5 Calculations You Need To Know As A Property Investor

There are a number of buy to let calculators that help property investors make informed decisions about prospective property investments.

Buy to let calculators are specially designed financial tools that allow a property investor to calculate key financial metrics for a buy to let property.  Once data has been inputted, the buy to let calculator should then calculate the income and expenses of a property, as well as the potential rate of return on their investment.  This should help a property investor determine if the specific property is an appropriate investment for them.

Many of these buy to let calculators allow investors to see what the rental yield, mortgage costs and loan to values, and stamp duty are estimated to be. You input the numbers of a specific deal, and then the buy to let calculators do all the maths for you instantly.

These types of buy to let calculators allow investors to effectively and quickly compare different deals and understand whether potential investments could fit their personal financial goals.

Here are five key buy to let calculators that will help you along your property investment journey – all in one place. We’ll cover the importance of these calculations, what they mean, and how they can be an important part of your decision-making as a property investor.

Rental Yield Calculator

Rental yield is based on a property investor letting out the property to a tenant and is a metric showing they are expected to earn across a year. This figure is impacted by a number of factors.

Rental yield buy to let calculators can help you analyse the income generating potential of a prospective investment opportunity. At Property Investor Academy, we provide free gross rental yield and net rental yield calculators for single-let properties.

These buy to let calculators will help you work out how much income you’re projected to earn from a property each year. Rental yield is a key way to measure how well a property is set to perform and can be used to compare different properties and investments.

Gross rental yield

Gross rental yield is calculated by dividing the annual rent by the property purchase price. This calculation gives you a percentage, showing an estimate of how much income will be generated by the property every year.

Net rental yield

Net rental yield is calculated the same as gross rental yield. However, it takes into account all of the expenses incurred by the property investor as a result of owning and letting the property. This includes maintenance costs and management fees.

What is a good yield?

As rental yields are one of the most important metrics for property investors, this is a key consideration when assessing whether to purchase a property investment. The average UK rental yield sits at 3.63%, according to SevenCapital, so any yield above that level is considered a higher rental yield.

Keep in mind that rental yields can change from postcode to postcode and can also fluctuate over time. It can be particularly beneficial to look for locations that offer long-term growth and high levels of tenant demand, in addition to more affordable property prices.

HMO yield calculator

Houses of multiple occupation (HMOs) are a more complex form of property investment than single lets. At Property Investor Academy, we have a HMO yield calculator to help you evaluate a potential HMO property investment and compare it against other opportunities.

HMO yield calculations

As HMOs costs are higher, it’s especially important to factor in what impact expenses will have on your profits. With HMOs, a number of expenses need to be included to get a more accurate picture of a net yield. This includes utility bills, property management fees, and marketing costs.

It’s also important to factor in void periods where rooms are empty as with HMOs there’s a higher level of tenant turnover.

What is a good HMO yield?

HMOs typically achieve higher rental yields than single-let properties. Research with the BVA BDRC Landlord Panel revealed that HMOs achieve an average rental yield of 6.8%. This can be even higher for some HMO properties with location and property type greatly impacting yields.

Buy To Let Mortgage Calculator

If you’ll be using a mortgage to help fund your buy to let investment, you need to be aware of what your monthly payments will be, as this impacts how much you can make from the property.

You must keep up with your mortgage payments, or the lender could take possession of the property and sell it to cover the amount that’s unpaid.

Interest Only Mortgage Calculator

Most property investors in the UK borrow on an interest-only basis. With these kinds of mortgages, the interest is paid each month, but there are no monthly capital repayments. This is instead repaid on the final maturity date, or sometimes investors can make voluntary repayments throughout the mortgage term.

Our interest-only mortgage calculator allows you to put in the total amount you’re planning to borrow, the mortgage length, and interest rate. We then calculate your estimated monthly payments and what your total interest payments will be across the length of the mortgage deal.

Repayment Mortgage Calculator

Some property investors use repayment mortgages, where you make monthly payments covering both the interest and capital.

Our repayment mortgage calculator allows you to easily crunch the numbers and estimate how much you’ll need to pay monthly and the total amount of interest you’ll pay across the lifetime of the mortgage.

BTL mortgage interest rates in 2022

Mortgage interest rates have risen across the board in 2022, and this includes the buy to let space. The Bank of England increased the base interest rate from 0.25% in December 2021 to 1.0% in March 2022 after four consecutive rises. This is the highest base rate since 2009, but interest rates are still historically low.

