BTL Forecasting Query (Spreadsheet)

Sausfest

Hey all, I originally posted here a few weeks back:
https://forums.moneysavingexpert.com/discussion/comment/75235649#Comment_75235649)
I was told to read up and learn, so I did.

I've put together a spreadsheet with everything I now know about what a BTL costs, what it makes on average and how to finance it. I put together a spreadsheet to give myself a forecast and ended up with a massive -£6k loss in the first year and then +£700 per annum after that and onwards.

Can somebody look over my spreadsheet below and tell me where I'm going wrong or even if i'm right?
https://ibb.co/hd2CM30

I took a lot of my % rates and averages from places like which and tried to be slightly on the side of caution. There is the small capital growth, which i'm being generous with but £700 per annum seems a bit redundant. Thanks!

AdrianC

Just look at two headline numbers, one in, one out.
£5,400 of rent after the agent fees, £3,000 of mortgage interest (actually nearer £3,400 on your suggested 4.5% interest, before repayments).

That alone should tell you that you're not going to have massive annual profits.


Then consider that the numbers you have in for mortgage fees, SDLT and legal fees alone are more than the first year's rent.

I don't know what else you're expecting with those numbers going in...

00ec25

6% yield on a 100k property - never going to make significant money on that with 75|% leveraged. You are basically gambling on not having more than 1 month void and/or spending less on repairs just to get a small improvement each year and shorten your payback period for the capital purchase costs

700 return on 25,000 invested = 2.8% net yield (excl tax)
I'll bet you can get close or better than that on other investments - MSE even lists several 2.7% 5 year fixed term savings accounts right now
Factor in the differential treatment of tax on certain investments and the picture looks even worse.

anselld

As above, 4.5% is a high mortgage rate and 6% is not a particularly high yield.

You would hope/expect rental income to increase in line with value. So *if* your 4% growth in house price proves correct you should also inflate your rental income.

10% Agent fee you cant afford on those numbers. (10% agent is about 50% of your potential profit if you managed yourself.) Agents fees may also increase when the fee ban comes in.

LL insurance is too high unless you are in a war-zone.

Void - you would be unlucky to have one every year.

Tax - There will be at least 20% of your profit but if you are a higher rate tax payer it will probably wipe out your profit due to the claw back of interest relief from HR taxpayers.

dimbo61

Which is why many people are now leaving the BTL market.
If you lose £6,000 in the first year it will take 5/6 years before you start to make a profit if ever