Particularly given the changing economics of the buy-to-let sector, and what we feel is the need to adopt a judicious approach to the relative merits of a given deal, the financial calculator has been developed to facilitate a more detailed analysis. Please click here or fill your details in the short “JOIN OUR E-MAIL LIST” form to receive the file (as well as the accompanying notes and our professional property investor’s e-book).
Built in Microsoft Excel, the calculator has been split into 7 sections:
- Headline Figures: provide users with a cursory glance (using data extracted from the following section). Note that this particular spreadsheet caters only to single-let residential property analysis (not Houses of Multiple Occupation, multiple units, developments, refurbishments etc.);
- Detailed Figures / Information: a breakdown of 46 fundamental metrics and essential data sources based on inputting a handful of key numbers pertaining to the property in question. Via seven alterable cells, users can view a range of figures including the monthly mortgage payment (based on the adjusted loan to value and pay rate), estimated gross / net yield, return on capital employed (ROCE), the estimated debt service coverage ratio (DSCR), monthly net operating profit after (corporation) tax (NOPAT) and capital growth forecasts;
- Stress-Testing: users can adjust 10 specific best and worse-case scenarios (i.e. increasing and decreasing the default parameters), namely: purchase price, acquisition costs, open market value (OMV), deposit (equity injection), monthly rental, interest only mortgage figures, void period, new tenancy costs, monthly holding / recurring costs (including mortgage payments) and changes to the liquidity (contingency) fund;
- Acquisition Costs: Pooling a range of costs including the Stamp Duty Land Tax (SDLT) surcharge for second properties (from April 2016) as well as legal costs, valuation / condition reports, mortgage arrangement / brokerage fees, Special Purpose Vehicle (SPV) creation costs (set-up fee, debenture, transfers and accountancy advice etc.) amongst others;
- Refurbishment Costs: given the regional variabilities in labour expenses and often unpredictable nature of such works, accurately estimating refurbishment values is a relatively subjective task – even with so-called “vanilla” and relatively simple redecoration / cosmetic updating projects. For this reason, this section of the spreadsheet broadly lists the most common expenditure items when renovating properties for the rental market (without going into specific detail). We expect to develop specific “buy to sell” financial models in the near future;
- New Tenancy Costs: a list of the most common expenses involved when initially letting a residential property including tenant finding, reference checking, inventory, tenancy agreement drafting, legal compliance and deposit administration. These figures can be adjusted according to requirements;
- Holding / Recurring Costs: perhaps the most important consideration prior to making any buy-to-let acquisition to assure a durable return on investment, we have listed a broad array ongoing overheads (including repairs, maintenance, management costs, insurance, gas / electrical safety certificates, legal / accountancy costs and an adjustable liquidity fund allocation).
Access the buy-to-let property investor’s report by clicking here or completing the “JOIN OUR E-MAIL LIST” form (confirmation will be required). Note that you will also receive our accompanying notes, an 8-page document which explains how to maximise the use of the calculator. If you have previously subscribed to our newsletter and have not received the files in our “buy-to-let toolkit”, feel free to email us at firstname.lastname@example.org. Please also use this email address to forward us your comments and feedback or to discuss your individual investment objectives.