A good property deal is not defined by one headline yield. Purchase price, refurbishment, evidence-backed rent, finance, operating costs, return on every pound invested and the exit all have to work together. This guide applies that seven-step test to one three-bedroom terraced house in England: £155,000 asking price, £140,000 negotiated purchase, £18,000 refurbishment and £950 monthly rent.
Every figure below — and every figure in the hero image — comes from that same example. The mortgage is a £105,000 interest-only loan at an illustrative 5.5%, not a claim about the current best rate. Run your own assumptions in the Property Deal Analyser.
The deal in 60 seconds
One deal, fully reconciled
- Asking price
- £155,000
- Purchase price
- £140,000
- Refurbishment
- £18,000
- Monthly rent
- £950
- Mortgage
- £105,000
- Monthly cash flow
- £216
- Gross yield
- 8.1%
- Net yield
- 6.0%
- Cash-on-cash ROI
- 4.0%
- Verdict
- BORDERLINE
England additional-property purchase. SDLT, legal, survey, mortgage fees, refurbishment and every recurring operating allowance are included. Figures are before income or corporation tax.
The 10-minute framework
Step 1: Establish the realistic purchase price
Analyse against the price you can support with evidence, not the estate agent's headline. Check recent sold comparables of the same property type, bedroom count, condition and micro-location; note time on market; and understand the seller's position without assuming it guarantees a discount.
- Start with HM Land Registry sold-price records, then inspect the actual comparable listings.
- Prioritise similar properties nearby and adjust for condition, plot, tenure and extensions.
- Ask the agent about chain position, previous offers and why the sale has not completed.
- Set a maximum bid from your required return before negotiation begins.
The evidence-led offer
Step 2: Cost the refurbishment with a buffer
Broad cost ranges are useful for initial screening, but they are only indicative. Scope every room, separate essential works from cosmetic upgrades and obtain written contractor quotes before exchange. The canonical deal carries £18,000 including contingency; there is no second contingency hidden elsewhere in the model.
Refurbishment mini-checklist
- Structure and damp
- Roof and drainage
- Electrics
- Heating and hot water
- Kitchen
- Bathroom
- Windows and doors
- Decoration and flooring
- Landlord compliance
- Contingency
A contingency matters because surveys cannot expose every defect and opening walls can reveal additional work. If the base scope is £15,000 and the £18,000 budget includes a £3,000 buffer, record it that way so it is not accidentally counted twice.
Step 3: Prove the realistic rent
Asking rents show landlord expectations, not completed transactions. Support the £950 monthly rent with recently let properties of similar size, condition and location, plus written or emailed evidence from local letting agents. For an HMO, verify room rents, bills and occupancy separately in the HMO Deal Calculator.
- Match bedroom count, floor area, condition, parking and outdoor space.
- Separate furnished from unfurnished evidence.
- Ask what rent was achieved, not only what was advertised.
- Model voids even where demand appears strong.
Step 4: Model financing and lender affordability
At a £140,000 purchase price, 75% LTV produces a£105,000 mortgage and a £35,000 deposit. At the illustrative 5.5% interest-only rate, annual interest is £105,000 × 5.5% = £5,775, or £481.25 a month.
5.5% is a modelling assumption
Short-term funding adds a different stack of interest and fees. If the property is not mortgageable on day one, model that separately using the Bridging Finance Calculator and read Bridging Finance Explained. The Mortgage Affordability Calculator is useful for residential borrowing context; investment lenders apply their own criteria.
Step 5: Make every cash-flow deduction visible
Net operating income is rent after property operating costs but before finance. Net cash flow then deducts mortgage interest. Keeping those stages separate prevents mortgage cost from being buried inside “net yield”.
| Cash-flow item | Monthly | Annual |
|---|---|---|
| Gross rent | £950.00 | £11,400 |
| Less void allowance (5%) | −£47.50 | −£570 |
| Less management allowance (12%) | −£114.00 | −£1,368 |
| Less maintenance reserve (5%) | −£47.50 | −£570 |
| Less landlord insurance | −£29.17 | −£350 |
| Less compliance allowance | −£15.00 | −£180 |
| Net operating income | £696.83 | £8,362 |
| Less mortgage interest | −£481.25 | −£5,775 |
| Net cash flow | £215.58 | £2,587 |
The result is £215.58 monthly net cash flow, rounded to £216 in the dashboard and hero, and £2,587 annually. That is positive, but the appropriate buffer depends on financing, property type, condition, risk tolerance and reserve policy — there is no universal £150 pass/fail rule.
Run your full deal from first principles
Model purchase costs, refurbishment, finance, rent, operating expenses, yield and cash-on-cash return in one place.
