Rental yield & cashflow

Whether a hold strategy works depends on interest cover and cashflow after real void and maintenance allowances, not on the headline yield.

Acquisition

Purchase price

Acquisition costs

Tax, legals, survey

Refurbishment

Income & running costs

Monthly rent

Void allowance

weeks/yr

Management

% of rent

Maintenance

£/yr

Insurance

£/yr

Service charge / ground rent

£/yr

Mortgage

Mortgage balance

Rate

% pa

Repayment basis

Result

Total invested£237,000

Gross annual rent£13,800

After voids2 weeks void allowed£13,269

Operating costs£2,577

Net operating income£10,692

Gross yieldOn purchase price6.57%

Net yieldNOI on total invested4.51%

Annual mortgage cost£8,820

Annual cashflow£1,872

Monthly cashflow£156

Cash invested£79,500

Cash-on-cash return2.36%

Interest coverMost BTL lenders stress at 125–145%121%

Assumptions worth challenging

Interest cover below 125% is below most BTL lenders' stress requirements.

Check the acquisition tax on this purchase

Indicative figures only. Tax treatment of rental income differs materially between personal and corporate ownership and is not modelled here; nor are ground rent, licensing, EPC upgrade obligations or capital expenditure cycles. This is not tax, mortgage or investment advice.