London rental deal: £978,900 purchase and £6,444 monthly rent

[wire.honest]

I’m torn between judging this on net yield and ignoring the yield percentage until the cash-flow model survives a tougher test. The property is a London 4-bed duplex at £978,900, with projected rent of £6,444 a month, giving roughly 7.9% gross.

I have included voids, agent management, everyday upkeep and a separate allowance for substantial repairs. The building looks sound from what I have seen, although poor energy performance could bring additional costs. I am less confident about service charges, council tax during empty periods, insurance and reletting expenses. Which recurring item tends to do the most damage to a model like this, and how much positive monthly cash flow would you require before accepting the risk?

 

[AdaHope]

First thing I’d establish is the tenure and, if applicable, the service charge plus exposure to major building works. Those can undermine an attractive gross yield without appearing in a basic maintenance allowance. Also stress-test financing rather than focusing on one interest-rate assumption.

Personally, I’d want a clearly positive cash margin after all recurring costs and debt, not merely a particular net-yield headline.

 

[readTheEcho]

I’d be cautious about treating £6,444 as settled demand. Is that an achieved rent for a comparable 4-bed, or the asking figure? Also clarify whether it will be one household or separately occupied rooms, because management, turnover and local compliance costs may differ.

Add council tax during void periods, reletting costs, insurance increases and an energy-upgrade scenario. Then run the model with a longer vacancy and lower rent; if the deal only works at full occupancy, 7.9% gross is doing too much of the selling.