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How To Buy To Let Property On A Realistic Budget: Costings, Cash flow, ROI and Cash Margin

Property investment is a capital hungry business – the purchase of a property is just the beginning of a long line of costs.

You need more than you think.  (Rule: 52)

Estate agents, glossy brochures and TV programmes deal in the “headlines” of buy to let; the sort of sums which make you think property is a short-cut to becoming an over-night millionaire.

Property can make you money – but it’s also going to cost you money.  And there’s a lot of hidden expenses involved.  These are the boring details that many don’t like to deal with – talking about solicitors fees and stamp duty takes some of the sexy sheen away from which kitchen worktop to opt for.

But the devil is in the detail.

If you want to get real about buy to let, you need to factor all these costs in to your budget – because as you will see with my “easy” buy to let property experiment – the “untalked about” costs are pretty high.  If you need a point of comparison, check out the numbers from the Stevenage property project.

The “easy” buy to let property experiment case study: The Property

This three bedroom, mid-terraced Victorian property with attic conversion is located in Waltham Cross, approx. 15 miles from Central London.  It is a spacious property offering 129 sqm (1388 sqft) of internal accommodation with a small rear garden.  It is 3 minutes walk from the train station which gets you into London in 20 minutes.  The M25 and A10 are within 5 minutes drive.  The town centre is a 5 minute walk and good schools are located close by.  The area is a likely candidate for Cross Rail in the future.

The “easy” buy to let property experiment case study: The Numbers

The property was purchased before auction for £250k.

Here is the breakdown of all administrative expenses (including VAT):

Mortgage broker admin fee  £        199.00
Mortgage admin fee  £    1,999.00
Mortgage completion fee  £          35.00
Mortgage surveyor fee  £        355.00
Search fee check (flood check)  £          42.00
Auction house fee  £        540.00
Solicitor purchase fee  £        660.00
SDLT form  £         60.00
Bank transfer fee  £          42.00
Chancel indemnity fee  £          15.30
Stamp duty  £    2,500.00
Land registry fees  £        270.00
Land registry search fee  £            3.00
Bankruptcy search fee  £            2.00
Contribution to sellers legal costs  £    1,872.14



Mortgage & Equity: 

A buy to let mortgage of £172,465 was arranged to finance this property.  The product was a 5 year fix at 4.49%.

The equity to complete the property purchase was:  £77,535

Renovation costs: 

The before and after photos of the property renovation are here.

The breakdown of all costs including labour and materials:

Kitchen (inc upgraded worktop; hob, oven and fan; sink & tap, handles)  £    1,237.12
Kitchen fitting  £        350.00
Flooring  £    1,300.00
Plumbing (inc. new boiler with 7 year guarantee, pipework etc)  £    2,135.00
Double glazing (windows & doors)  £    3,244.00
Bathroom suite (bought new off eBay)  £        120.00
Bathroom shower & taps (new off eBay)  £          55.00
Partial rewire (inc new board with RCD, sockets, lights, periodic test cert)  £        975.00
Labour (plastering, tiling, carpentry etc)  £    1,560.00
Labour (removal kitchen, bathroom, tiles etc)  £        450.00
Materials (paint, tiles, etc)  £        660.51
Gas & Elec meter usage  £          30.00

The totals:

Administrative and renovation costs totalled:  £20,711.07 in addition to the £250,000 purchase price of the property.

A mortgage was raised to finance the purchase of the property.

Equity of £77,535 was required to purchase the property plus renovation and admin costs means the total cash invested in the property is:  £98,246.07

Cash flow, ROI and Cash Margin

Most people in the property industry quote gross rental yields to illustrate performance.  However, because I look to take a “wage” from my property investments then I calculate property performance according to different indices.  Unlike many others, I also include the monthly running costs to calculate how much money will be made every month.

You will note, none of the figures below allow for capital appreciation.  If you want more information on how to run the numbers and make calculations check out The Rules.

The total cash invested in this property is: £98,246.07

The property is rented (single family let) at £1450 pcm: £17,400 per annum

The monthly mortgage payments (on 5 year fix) are: £652 pcm:  £7824 per annum

At first glance these numbers look great: a potential profit of £9576 per year (£798 per month).  However, you need to factor in expenses and voids throughout the year.  While this property is newly renovated and in a high demand area, it is best to always prepare for a worst case scenario.  I use an easy rule of thumb; I allow 10% of the annual rent to cover maintenance costs (inc. insurance, CP12 etc)  and I allow for one month void per year.  I self-manage this property.

