Buy-to-Let Calculator
Last updated: 27 June 2026
Reviewed by Gavin Meiring, Lead research and primary author · Doctoral Candidate (Corporate Governance) · Research and drafting assisted by AI
- Buy-to-let mortgages only became a mainstream UK product in 1996, when the Association of Residential Letting Agents teamed up with UCB Home Loans to launch the first dedicated range.
- The UK's 1988 Housing Act created assured shorthold tenancies, giving landlords the right to regain possession of their property — the legal foundation on which the buy-to-let boom was built.
- The '1% rule' used by many landlords holds that monthly rent should equal roughly 1% of the purchase price for a property to be worth it — a rule of thumb, not a law of finance.
Buy-to-Let Calculator
A buy-to-let calculator works out the rental yield, monthly cash flow, and return on investment for a residential property purchased as a rental investment. It is used by prospective landlords assessing whether a property is worth buying, existing landlords reviewing portfolio performance, and investors comparing property returns against other asset classes.
How to Use the Buy-to-Let Calculator
- Enter the property purchase price and any additional acquisition costs (stamp duty, legal fees, survey).
- Enter the expected monthly rental income.
- Enter the monthly costs: mortgage interest, letting agent fees, insurance, maintenance, and any ground rent or service charge.
- Enter the deposit amount and mortgage details (interest rate and term) if applicable.
- Click calculate to see gross yield, net yield, monthly cash flow, and return on equity.
The Formula
Gross rental yield = (Annual Rental Income / Property Value) x 100
Net rental yield = ((Annual Rental Income - Annual Costs) / Property Value) x 100
Monthly cash flow = Monthly rental income - Monthly mortgage payment - Monthly running costs
Return on equity = ((Annual Net Income) / (Total Cash Invested)) x 100
Total cash invested = Deposit + Stamp duty + Legal fees + Refurbishment costs
Real-World Example
Property purchase price: £250,000. Monthly rent: £1,300. Mortgage: £175,000 at 5.5% interest-only (monthly payment: £802). Annual costs: letting agent (10% of rent = £1,560), insurance (£600), maintenance allowance (£600), total: £2,760 per year (£230 per month).
Gross yield: (£15,600 / £250,000) x 100 = 6.24%
Net income: £15,600 - £2,760 - £9,624 (mortgage) = £3,216 per year
Monthly cash flow: £1,300 - £802 - £230 = £268
Total cash invested: £75,000 deposit + £10,000 acquisition costs = £85,000
Return on equity: £3,216 / £85,000 = 3.78%
Tax Considerations for Landlords
Since April 2020, individual landlords can no longer deduct mortgage interest from rental income before calculating tax. Instead, they receive a 20% tax credit against the mortgage interest. This significantly affects higher-rate taxpayers: a landlord in the 40% tax bracket on a geared property may pay tax on the gross rental profit while making a cash loss after tax and mortgage payments. The change has made buy-to-let investment more complex for higher earners. Owning property through a limited company avoids this restriction (companies can still deduct mortgage interest), but attracts corporation tax and creates complications around drawing income. Stamp Duty Land Tax (in England) adds a 3% surcharge on additional residential property purchases. Annual rental income must be declared on a self-assessment tax return, and allowable deductions include repairs and maintenance, letting agent fees, landlord insurance, and professional fees, but not mortgage capital repayments.
Frequently Asked Questions
What is a good rental yield for a buy-to-let property? Gross yields of 6% or above are generally considered reasonable for residential buy-to-let in most UK markets outside London. Central London typically yields 3 to 4.5% gross, with higher capital growth expectations compensating. Northern cities such as Manchester, Leeds, and Liverpool have historically offered higher yields (6 to 8% gross in some areas) with lower entry prices. Net yield after all costs and tax is the more meaningful figure; a gross yield of 7% can become 3 to 4% net after mortgage costs, management fees, and tax.
Should I buy with a mortgage or cash? Cash purchases eliminate mortgage costs and maximise monthly cash flow, and since 2020 are more tax-efficient for higher-rate taxpayers. However, using a mortgage amplifies your return on equity if the property appreciates: a 10% rise on a £250,000 property is £25,000, which gives a much higher return on an £85,000 cash deposit than on the full £250,000. The optimal approach depends on the net cash flow position after tax, alternative uses for the capital, and your risk tolerance for geared property exposure.
What void periods should I factor in? Most advisers recommend allowing for 4 to 8 weeks of void (unoccupied) periods per year in your financial model. This means using 11 months of rent in annual calculations rather than 12, or approximately 92% occupancy. Properties in areas with high tenant demand and strong transport links typically have shorter voids. Including a void period in your model prevents over-optimistic cash flow projections from distorting your investment decision.
What are my obligations as a landlord? UK landlords must meet legal requirements including providing a gas safety certificate (annually), an electrical installation condition report (every 5 years), an Energy Performance Certificate (minimum E rating), fitting smoke alarms on every floor, carbon monoxide alarms in rooms with solid fuel appliances, protecting the tenant's deposit in a government-approved scheme within 30 days, and providing a valid "how to rent" guide. Local authority licencing requirements (selective, additional, or HMO licences) may also apply. Failure to comply can result in fines, inability to serve valid eviction notices, or criminal prosecution.
