What is an acceptable gap between finance costs and rental income?

Discussion in 'General Property Investment Discussion' started by Longterminvestor, Oct 12, 2018.

  1. Longterminvestor

    Longterminvestor Active Member

    When looking at buy to let investments, what is an acceptable gap between finance costs and rental income? I would be interested to see some practical examples where possible.
     
  2. diyhelp

    diyhelp Active Member

    As a rule of thumb I work on 20% headroom, i.e. rent should always be 20% higher than finance and upkeep costs of a buy to let property.
     
  3. FWL

    FWL Member

    I think 20% is a decent rule of thumb but it can vary from project to project - its not set in stone.
     
  4. lookinginvest

    lookinginvest Member

    You need to be careful when calculating acceptable “headroom” because this figure will change over time. It is not simply a case of setting the “headroom” at the point of acquisition - you should be monitoring this on an ongoing basis. Also, if possible you should put the surplus income into a separate account for a rainy day.
     
  5. Longterminvestor

    Longterminvestor Active Member

    You need to monitor your "headroom" between income and financial liabilities as this figure will change over the years.
     
Loading...

Share This Page