This means from the monthly “profit” I need to allow for the following expenses:

Void allowance: £120.83 per month (One month void per year, calculated as £1450/12)

Maintenance allowance: £145 per month (Calculated at 10% of annual rent)

To calculate the realistic Monthly Cash Flow, you do the following:

Monthly Income (MI) – Monthly Expenses (ME)

The Monthly Cash Flow (MCF) figures for this property are:

  • Rental income: £1450 per month
  • Minus:
  • Mortgage interest: £652 per month
  • Void allowance: £120.83 per month
  • Maintenance allowance: £145 per month

This means the realistic Monthly Cashflow of this property is:

£1450 (MI) – £917.83 (ME) = £532.17 (MCF)

£532.17 is the surplus cash the property will make every month after taking into account the estimated expenses.


To calculate the Return on Investment (ROI) you do the following:

ROI = Monthly Cash Flow x 12 Months/ Total Cash Invested

(£532.17 x 12/ £98,246.07) x 100 = 6.5%

The ROI shows the annual return is 6.5% on the cash invested in the property, after estimated expenses.


To calculate the Cash Margin you do the following:

Cash Margin = Monthly Cash Flow/ Monthly Income

(£532.17/£1450) x 100 = 36.7%

A Cash Margin of 36.7% means I get to keep, on average, over one-third of the rent I collect after costs.  The higher the margin means the more money there is to be made and, the better buffer you have if rents fall or costs increase.

Was the project worth it?

This property has been bought as a long-term investment.  I am happy with the results achieved and believe this property performs well as both a day-to-day rental income producer and *takes her crystal ball* should perform well in the future with regards capital appreciation.

Only time will tell if this turns out to be an “easy” buy to let – but for now, signs are promising.

If you missed the property renovation videos, or just fancied a binge-fest on the buy to let renovation- you can find them all here:

Property Renovation Kick Off

Week 1

Week 2

Week 3

Week 4

Week 5: It’s a wrap!

  1. Sara

    Sam, FANTASTIC job. Loved seeing the progress from week to week and enjoyed all your videos. When I saw your figures I cringed when I saw you had opted for a 5 yr fixed rate mortgage. I have had 2 fixed rates for 5 yrs on my buy to lets in the past, and I will always regret it. I don’t mind the “fixed rate” but I have found that over time, 2 yrs is a safe enough term to get a fixed rate, then you can always renegotiate and there are always competitive rates going, but to be locked in for 5 yrs….hummm I’ll NEVER do that again, but that’s my person experience. So are you already planning the next purchase???? CAN’T WAIT to see what you have in store. GOOD LUCK!!!

    1. Sam

      Thanks so much for your lovely comments and I am pleased you have enjoyed the experiment. I am seriously very happy with 5 year fixed rate mortgages, I have a number of them – and keep going back for more! Two years passes too quickly and when you work out the admin fees, surveyor fees, legal fees etc – the costs involved can get pretty high if you re-mortgage so often. You need to factor these costs in.

  2. Jason

    Thanks Sam for your frank figures. Much better than the Homes under the Hammer “plus mortgage and solicitors fee” vagueness! I think mortgages are a personal choice due to your circumstances (if there was a definitive answer as to which is financially best then people would only take out that type of mortgage). In this case, as it’s an “easy buy-to-let”, then a long term fixed is probably appropriate for it’s predictability and no more mortgage paperwork for five years. Hope it goes well for you.

  3. Matt

    I started following your blog at the start of the Easy BTL experiment but this is the post I’ve really been waiting for. I found your Stevenage property previously but this analysis goes beyond that and really gives a good feel for what I need to consider as I delve deeper into BTL. It also gives me some benchmark figures for ROI and Cash Margin which I think is great.

    Presumably you can use ROI and Cash Margin to compare the effectiveness of one investment with another. I suppose it’s possible to find yourself in a situation where these indicators suggest you should consider selling off an inefficient investment?

    1. Sam

      Hi, I’m pleased the detail has helped you. Yes, these indices can also be used to compare investments and also on properties you currently own to indicate how they are performing – good and bad!

