From the point of view of a landlord, we’d always call it “rate of return.” It is not an interest rate.
Also from the point of Sharia Law where interest is forbidden, this is an important consideration for marketing leased property internationally.
Because most long term leases are “adjusted for inflation” or have regular increases, and too, costs & taxes change, the long term rate of return is guesswork. But it is guesswork within a narrow range especially if the lease is one where in addition to rent, the tenant pays for all taxes, repairs & other specified costs. This is called a net lease. I would rent big property no other way.
OK, to get specific, a property costs me $10 Million. It is rented on a net lease for $1 million a year. My “rate of return” (not an interest rate) is 10% a year-to start!
It is better than interest on a bond or mortgage because a good part of the rent is “sheltered” and tax-free because of depreciation allowed on the property. In the real world the property is appreciating at maybe 5% a year.
If I bought the property entirely with borrowed money, amortized at 5% a year, I take home $500,000 a year cash for myself with no investment. Of course, the rent goes up every year!
In the meantime, my property is going up in value at minimum another $500,000 a year. And the loan is being paid off. So my rate of return is “infinity.” I am “making” well over a million a year with no investment other than my time and expertise.
Probably twenty years later, my property will be worth $100 Million. This is how investors in real estate become Billionaires as explained in my book Think Like A Tycoon.