Too Good to Be True? Let’s Find Out

Good morning.

Back when I was buying my first property, I was obsessed with one thing — the yield.

“What’s my return?” That was my entire personality.

Fast forward to now… and well, let’s just say me and spreadsheets are in a committed relationship. I spend more time with data than I do with humans.

(I’m working on this)

Then when I started viewing properties, listings and agencies use yield very vaguely. Is it Net or gross yield or I’m I looking at the ROI?

So this week, we’re staying in Derby and we’re breaking down a real deal.

On paper? It looks like a dream.

In reality? Is it still a good deal?

Let’s dive in.

In this newsletter, you'll find...

• OTHER NEWS

• THE PROPERTY SNAPSHOT

• BOTTOM LINE

• YOUR NEXT STEPS

OTHER NEWS

1. Prices are rising in the most affordable areas according to the latest Zoopla data.

2. A new report by the Intermediary Mortgage Lenders Association (IMLA) reveals that 3.5 million potential homebuyers have been blocked from entering the UK housing market since the financial crisis—not due to affordability issues, but due to overly strict regulations.

THE PROPERTY SNAPSHOT

Let’s start by looking at a snapshot of a property currently listed in Derby.

It’s a property that is valued at £80,000 with a ‘potential rental yield of over 10%’ in
Friar Gate, Derby, Derbyshire DE1.

But what does that really mean—and is this the yield you should be paying attention to?

I want to show you how to take control of the numbers, so you can actually tell whether this is a good deal in today’s market.

The Property Snapshot

Property Overview:
  ○ Price: £80,000
  ○ Beds/Baths: 1 bed / 1 bath

Deposit & Investment
  ○ Deposit (25%): £20,000
  ○ Total Upfront Investment: £30,500 (includes deposit, stamp duty, legal fees, etc.)

Expected Monthly Performance
  ○ Monthly Income: £805
  ○ Monthly Expenses: £402.75
  ○ Monthly Cash Flow: £402.25

Returns
  ○ ROI: 15.83% (£4,827 annual income ÷ £30,500 investment × 100)

Running Costs (Estimates)
  ○ Mortgage (Interest-Only @ 4.5%): £225
  ○ Service Charge: £41.67
  ○ Ground Rent: £20.83
  ○ Insurance: £25
  ○ Maintenance: £50
  ○ Void Allowance (5%): £42.50

Why It Looks Good

The first thing that jumps out is the £80,000 price tag, closely followed by a 10% yield. On the surface, those are strong numbers—low entry price and a high rental return.

What’s not to like?

Dig a little deeper and there are even more positives: it’s just a mile from Derby station, so transport links are solid. Plus, there are schools nearby, which makes it appealing for families.

The photos do a good job too—brick-built apartment on a decent-looking street. Visually, it ticks a lot of boxes.

It’s easy to see why this deal grabs your attention—and rightly so.

The Real Story (Numbers Breakdown)

Expected Monthly Income:

Average rent in Derby for a 1-bedroom flat in DE1 is £805 per month

Total = £805.00 per month.

Monthly Expenses Breakdown:

Mortgage Payment (Interest Only @ 4.5%): £225.00

Service Charge: £41.67

Ground Rent: £20.83

Landlord Insurance: £25.00

Maintenance Allowance: £50.00

Void Allowance (5%): £42.50

Total = £405.00 per month

So monthly net cashflow will be £445.00 per month

Lastly, we’ll calculate the total upfront investment for this property. This includes all legal costs, stamp duty, and any potential refurbishment—just to give it a good finishing touch before handing it over to management to let.

Total Upfront Investment

Deposit: £20,000

Solicitors: £1,500

Refurb: £5,000

Stamp Duty (Buy-to-Let): £4,000

Total Upfront Investment: £30,500

Now let’s calculate the ROI—because in my view, this is the number that really tells you whether an investment stacks up.

Why?

Because ROI takes into account all the costs that affect your cashflow and considers your total upfront investment. Two key things you need to understand before calling any deal a good one.

Expected ROI

£4,827 (Net Annual Income) ÷ £30,500 (Upfront Investment) × 100

= 15.83%

What Does This Mean?

A 15.83% ROI means you're earning 15.83p for every £1 you’ve invested upfront—after accounting for all ongoing costs like mortgage payments, service charge, insurance, maintenance, and voids.

That’s a very strong ROI especially in today’s market. Most property investors aim for anything above 8–10% when factoring in net income, so 15.83% puts this deal in a very healthy range.

BOTTOM LINE

Yes, on paper, this looks like a solid investment:

Low entry price

Strong rental income

High ROI

Reasonable monthly costs

We’ve also talked about previously why Derby is becoming a hotspot as an area for investors and you can read this article here.

YOUR NEXT STEPS…..

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