Buy-to-Let Deal Analysis: The 7 Numbers That Actually Matter

2026-08-31

Buy-to-Let Deal Analysis: The 7 Numbers That Actually Matter

Two Numbers Aren't Enough

Property forums are full of posts that start with "I found a property for £180,000 that rents for £900/month — is it a good deal?" The answer is always the same: you don't have enough information to know. Price and rent are two of the seven numbers you need. Without the other five, you're guessing.

Here are the seven numbers that determine whether a buy-to-let deal actually makes money, in the order you should calculate them.

1. Cash Invested

Not the property price — the actual cash leaving your bank account. Deposit, stamp duty, legal fees, survey, broker fee, arrangement fee, and any upfront renovation. This is the money at risk and the base for your ROI calculation.

On a £180,000 BTL at 75% LTV: deposit £45,000, stamp duty £8,500, fees ~£3,500 = £57,000 cash invested. Most investors quote the deposit and forget the rest, which flatters the ROI by 20%.

2. Gross Yield

The quick screening metric. Annual rent divided by purchase price.

£900/month × 12 = £10,800 ÷ £180,000 = 6.0% gross yield.

Anything below 5% in the current rate environment is almost certainly cash-flow negative with a mortgage. Between 5-7% is the viable zone. Above 7% is strong — but verify the rental evidence carefully, because high yields sometimes signal high risk areas.

3. Monthly Cash Flow

Rent minus every monthly cost: mortgage, management, insurance, maintenance allowance, ground rent/service charge, and any other recurring expense.

£900 rent - £562 mortgage (£135k at 5%) - £90 management (10%) - £30 insurance - £72 maintenance (8%) - £25 accounting = £121/month positive cash flow.

If this number is negative, the deal costs you money every month. That doesn't automatically make it bad — capital growth can compensate — but you need to fund the shortfall from income, indefinitely.

4. Net Yield

Annual cash flow (after all costs and voids) divided by purchase price. This is the real return the property generates as a percentage of its value.

£121/month × 12 = £1,452, minus one month void (£900) = £552 annual cash flow. Net yield = 0.31%.

That's dramatically lower than the 6% gross yield. This is why gross yield is misleading — it hides the gap between collecting rent and keeping profit. A good net yield for a leveraged BTL in the current environment is 2-4%. Anything above 4% is excellent.

5. ROI (Return on Cash Invested)

Annual cash flow divided by cash invested. This measures the return on your actual money, not the property value.

£552 ÷ £57,000 = 0.97% ROI. Your £57,000 is earning less than 1% in cash returns. A savings account would beat this.

But ROI doesn't include capital appreciation. If the property grows 3% per year (£5,400), your total return is £5,952 on £57,000 = 10.4%. That's the full picture — cash flow plus growth. The question is whether you believe the growth assumption.

6. Stress-Tested Cash Flow

What happens to your cash flow when rates rise 2% at your next remortgage? What if you have two months void instead of one? What if rent drops 10%?

At 7% interest (stress +2%): mortgage becomes £787/month. Cash flow drops to -£104/month. You're paying £1,248/year to hold this property. Can you fund that from income? For how long?

This is the number that separates sustainable investments from ticking time bombs. Every deal should survive a 2% rate stress. If it doesn't, either the price is too high or the deposit is too low.

7. Break-Even Interest Rate

The interest rate at which your monthly cash flow hits exactly zero. Above this rate, you're losing money every month.

In our example, the break-even rate is approximately 5.4%. With a current rate of 5%, you have only 0.4% of headroom before the deal goes negative. That's razor-thin.

A comfortable deal has at least 1.5-2% of headroom between the current rate and the break-even. This gives you a buffer against rate rises and unexpected costs.

The Seven Numbers in Summary

For the £180,000 property at £900/month rent:

Is this a good deal? The gross yield looks decent. The cash flow is positive — just. But the stress test fails, the ROI is under 1%, and the break-even rate is dangerously close to the current rate. This deal works in perfect conditions and falls apart under any pressure.

The right move: negotiate the price down to £165,000 (gross yield rises to 6.5%), or find a property that delivers the same rent at a lower price. The maths tells you exactly what to offer.

Do This for Every Deal

Seven numbers. Five minutes. The difference between a deal that builds wealth and one that bleeds it is always in these calculations. Don't rely on gross yield alone, don't trust agent estimates without checking comparables, and never skip the stress test.

Run the numbers. Every time. No exceptions.