Cashflow examples for letting your home

What will my monthly bottom line be? If you are considering becoming a landlord, arguably this is the most pressing question. The importance of monthly cashflow cannot be understated. It determines whether at the end of each month you will have more in your pocket after starting the letting business, or perhaps less. That's why I've developed the interactive Landlord Cashflow Calculator.

Unfortunately, cashflow can be difficult to estimate, as you don't and cannot know your expenses and even rental income in advance. Your required expenses are influenced by many factors out of your control like damage and repairs. Your rent is influenced by how fast you can find a suitable tenant, and whether they pay reliably. Furthermore, the tax situation with expenses, mortgage interest relief, and interaction with your regular employment income can appear opaque. Yet, it is important to understand what you are getting into.

So let's crunch some numbers. (Don't worry, the calculator does the heavy lifting and provides you a beautiful and intuitive visual summary.) We'll focus on cashflow in England 2026/2027.

My current cashflow situation: consent to let

Based on my personal situation consider the following scenario:

I was living in my own flat with £1100 monthly mortgage payment. When I moved in with my partner, I wanted to let it, expecting a rent of £1280. The estimated monthly expenses came to £150. That looked like I could just about cover expenses and mortgage with the rent! My employment income after pension contribution was £77k p.a. How would my financial situation change when letting my flat?

Based on these numbers, the cashflow calculator shows the following monthly situation:

We see that, as a higher-rate taxpayer, the additional tax due when starting to let is a significant £372 per month (this is after deduction of expenses and interest relief following section 24). That means, after setting aside rental income for tax and paying the expenses, there is not enough left to fully pay the mortgage. I am left with a shortfall of £342, which reduces my monthly bottom line compared to having disposed of the flat.

So why am I still a landlord and did not sell up? As you can see, the interest portion of the mortgage is completely covered by the rent. It is the principal repayment, which reduces the mortgage debt owed, that I need to supplement from my employment income. Consequently, while the £342 a month are missing from my pocket, they are not lost, rather, along with a portion of the rental income, they increase the equity in my flat. And when my mortgage is paid off at the end of it's term, I will own my flat outright.

Currently, my mortgage is my residential mortgage from when I was living there myself. I had obtained consent-to-let from my lender. At the end of my fixed deal I can remortgage to a buy-to-let and change the term. Which brings us to the next example.

My future cashflow situation: buy-to-let mortgage

Consider this future scenario:

In a few years, my mortgage fixed deal comes to an end, and I remortgage to a buy-to-let. I choose an interest-only mortgage, because I am saving for a new car and want to reduce mortgage payments. As interest rates have decreased, I can secure a deal for £331 a month.

For simplicity, income and expenses remain unchanged. Perhaps counterintuitively, the tax has increased (due to less interest relief). However, my cashflow looks completely different: The let leads to £413 extra cash in my pocket every month. I am aware that, due to the interest only nature of the mortgage, the total sum owed is not reducing, and am considering overpayments once I have purchased the car.

Your own cashflow situation

Now it's your turn. Head over to the cashflow calculator and try some scenarios. You might be surprised.

This is a simplified model for illustrative purposes only. This is not financial advice and should not be relied upon as such. Always consult with a qualified financial advisor or accountant for personalised advice.