While levels of BTL mortgage product availability is high, the average overall two-year fixed rate is 3.41%, according to Moneyfacts. This is the highest average rate recorded since September 2015, and the average five-year fixed rate is 3.56%, which is the highest since March 2019.

Higher interest rates make borrowing more expensive, so it’s important to be aware of how increasing interest rates will impact your property investments, particularly as many professionals in the industry believe interest rates will continue to rise throughout 2022.

Loan To Value Calculator

When looking for a mortgage, there are a number of variables that can impact the deals you’re offered. One of the main factors is the loan to value (LTV) ratio.

Understanding LTVs can help property investors find the best mortgage deals on offer. LTVs affect the interest rate you’ll pay on your mortgage. It’s a simple metric which indicates the level of risk associated with the loan, so the lower the ratio, the lower the risk.

Loan to value calculation

A mortgage loan to value is calculated by dividing the value of the mortgage you need by the mortgage valuation of the property. Keep in mind that refurbishment costs, legal fees, and stamp duty aren’t included in LTV calculations.

In the loan to value buy to let calculator on our website, input the purchase price, mortgage valuation, and mortgage amount offered, and then we instantly calculate the associated LTV and deposit required.

BTL loan to values on offer in 2022

Currently, there’s good availability of mortgage deals across different loan to value ratios. Keeping your mortgage LTV low by paying a larger reposit means you will likely be offered better mortgage deals. The mortgage interest rate will usually be lower, which means you’ll pay less overall than if you had a higher LTV ratio.

Interest rates have increased across the board for buy to let mortgages since December 2021, except for mortgage deals with 85% LTV, according to Moneyfacts. It’s helpful to be aware of what’s happening across different LTVs in the mortgage market, so you can get the best deal possible.

If you need additional support, a mortgage broker can help you further understand the ins and outs of the mortgage market and the best deals for your personal and financial circumstances.

Stamp Duty Calculator

Stamp Duty Land Tax needs to be paid within 14 days of completing a property transaction in England and Northern Ireland. There are similar taxes called Land and Buildings Transaction Tax in Scotland and Land Transaction Tax in Wales.

Stamp duty rates depend on the property purchase price, whether you’re a first-time buyer, and the type of property being purchased (residential or non-residential). There’s currently an additional surcharge for property investments as well.

Our stamp duty buy to let calculator, which is a helpful tool provided by PropertyData.co.uk, allows you to calculate how much stamp duty you will owe for a property you’re interested in purchasing. This will help ensure you plan for the taxes involved in buying a potential investment.

Concluding Thoughts

Buy to let has become a popular investment choice for many people. Buy to let calculators are useful tools for any individuals looking into buy to let investments, whether they be experienced landlords or new investors.

For those considering buy to let, buy to let calculators can help a property investor determine the potential returns and any other factors related to a property investor buy to let plan.

With buy to let calculators, a property investor may be able to estimate:

  • the amount of money that a property investor could potentially receive from rental income

  • how much rent a property investor could charge for different sized properties or rooms

  • how long it will take until buy to let starts making a profit for a property investor

  • how much deposit a property investor will need to purchase a property

  • a property investor can also use buy to let calculators to compare buy to let properties based on potential rental returns, rent per room or property size.

These buy to let calculators are helpful because they give people an idea of how much money they will be making before actually taking steps towards buy to letting. This can save a lot of headache down the road by avoiding bad buy to lets or buy to lets that are not worth it over time. Knowing this information up front makes all buy to lets better investments.  

All of these buy to let calculators are free to use on Property Investor Academy and no sign up is required, so you can get started assessing potential property investment opportunities right away! Make sure you’re doing these calculations for any property investment you’re interested in buying.

These buy to let calculators are not to be used for specific financial advice. These are estimates to help explain how the market is currently operating.

Peter D Doherty

Peter D Doherty is the founder of the Property Investor Academy.

A Masters graduate in accounting and finance from Dublin City University, Pete worked in the City of London for 14 years. He held senior finance roles (Financial Controller) in several substantial UK commercial banks. He is a graduate of Macquarie University.

With over 10 years property investing experience, he is the owner of a London based lettings agency as well as proptech consultancy. He regularly contributes to online landlord forums such as Propertytribes and Reddit.  Peter is a member of National Residential Landlords Association (“NRLA”).

https://uk.linkedin.com/in/peter-doherty-tal
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