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Illustration B, the Leeds three-bed, clears about £650.04 a year after interest on the base sheet. That is less than £54.17 a month. The tests below move one assumption at a time.
The base case is the ledger on the examples page: price £228,000.00, rent £1,175.00 a month, 75% interest-only at 5.49%, three void weeks, management at 9.6%, and other costs of £1,895.00. Each column changes only the item in its heading.
| Measure | Base case | Rate up 1.5 points | Void stretched to 8 weeks | Repairs £3,500 over the reserve | Rent 5% below the asking rent |
|---|---|---|---|---|---|
| Cash after interest, year | £650.04 | -£1,914.96 | -£705.73 | -£2,849.96 | £53.39 |
| Cash after interest, month | £54.17 | -£159.58 | -£58.81 | -£237.50 | £4.45 |
| Gross yield | 6.18% | 6.18% | 6.18% | 6.18% | 5.88% |
| Cash-on-cash, before tax | 0.90% | -2.64% | -0.97% | -3.94% | 0.07% |
These figures are illustrations built for the page. They are not a listing, not a forecast, and not a statement of what any actual property has returned. Tax, lending, and housing rules change. Take advice from a solicitor, a tax adviser, and a mortgage adviser before you commit money.
Buy-to-let products reprice. A lender may also test affordability at a higher rate than the pay rate, often with a stress margin. If your year only works at the teaser, the refinance in two or five years is the real underwriting. We add 1.5 percentage points and leave every other line alone.
Three weeks is a tidy changeover. Eight weeks is a failed check-out, a quiet January, and a council tax bill while the house is empty. Council tax on an empty home is local and time-limited; do not assume a long exemption. The void line here is lost rent only.
The reserve is already in the base case. A further £3,500 is a boiler and a damp patch, not a renovation fantasy. The rent cut is five percent: the asking rent on the advert, not the rent a careful tenant agrees after the survey of the street.
We do not publish a universal hurdle rate. A landlord with no borrowing can live with a different month from a landlord whose salary must cover a shortfall. The useful test is personal: if the stressed column is a number you cannot fund from other income for a year, the base column was never the decision.
Capital growth does not pay a stressed month unless you sell or release equity, and both of those have costs and, often, tax. Treat them as a separate essay. They are not a patch on this table.
Stress your own figures