Also try these free tools related to Buy-to-Let Calculator: - Mortgage Calculator
A second worked example on a smaller property
The example above uses a £250,000 property with a 30% deposit. This one works through a cheaper property with less equity in it, which is the shape many first purchases take.
Purchase price: £180,000. Monthly rent: £950, so £11,400 a year. Mortgage: £135,000 at 5.5% interest-only, which is a 75% loan to value and a monthly payment of £618.75. Deposit: £45,000. Acquisition costs: £6,500. Annual running costs: letting agent at 10% of rent (£1,140), insurance £480, maintenance allowance £480, so £2,100 a year, or £175 a month.
Gross yield: (£11,400 / £180,000) x 100 = 6.33%.
Net income: £11,400 - £2,100 - £7,425 (mortgage) = £1,875 a year.
Monthly cash flow: £950 - £618.75 - £175 = £156.25.
Cash invested: £45,000 deposit + £6,500 acquisition costs = £51,500.
Return on equity: £1,875 / £51,500 = 3.64%.
The gross yield is higher than the £250,000 example and the return on equity is lower, which is the normal trade on a smaller deposit. Less cash up front means a larger loan, and the extra interest comes out of the net figure.
The two properties side by side
| Line | £250,000 property | £180,000 property |
|---|---|---|
| Purchase price | 250,000 | 180,000 |
| Monthly rent | 1,300 | 950 |
| Deposit | 75,000 | 45,000 |
| Acquisition costs | 10,000 | 6,500 |
| Loan to value | 70.0% | 75.0% |
| Monthly mortgage interest | 802.08 | 618.75 |
| Annual running costs | 2,760 | 2,100 |
| Gross yield | 6.24% | 6.33% |
| Annual net income | 3,216 | 1,875 |
| Net yield | 1.29% | 1.04% |
| Monthly cash flow | 267.92 | 156.25 |
| Cash invested | 85,000 | 51,500 |
| Return on equity | 3.78% | 3.64% |
Gross yield across prices and rents
Gross yield depends on two numbers, and this grid shows how the same rent reads very differently against three purchase prices:
| Purchase price | Rent £950 a month | Rent £1,100 a month | Rent £1,300 a month |
|---|---|---|---|
| 180,000 | 6.33% | 7.33% | 8.67% |
| 250,000 | 4.56% | 5.28% | 6.24% |
| 320,000 | 3.56% | 4.12% | 4.88% |
For a 6% gross yield on a £250,000 property the rent has to reach about £1,250 a month, since £250,000 x 6% / 12 = £1,250. On a £180,000 property the same target needs £900 a month. That arithmetic is worth doing before a viewing, because it turns a target yield into a rent the property has to achieve.
What a single void month costs
Voids are the cost that new landlords most often leave out. On the £250,000 property, using the page's own figures, each month the property stands empty removes a month of gross rent but also saves the letting agent's commission on it:
| Months of rent collected | Gross rent | Agent fee | Net income | Monthly cash flow | Net yield |
|---|---|---|---|---|---|
| 12 | 15,600 | 1,560 | 3,216 | 268.00 | 1.29% |
| 11 | 14,300 | 1,430 | 2,046 | 170.50 | 0.82% |
| 10 | 13,000 | 1,300 | 876 | 73.00 | 0.35% |
| 9 | 11,700 | 1,170 | -294 | -24.50 | -0.12% |
One void month removes £1,170 of net income, which is about a third of the year's profit. Three void months turn the property into a cash loss. That is the arithmetic behind the 4 to 8 week allowance the FAQs above recommend, and it is the reason a property with a thin margin can look fine on a spreadsheet and lose money in practice.
Interest rate sensitivity
The mortgage is the largest single line, so the interest rate moves the result more than any other input. On £175,000 interest-only with rent of £1,300 and £230 a month of running costs:
| Interest rate | Monthly interest | Monthly cash flow |
|---|---|---|
| 4.0% | 583.33 | 486.67 |
| 4.5% | 656.25 | 413.75 |
| 5.0% | 729.17 | 340.83 |
| 5.5% | 802.08 | 267.92 |
| 6.0% | 875.00 | 195.00 |
| 6.5% | 947.92 | 122.08 |
A rise from 4.0% to 6.5% removes £364.58 a month, which closes most of the gap between this property and a break-even position. Rates on buy-to-let products are typically priced above residential rates for the same term, so the lower half of that table is the optimistic end.
What the yield figures leave out
- Yields here are calculated on the purchase price, not on the cash invested. That is why a geared property can show a 6.24% gross yield alongside a 3.78% return on equity.
- The mortgage figures assume interest-only. A repayment mortgage lowers the monthly cash flow and builds equity that these columns do not count.
- The maintenance allowance is a reserve, not a measured cost. On an older property with a new boiler and roof to come, budget more.
- Void periods, council tax while empty, arrears, and refurbishment between tenancies all sit outside these figures. The void table shows what leaving one out costs.
- Stamp duty, legal fees and refurbishment reduce the return on equity by raising the cash invested, and they leave the yield on the purchase price untouched.