GuideBuying a home
Buy-to-let sums
Rough yearly sums for a home you let out: rental yield, what is left after costs and the mortgage, and the cash needed to buy.
Use it
Example
A £400,000 flat with a £100,000 deposit, an interest-only mortgage at 5%, £1,800 a month rent, 2 empty weeks, a 10% letting agent and £100 a month for repairs. Gross yield 5.4%, net yield 4.4%. The mortgage costs £1,250 a month and about £208 a month is left. You need £132,000 on the day: the deposit, £30,000 stamp duty at the rates for an extra home, and £2,000 legal and survey fees. Try it in the buy-to-let calculator.
How we calculate it
- Gross yield is a year's rent divided by the price.
- Rent after empty weeks is a year's rent times (52 − empty weeks) ÷ 52.
- Running costs are the agent's share of the rent collected plus service charge, ground rent, insurance and maintenance.
- Net yield is rent after empty weeks minus running costs, divided by the price. Mortgage payments are not taken off.
- Interest-only pays just the interest; repayment also pays off the loan over the term.
- Cash flow is what is left after the mortgage; below zero, you top it up yourself.
- Stamp duty uses the stamp duty table, with the extra-home rates unless you untick them. Cash needed is deposit plus stamp duty plus legal and survey fees and any work.
- The yearly return on that cash is the yearly cash flow divided by the cash needed.
The fine print
- Everything is before income tax. Rental profit is taxed as income, and landlords who own in their own name get a 20% tax credit on mortgage interest instead of deducting it.
- Optional costs left blank are listed as unknown and left out of the totals, never quietly counted as zero.
- Rents, rates and costs change; nothing here predicts them.
- Not financial advice. These are rough sums with your own numbers; check them with a solicitor, mortgage broker or tax adviser before you rely on them.