Illustration A
Two-bed conversion flat, London N17
- Price
- £385,000.00
- Headline rent
- £1,750.00 / month
- Gross yield
- 5.45%
- Cash after interest
- -£2,020.76 / year
- Cash-on-cash, before tax
- -1.59%
Real estate cash flow · United Kingdom
The rent is the easy line to read.
Orbitalevault is a London blog about residential cash flow. We take a headline rent apart until the month shows what is left after voids, repairs, interest, and the tax rules that apply to an individual landlord.
A month from illustration A
-£168.40
Cash after interest, before income tax, on a two-bed London flat priced at £385,000.00 and let at £1,750.00 a month. The gross yield is 5.45%. The month is still short.
- Rent in
- £1,750.00
- Interest out
- £1,263.28
- SDLT on day one
- £28,500.00
- Cash put in
- £127,200.00
Gross yield ranks listings. It does not pay the boiler.
The three illustrations below use the same discipline: additional-dwelling stamp duty for a UK-resident buyer in England, an interest-only loan at 75%, a named void, and a repairs reserve. None of them is a property we are offering. The point is the gap between the sticker and the year.
Illustration B
Three-bed terrace, Leeds
- Price
- £228,000.00
- Headline rent
- £1,175.00 / month
- Gross yield
- 6.18%
- Cash after interest
- £650.04 / year
- Cash-on-cash, before tax
- 0.90%
Illustration C
Five-room shared house, Nottingham
- Price
- £340,000.00
- Headline rent
- £2,900.00 / month
- Gross yield
- 10.24%
- Cash after interest
- £6,908.04 / year
- Cash-on-cash, before tax
- 5.30%
Notes from the desk
Longer reading on the three mistakes we see most often: trusting gross yield, treating a void as bad luck, and forgetting that Section 24 taxes a profit the bank account does not hold.
How a note is built
One month, written out, then stressed.
- Price the day-one cash. Deposit, stamp duty, legal work, survey, and any licence works. If it is not cash, it does not belong in the yield.
- Price a dull year. Rent, a void, management, insurance, compliance, service charge or bills, and a repairs reserve. Then interest.
- Move one assumption. A higher rate, a longer void, a rent that does not stick. If the year only works on the first sheet, it does not work.
Send a deal sheet, or a correction.
The desk reads at 49 Coniston Rd, London N17 0EX, UK. We answer editorial questions. We do not arrange mortgages, and we do not tell you whether to buy.