Two deliberately different properties
| Assumption | London-style case | Regional-city case |
|---|---|---|
| Purchase price | £400,000 | £220,000 |
| Mortgage at 75% LTV | £300,000 | £165,000 |
| Deposit | £100,000 | £55,000 |
| Illustrative tax and buying costs | £30,000 | £15,000 |
| Initial cash required | £130,000 | £70,000 |
| Monthly rent | £2,000 | £1,375 |
| Gross annual rent | £24,000 | £16,500 |
| Gross yield | 6.0% | 7.5% |
The regional case leaves £60,000 of the original £130,000 uncommitted. That is useful—but it is not a free return. The investor must decide whether to hold it as a reserve, reduce debt, invest elsewhere or consider another property.
Illustrative Year 1 cash flow
| London-style case | Regional-city case | |
|---|---|---|
| Rent collected at 95% occupancy | £22,800 | £15,675 |
| Management | £2,280 | £1,881 |
| Service charge, repairs and other running costs | £4,500 | £3,200 |
| Interest at 5% | £15,000 | £8,250 |
| Pre-tax annual cash flow | £1,020 | £2,344 |
| Cash-on-cash return | 0.8% | 3.3% |
Why this is not a verdict on either region
The comparison does not capture local tenant demand, licensing, building condition, lease length, service-charge risk, achievable rent, liquidity or future price changes. A lower-priced property may also require more hands-on management or have concentrated local-employer risk. A London property may have stronger resale liquidity—but that must be tested, not assumed.
Inflation is not one number
Rent, service charge, repairs, insurance and mortgage interest rarely move together. For example, rent growing by 2% does not protect the investor if operating costs grow by 4% and the mortgage later refinances at a higher rate. Model each item separately and use annual overrides for known changes.
Apply the same tax treatment, holding period, occupancy logic and exit-cost assumptions. Then compare cash flow, cash-on-cash return and IRR—not gross yield alone.
The two property cases use illustrative assumptions rather than current market averages or forecasts.