  4. Rabh

    Great writeup. Just one question. Unless I’m missing something, is there any reason you paid £250,000, rather than £249,999.99, which would have saved you money in stamp duty fees?

  5. Kiki Right

    Hi Sam,
    Great job and in such a short time too. Well done.
    I really like the breakdown of costs you have provided, including every item so us aspiring newbies get to understand the reality of property investing for buy to let.

    There’s just one thing, you mention in the article that you self-manage. Do you also arrange the lets yourself and if so how do you go about this? Where you do use an agent to find your tenants, what do you consider to be a reasonable fee for letting a property? And what would you expect the agent to provide for this fee?

    1. Sam

      Hi, thanks I am glad it gives you a good insight. I use agents for “Let only” or if the property is close-by then I look to do an advertise only option – i.e. they just advertise the property and I show the property, do referencing, paperwork etc. As an experienced landlord and ex-letting agency owner this is an easy option for me. However, I would be hesitant to recommend this route to a new investor as you need to ensure you have undertaken the correct procedures. There are many online letting agents who offer a hybrid ‘pic’ n ‘mix’ model as I have suggested. UPAD are the biggest and most well-known, however there are many others who offer similar services at varying price points.

  6. Simon Topple

    Blimey that’s a lot to get into the property – nearly £100k.

    My last purchase was £92,500 with a 25% deposit of £23,125 and refurbishment and fit out costs of around £5,000. Gross rent on multi let is £1,300 per month with costs of £150pm for utilities, and £265 for a mortgage., so around £13788 gross minus approx £4984. So around £8804 cashflow? On an investment of approx 28k it’s a 31% return. I’m confident of it valuing up at £110k as we bought it reasonably cheaply…

    1. Sam

      Thanks for your comments Simon, yes it is a fair bit of money. However, this purchase has been completely different; I am looking for an “easy” buy to let. I am not looking to pull money out in the short-term – re-mortgaging is incredibly expensive with current admin fees. I want a single let in an area close to me: Herts/ London. Your purchase sounds fabs – but would not have met with my purchase criteria – I don’t want to spend time running a HMO! I also want to be invested in an area close to London with strong capital potential.

  7. George

    Thanks for the detailed figures! But I note that you have not included the cost of the time YOU spent on this project (sourcing the property, planning the works, decorating, cleaning, managing the project, letting it, etc.) Surely that could add to thousands of pounds. Am I being pedantic?

    1. Sam

      Nope, you are bang on. I added this project (which took me 5 weeks to complete part-time) on top of my current work load. Out-sourcing this would have cost a lot. I have undertaken this as part of my role of being a property investor.

  8. James Guthrie

    Hi, Sam, love your project, I think moving to better up market areas
    is definitely the right way to go , I just wondered if you build up your portfolio on interest only mortgages what level of finance do you carry across your portfolio and what is your exit strategy . Keep up the good work. James
    and what is your exit strategy

    1. Sam

      Hi, thanks James. I hold a variety of mortgages from Interest Only to Repayment and varying LTVS. In recent times I have not re-mortgaged properties due to the high fees involved and my decision to keep LTVs low. With the London properties I own this means the LTVs are now pretty low given the capital growth over the past few years. With regards my exit plan, I intend to start swapping around some investments (selling some and replacing with others) and eventually consolidating to fewer properties.

  9. Anna Cooper

    This article was a great introduction to the ‘real costs’ associated with property development. It has definitely given me some food for thought.

  10. James Guthrie

    Hi Sam, Now that your “Easy Buy To Let ” has been finished I have
    been waiting for the sequel of the ” Easy Buy To Let Portfolio ” . How
    many properties would you have 10 or 20 ? .

    Regards James

    1. Sam

      Hehe. Well, that depends on: where they are; what tenants are in; how much rent and profit; LTV & finance deal and capital growth projections. That’s off the top of my head – can you add more?

      1. James Guthrie

        Hi Sam, yeah your right , there are quite a few considerations, as well as capital gains tax when sell and stamp duty when you buy again, it does make it difficult to swap your properties, There is definitely a book
        there. Regards James , Love you books love your blog

        1. Sam

          Yes, you are right to consider those. You can at least sell one property per year and use your CGT allowance. Like the idea of the book! Glad you enjoy – have you seen I’m about to launch Biddsy? Am hoping you’ll also like!

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