Accurate measurements of profit

From a true investment perspective, tax does not enter into the discussion as each investor has their affairs structured differently eg company vs personal vs trust.

Miike,
You could do a degree in accounting, then some post grad study on this subject, and still  not have an answer.  There are a great deal of ways to measure profit, and the more long term and complex the investment gets, the harder it is to measure profit.  What you can achieve, is comparable measures of profit.  If you measure it the same way, each time, then you can compare the profit from different projects and accross different period of time.
One definition of profit might be the net increase in future economic benefits under the control of an entity over a period of time.  Ie, how much you have today (as a net figure), less how much you had on this day last year (as a net figure), will give you the change in your wealth over that period of time.  This is perhaps more objective, though harder to measure than the usual income less expenditure, because the income less expenditure throws up difficulties with depreciation and other types of income and expenditure which from a cash flow perspective occur outside the period of time which you are calculating profit for, but in reality are related to the income generated in that period.  The difference in wealth is harder to measure because it requires accurate valuations to be carried out on assets. 

I'm afraid profit measurement is not a simple matter, it is a real can of worms.  The more you study it, the more disillusioned you become with the possibility of measuring profit at all, and the probability that everyone else who is measuring and reporting profit are doing so to their own advantage, rather than in order to provide accurate and usable information.

S

Are you talking about buying and then selling a property within a short amount of time?  You don't intend to hold the property for x years?

Alluding to what I was saying earlier, all of my information excludes the effect of tax, depreciation allowances etc. The models that I use include DCF & IRR which, whether used for projects, investments or other transactions, produces profitability data. How you then use it is up to yourself.

Tax is generally excluded as projects or investments run over several years and adding tax only muddies the results.

A couple of useful texts –

Real Estate Planning & Management – Andrew Kelty ISBN 1 876 602 18X
Property Valuation & Investment Analysis: A Cashflow Approach – Jon Robinson (Law Book Company)

A little bit of light reading in the latter however the models put forward are practical applications

OK:
Income:= Rent + Proceeds from sale
Expenditure = Purchase price, holding costs (rates, insurance, maintenance, management), improvement costs, finance costs(interest, fees, application fees), legal costs (stamp duty, legal transfers and searches), acquisition costs (building and pest inspection etc), disposal costs (RE agent commission, advertising).

Profit = Income – Expenditure.

If you hold the property over 4 years, you need to determine how you want to apportion your proft (loss) across the 4 years.  Do you want to just divide by 4?  There are a few different ways of doing it.  What is important is to decide upon a way that you feel is accurate, then use that method all the time, so that your figures are comparable.  ROI (return on investment) is a % figure representing profit divided by initial investment, times by 100.  ROI p/a means you need to take your annual profit and do the same sum. 
S

I should say that the application of tax is another whole calculation, really.

You would need to work out the annual taxable income.
Negative gearing which results in an income tax deduction you may choose to add to your total income for the profit. (ie negative gearing which results in say $1000 a year less income tax really means $1000 more income)
Don't forget to deduct CGT in the year you sell the property.
Be careful not to double count depreciation.  Depreciation should be used to calculated taxable income, but not actual profit, as you are selling the property at the end of the 4 years.  You would use either market valuation or depreciation in the profit calculation if you intended to continue to hold the property.