This is a tool that calculates the total return and internal rate of return on a buy-to-let property. In addition, it displays various intermediate, calculated results.

Note: The tool does not currently allow for any specification of how the buy-to-let investment is funded, e.g. by taking out a mortgage. In addition, it does not consider the tax payable on rental income or any capital gains tax due on the selling of the property.

The information required for the calculation of the returns can be considered in three parts, matching the layout of the tool.

The first part is the information related to the property purchase, which, when supplied, gives the intermediate, calculated total purchase cost. This information is described in the following list:

• The property cost, which is the price paid for the property.
• The purchase costs, which is the sum of the one-off costs involved in the property purchase. If you need a tool to sum up the individual purchase costs to obtain this total, then you can use the UK House Purchase Reckoner or House Purchase Reckoner.
• The preparation costs, which are the one-off costs in getting the property ready for rent, e.g. installing new kitchen appliances.

The second part is the information related to the rental income, which, when supplied, gives the intermediate, calculated monthly net and effective rental income. This information is described in the following list:

• The monthly gross rental income.
• The agency fee rate, which is the rate charged on the monthly gross rental income by the letting agency. This is usually expressed in percentage terms (unless the formatting is explicitly set to express it as a decimal).
• The monthly costs (excluding the agency fees) involved in letting the property, e.g. repairs and maintenance.
• The number of void periods, expressed in terms of the average number of months per year that the property is vacant for. This affects how much less the effective rental income is from the best-case net rental income.

The third part is the additional information required for calculating the buy-to-let returns, as well as the intermediate, calculated final property price, net capital return on the property and the total effective net rental income. This information is described in the following list:

• The house price appreciation as a yearly rate. This is usually expressed in percentage terms (unless the formatting is explicitly set to express it as a decimal).
• The holding period in years, which is the number of years the property is owned for before being sold.
• The estate agent fees for selling the property, charged as a percentage of the final selling price.
• The legal fees charged for the sale of the property.
• The annual rental inflation.

Associated tool link: http://www.coggit.com/tools/buy_to_let_calculator.html