Methodology for this buy-to-let profit calculator
This section provides details on all of the information collected, presented and calculated in the buy to let profit calculator on this page.
Read this section if you have any questions about what the information above actually means or if you'd like to fully understand the calculations that are being performed and would like to be able to use them elsewhere.
- Expected price
- Enter the full price that you expect to be paying for the property. If further along the process, this would be the amount of your accepted offer for the property.
- Initial repair cost
- This should be the amount you're budgeting for any repairs, refurbishment or up-front work you're expecting to do. It could range from the cost of a professional snagger on a new build, through fitting a new kitchen or applying some paint, to major building works that involve moving walls and changing layouts.
- Forecast monthly rent
- Beware to enter the monthly rent here, the calculator will multiply it up for answers that require an annual figure. You can research possible rents by talking to local agents, performing rental searches on Rightmove or Zoopla (remember to also search for "let agreed" properties to help guage demand). You might also find the free property tools browser extension useful as it includes local rents data.
- Cash available
- You can leave this blank and the buy-to-let calculator will tell you the minimum amount of cash you need to make the purchase work with the mortgage criteria (in the other fields). Alternatively you can enter the amount of cash you'd like to put into the project. The calculator will check this is above the minimum (you'll see a red highlight if it's not) and beyond that it will reduce the mortgage used. Enter a large number here if you'd like the run the profit calculations with no mortgage at all.
- Legal fees
- This field is for your conveyancing and other legal fees involved in the purchase transaction.
- Mortgage rate (%)
- The interest rate for the mortgage loan you're expecting to get. Typically this would be a fixed rate, or if not it would still be the "current" rate - you might like to try running the calculations with a few higher rate scenarios to see what the effect on your buy-to-let profit would be.
- Mortgage fees
- Mortgages vary greatly but there are often setup fees involved. Put that amount in this field and the calculator will include it as an investment cost. Not that in some situations you might actually want to consider mortgage fees as an ongoing cost, for example if you're expecting to remortgage every two years to maintain fixed rates the calculations work better with those fees as an expense. You can use the PaTMa Prospector calculator to fully customise expenses to cover such a scenario.
- Max LTV (%)
- Enter the maximum Loan To Value permitted by the mortgage you expect to use. The calculator will use this to check (and limit) the mortgage used in the calculations.
- Required rental cover (%)
- Also known as the Interest Cover Ratio, this is the percentage Rental Cover required by your mortgage.
- Stress rate (%)
- The mortgage interest rate that is use in the Rental Cover calculation for you mortgage. This will affect the maximum mortgage that you can get.