Refurb-to-Let, Worked Example: From Renovation Spec to Rental Yield
2026-11-07
Most renovation guides stop at the cost of the work. Most deal guides start from a property that's already lettable. The interesting part of refurb-to-let sits between the two: how the renovation budget flows into the money you leave in, the rent you achieve and the cashflow you're left with.
This post works one deal through from start to finish. The property is a hypothetical two-bed Victorian terrace in a northern city — the numbers are realistic for 2026, but they're illustrative, not a real listing. The point is the method.
The Property
- Two-bed mid-terrace, original 1900s layout, vacant
- Asking price: £125,000. Agreed: £120,000
- Condition: dated kitchen and bathroom, 1980s wiring, old back boiler, tired decoration throughout
- Local evidence: refurbished two-beds on the same streets let for £850-£900 a month and sell for £160,000-£170,000
The opportunity is the gap between "dated" and "refurbished". The question is whether the gap is big enough once every cost is counted.
Step 1: Write the Spec Before You Make the Offer
The most expensive renovation mistake is pricing the work after you've agreed the price. A room-by-room spec, written from the viewing, turns "needs updating" into a number you can negotiate with.
| Item | Scope | Budget |
|---|---|---|
| Full rewire | New circuits, consumer unit, sockets and lighting throughout | £4,500 |
| Heating | Remove back boiler, new combi boiler and radiators | £2,800 |
| Kitchen | Mid-range units, laminate worktops, integrated oven and hob | £6,500 |
| Bathroom | Full replacement — suite, tiling, extractor, electric shower | £4,500 |
| Plastering | Making good after the rewire, two ceilings re-skimmed | £2,500 |
| Decoration | Walls, ceilings and woodwork throughout | £2,200 |
| Flooring | Carpets to bedrooms and stairs, LVT downstairs | £1,800 |
| Joinery and sundries | Internal doors, skirting repairs, ironmongery | £1,000 |
| Subtotal | £25,800 | |
| Contingency (10%) | For what you can't see — under floors, behind plaster | £2,580 |
| Total works budget | £28,380 |
Notice the order. The rewire and heating come first because they determine how much plastering follows. Pricing a kitchen before you know whether the walls are coming off is how budgets slip.
[!tip] Contingency isn't optional on a period property Ten percent is the minimum on a Victorian terrace. Joists, lintels and damp are the usual surprises, and none of them show on a viewing. If the survey flags anything structural, raise the contingency rather than hoping.
Build the spec room by room and get a costed breakdown you can hand to contractors:
:::tool renovation-spec Build Your Renovation Spec :::
Step 2: Total Cash In
Assume you buy with cash (or bridging, which adds cost — see below), do the works, then refinance.
| Item | Amount |
|---|---|
| Purchase price | £120,000 |
| Stamp duty (5% additional-property surcharge on £120,000) | £6,000 |
| Legal fees and survey | £2,500 |
| Works including contingency | £28,380 |
| Holding costs (4 months: council tax, insurance, utilities) | £900 |
| Total cash in | £157,780 |
That £157,780 is what this property has really cost you — not the £120,000 headline.
Step 3: Refinance at the New Value
Once the works are done and the property is let, you refinance on a buy-to-let mortgage at the new valuation.
- Post-works valuation: £165,000 (the middle of the local evidence, not the top)
- Mortgage at 75% LTV: £123,750
- Refinance costs (arrangement fee, valuation, legal): £2,500
Money left in the deal = £157,780 − £123,750 + £2,500 = £36,530
This is where many "BRRR" stories go quiet. The renovation added value — £165,000 against a total cost of £157,780 — but at 75% LTV the refinance only returns 75% of the end value. To pull all your money out, the end value would need to be roughly £213,000. Most refurb-to-let deals leave a meaningful share of the cash in, and that's fine — as long as you know it upfront.
Step 4: The Cashflow
Rent: £875 a month (£10,500 a year) — the middle of the local range.
| Annual cost | Amount |
|---|---|
| Mortgage interest (£123,750 at 5.0%, interest-only) | £6,188 |
| Letting and management (10% + VAT) | £1,260 |
| Insurance | £480 |
| Maintenance (5% of rent) | £525 |
| Voids (4% of rent) | £420 |
| Compliance (gas safety, EICR, EPC averaged per year) | £200 |
| Total costs | £9,073 |
Pre-tax cashflow: £10,500 − £9,073 = £1,427 a year (£119 a month)
Cash-on-cash return: £1,427 ÷ £36,530 = 3.9%
On a value of £165,000 the gross yield is 6.4%. The net picture is much thinner — and it's very sensitive to the mortgage rate.
| Mortgage rate | Annual interest | Pre-tax cashflow | Cash-on-cash |
|---|---|---|---|
| 4.5% | £5,569 | £2,046 | 5.6% |
| 5.0% | £6,188 | £1,427 | 3.9% |
| 6.0% | £7,425 | £190 | 0.5% |
Step 5: What Would Make It Work Better?
The deal isn't bad — it creates a little equity, it's fully let, and the rate risk is visible. But it's not the deal the asking price suggested. These are the levers, in order of power:
- Buy price. At £110,000 instead of £120,000, stamp duty falls by £500 and the money left in falls to around £26,000. Cash-on-cash rises to roughly 5.5% — from a single negotiation.
- Self-management. Managing it yourself saves £1,260 a year and lifts cash-on-cash to around 7%. It costs your time instead.
- Rent. At £925 a month instead of £875, cashflow rises by about £475 a year (management, maintenance and voids scale with rent, so you don't keep the full £600). Only bank this if the evidence supports it.
- Spec discipline. Every £1,000 cut from the spec is £1,000 less left in the deal — but only cut what tenants won't notice. Don't skimp on the kitchen and bathroom; they decide the rent.
Run the whole deal — purchase, works, refinance and cashflow — side by side:
:::tool deal-analyser Analyse Your Refurb-to-Let Deal :::
A Note on Bridging
If you buy with a bridging loan rather than cash, add the bridge's interest and fees to the cash in. At around 0.85% a month plus a 2% arrangement fee on a £90,000 bridge, four to six months costs roughly £5,000-£6,500 — which goes straight onto the money left in. See Bridging Loans Explained for how to price one properly.
Summary
- Write a room-by-room spec before you make an offer — and negotiate with it
- Add stamp duty, fees, holding costs and a 10% contingency to find your true cash in
- At 75% LTV, the refinance returns 75% of the end value — expect to leave cash in
- Model the cashflow at several mortgage rates, not just today's
- The buy price is the most powerful lever you have; it's set before any work starts
A refurb-to-let deal is made at the offer stage and proven at the refinance. Everything in between is execution.
This is a hypothetical example for educational purposes. Costs, values and rents vary widely by area and property — always get quotes, a survey and independent advice before buying.