29 October 2026
The £250 net trap
A North East terrace 40% below its street still returns £80 a month. Here is the refinance maths that decides whether a discount is worth anything.
# The £250 net trap
A two-bedroom terrace came up this week at £60,000. The street had sold at a median of £100,000 for the same house type over the last three years. That is 40% below what the street does — the sort of number that gets forwarded around WhatsApp groups before anyone has checked anything.
Here is what it actually returns.
The purchase
- Purchase price — £60,000
- Refurbishment (my estimate from photographs, not a builder's quote) — £17,500
- Survey and mortgage fees — £1,000
- Legal — £1,500
- Stamp duty at 5% — £3,000
- Sourcing fee — £3,500
- Total cash required — £86,500
The refurbishment is the soft number in that list and I will come back to it.
The refinance
Refinance at 75% of the finished value of £100,000 and you borrow £75,000. At 5% interest-only that is £312.50 a month before a tenant has paid anything.
Now add the running costs: management at 10%, insurance at £40, and £193 for the rest — voids, certificates, repairs, the small things that are never small.
Total monthly costs: £620.50.
The return
At £750 rent: £129.50 a month, £1,554 a year, and 13.5% on the £11,500 left in the deal.
That is a real deal. It is not a spectacular one, and it depends entirely on the £750.
- At £695: £80 a month and 8.3%
- At £750: £129.50 a month and 13.5%
- At £800: £174 a month and 18.2%
Everything between a mediocre deal and a good one sits inside £105 of rent.
The trap
Here is the part that catches people, and it is the reason I wrote this.
The bigger the discount, the bigger the refinance, and the bigger the interest bill.
Take the same house and use the street median as the finished value instead of the most recent sale. Now the finished value is £127,500, the refinance is £95,625, and the interest is £398 a month.
The discount looks like 45% instead of 40%. The reality:
- Nothing left in the deal — the refinance returns more than the cash spent
- At £695 rent the cashflow is minus £6 a month
- At £800 rent it is £89 a month
A bigger discount produced a worse deal. The discount is not the return. The rent is the return.
Why £250 matters
If a buyer needs £250 a month clear after a refinance at 75% — and plenty do — then on a £60,000 house the rent has to be about £745 a month. That is roughly a 15% gross yield on the purchase price.
Most two and three-bedroom terraces in the North East let for £650 to £750. So the rent is the gate, not the price. A house at £60,000 let at £695 fails that test however cheap it looks, and a house at £75,000 let at £850 passes it comfortably.
What I do differently because of it
I ask what it lets for before I ask what it costs. An agent's written figure beats any portal average, and portal asking rents run 11–15% above what is actually achieved at town level — more on individual streets.
I take the finished value from the lowest defensible sold price, not the median. If the most recent sale on the street is £100,000, I use £100,000. If the discount survives that, it is real.
I treat the refurbishment as a guess until a builder has been in. The £17,500 above came from photographs — damp staining in two rooms, a kitchen already new, a bathroom I could not see. It could be £15,000. It could be £21,000. The difference moves the whole calculation.
The plain version
A discount tells you what someone is asking. The rent tells you what the house earns. Only one of those pays a mortgage.
If you are buying in the North East and want the numbers checked before you view — not after — get in touch.
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