Step 6: Separate yield from return on cash
These three measures answer different questions. Use purchase price — not asking price — as the denominator for property yield, and include all acquisition cash in the ROI denominator.
| Measure | Calculation | Result |
|---|---|---|
| Gross yield | £11,400 gross rent ÷ £140,000 purchase | 8.14% |
| Net yield | £8,362 NOI before finance ÷ £140,000 purchase | 5.97% |
| Cash-on-cash ROI | £2,587 cash flow ÷ £64,650 total cash invested | 4.00% |
Total cash invested
| Deposit (25%) | £35,000 |
|---|---|
| SDLT — England additional property | £7,300 |
| Legal and conveyancing assumption | £1,500 |
| Survey assumption | £450 |
| Mortgage product fee assumption (2%) | £2,100 |
| Broker fee assumption | £300 |
| Refurbishment including contingency | £18,000 |
| Total cash invested | £64,650 |
The SDLT is £7,300: 5% on the first £125,000 and 7% on the remaining £15,000 under England's higher rates for an additional dwelling. This assumes a UK-resident buyer who already owns another qualifying residential property and is not replacing a main home. Check the current position with the Stamp Duty Calculator. For a deeper explanation of the metrics, read Rental Yield vs ROI and test the return in the Buy-to-Let ROI Calculator.
Step 7: Plan the exit before entry
A plausible exit protects you if rent, rates or your own plans change. Check each route before buying, not when you need to sell.
- Owner-occupier resale: preserve a layout and finish that appeal to the wider residential market.
- Investor resale: prove rent, occupancy, compliance and operating costs.
- Long-term hold: stress-test rates, major repairs and changing regulation.
- Refinance: confirm valuation evidence and lender affordability rather than assuming equity release.
- BRRR: value must be created and refinanceable; model it in the BRRR Calculator.
- Sale after refurbishment: include selling fees, finance, tax and a slower-than-planned sale.
See BRRR Strategy Explained and HMO vs Buy-to-Let before choosing a higher-complexity strategy.
Deal verdict
Worth deeper due diligence, not an automatic purchase
At £140,000, the price has comparable support, the £18,000 refurb is manageable if quoted properly, £950 rent is plausible if confirmed, and the deal stays cash-flow positive. But £216 monthly cash flow and 4.0% cash-on-cash ROI are modest relative to the £64,650 committed. The negotiated price materially affects viability, so the deal should not be approved at the £155,000 asking price without rebuilding the mortgage, SDLT, yield and return calculations.
Common deal-killers to investigate early
A strong spreadsheet cannot repair a legal or physical problem
- Short leases: extension cost and mortgageability can change sharply as the term falls.
- Cladding and EWS1: establish whether a flat needs external-wall evidence and whether remediation liabilities remain.
- HMO planning and licensing: check Article 4 directions, planning use and local licensing before assuming conversion.
- Flood, mining and subsidence: use location searches, insurance evidence and an appropriate survey.
- Energy efficiency: the current minimum remains EPC E unless exempt; government policy sets a new equivalent EPC C standard for private rentals from 1 October 2030, so price likely upgrade work now.
- Leasehold terms: review ground rent, service charges, major works, restrictions and management quality.
- Non-standard construction: confirm lender and insurer appetite before paying for valuation.
- Structural defects and restrictive covenants: investigate anything that limits letting, alteration, refinance or resale.
Common analysis mistakes
Nine ways a spreadsheet becomes misleading
- Analysing against asking price instead of the likely purchase price.
- Using advertised rent without recently let evidence.
- Assuming full occupancy and forgetting voids.
- Ignoring maintenance and long-term replacement reserves.
- Leaving management out because you intend to self-manage today.
- Forgetting SDLT, legal, survey and mortgage acquisition costs.
- Confusing gross yield, net yield and cash-on-cash ROI.
- Modelling only today's mortgage rate rather than a stress case.
- Assuming every pound of refurbishment adds a pound of value, or buying without a credible exit.
Money Tools UK Key Takeaways
Five lessons from the £140,000 deal
- One number cannot define a good deal. Price, refurb, rent, finance, cash flow, return and exit must all work.
- Evidence comes before optimism. Use sold comparables and recently let evidence, not asking prices alone.
- Operating costs belong above finance. £950 rent becomes £696.83 NOI before the £481.25 mortgage interest.
- Cash-on-cash ROI uses all cash invested. The denominator is £64,650, not just the £35,000 deposit.
- Negotiation changes viability. At £140,000 the deal is borderline but positive; at £155,000 every acquisition and return figure must be recalculated.
Sources & references
This guide was reviewed against official sources available on 19 September 2026. Cost allowances are illustrative and should be replaced with property-specific evidence.
- GOV.UK — Stamp Duty Land Tax: residential property rates
- GOV.UK — Higher rates of SDLT for additional residential property
- GOV.UK — HM Land Registry: search sold property prices
- GOV.UK — Private rented property minimum energy efficiency standard
- GOV.UK — 2030 private rented energy-performance policy response
- GOV.UK — Check long-term flood risk
- GOV.UK — Planning permission for houses in multiple occupation
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Read guideDisclaimer: This content is for informational purposes only and should not be treated as financial, tax, mortgage, investment or legal advice.