Buy-to-Let Math: ROI vs Cashflow — What £40K Looks Like in Derby

Good morning.

You’ve probably heard terms like ROI and cashflow thrown around — but many people use them interchangeably without fully understanding the differences.

This week, we’re breaking down these key financial metrics so you know exactly when and how to use them.

Last week, we explored the macro-level data for Derby. Now, we’re digging a little deeper to uncover what the numbers really tell us.

With mortgage rates still hovering around 4.5%, it’s more important than ever to understand which metrics truly reflect a deal’s performance — and which ones might mislead you.

So, let’s put it into practice: what does a £40K investment get you in Derby?

Let’s run the numbers.

OTHER NEWS

1. Average UK house price dipped by 0.8 per cent to £271,600 in June

2. Surge in choice for homebuyers leads to ‘fastest sales activity for years’

WHAT COULD A £40,000 INVESTMENT BUDGET GET YOU IN DERBY?

Let’s imagine you have £40,000 ready to invest. What kind of property deal could that secure in a city like Derby, and—more importantly—how would the numbers stack up?

In this edition, we’re going to break down a real property deal in Derby to see how your money could work for you.

We’ll analyse the investment from two key angles: cashflow (your monthly profit) and ROI (your annual return on investment).

But before diving into the numbers, let’s first clarify what these terms mean—so you can follow the logic and apply it to any deal you come across.

The Definitions

Property Breakdown

• Price: £125,000

• Beds/Baths: 2 Bed / 1 Bath

• Expected Monthly Income: £850

• Deposit (25%): £31,250

• Refurb: £5000

• Solicitors fees + Stamp Duty: £4,750

• Initial Investment (Total Cash In): £41,000

• Monthly Mortgage Interest: £351.56 (interest-only on £93,750 at 4.5%)

Run the Numbers

What This Tells Us

Cashflow

• How it's calculated:
  £850 (rental income) – £351.56 (monthly expenses, e.g., mortgage, insurance, maintenance) = £498.44 net profit per month

• What it means:
  After all costs are paid, the property generates £498.44 of monthly income
  That’s £5,981.28 per year in passive income.

ROI

• How it's calculated:
  (£498.44 × 12 months ÷ £41,000) × 100
  Where £41,000 is likely the total cash invested (e.g., deposit + fees + refurb).

• What it means:
  You’re getting a 14.59% return on your invested capital each year—which is really impressive.
  This is much higher than average savings or stock market returns, which makes it attractive for property investors.

About the Property in Derby

• Strong cashflow: It's generating nearly £500/month net—this is excellent, especially after covering all running costs.

• High ROI: At nearly 15%, it's well above typical buy-to-let returns in many UK cities (which range from 6%–10% in most areas).

• Investment viability: Based on these numbers, the Derby property is a high-yielding investment, likely suitable for investors focusing on cashflow over capital growth.

BOTTOM LINE

This Derby deal on Leman Street shows the power of smart, data-driven investing.

With a strong cashflow of £498/month and a standout ROI of 14.59%, this property punches well above average for UK buy-to-let returns.

After factoring in mortgage costs, refurb, and fees, you’re still walking away with nearly £6,000 a year in passive income.

For investors prioritising steady monthly income and a high return on capital, this kind of deal is a prime example of how the right numbers can unlock real financial value—especially in overlooked cities like Derby.

TO DO LIST

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