner of NESTRA REAL ESTATE GROUP and the founder of Nestra Insights. She works with international investment real estate, analyzing rental economics, development risks, capitalization, and exit strategies.