Buy-to-Let Strategy Calculator - PropMaps Setup

Have you asked yourself: Why do I want to invest in property? If you’re anything like me, you want to invest safely and build a property portfolio over a number of years. The ultimate goal, I suppose, is to create future wealth for yourself and your family. You’re aiming for financial security and (dare I say it) passive income.

The type of property investing I’m talking about—and what I believe the average investor in the UK is striving to achieve—involves gradually acquiring properties into a portfolio that increases in value over time while generating a monthly revenue stream from rent. It’s a tried-and-tested method and the reason so many people trust this process as a means of creating wealth.

Of course, when embarking on the journey of property investment, it’s important to assess a deal. How will this property perform right now, with the current mortgage payments and rental income? This is step-one analysis. The thing that surprises me, though, is how rare it is for people to calculate how a property will perform over several years or even decades. The snapshot numbers of a property only tell half the story, and the impact of time is paramount to understanding what the future holds for this decision—to buy or not to buy.

PropMaps is a tool specifically designed to calculate potential returns from property investment over the long term. It’s a property investment strategy calculator aimed at helping investors map out the future of their portfolio.

Rent in minus mortgage out is one of the simplest calculations you need, but PropMaps allows you to explore the impact of house price increases, inflation, rental growth, interest rates, cash extraction, and much more. It’s a fully comprehensive model for analyzing the underlying drivers that make property a great investment.

The first step in setting up the model is to add some high-level information in the "Analysis Setup" tab. This defines the scope over which we want to run the analysis—for example, 25 years. We can also add our date of birth, which allows us to gauge the outputs relative to our age, making it easier to identify major life milestones. Additionally, we can input our "current capital"—the amount of money we currently have to invest—as well as our "annual investment amount", which represents how much money we can contribute to the business each year.

To simulate the growth of a portfolio over time, we need to define a property that will act as the "model" (read: "average") to represent market trends over time. This model property is a configurable input that allows you, the user, to set the expected returns based on your personal investment strategy. For example, if you're investing in lower-cost, high-yield properties in the North of England, you might define the model property as £100k, with a monthly rental income of £625. Investors in London, on the other hand, might set their model property at £500k, with a rent of £1,700 per month.

When defining our model property, we also set expectations for management and maintenance costs as a percentage of rental income. If you use a letting agent to manage your property, you likely have an idea (or hopefully know exactly!) what their rates are, as these are typically charged as a percentage of rent. Similarly, you can estimate ongoing maintenance costs. If you own large, old HMOs full of students (who tend to throw parties), your maintenance costs might be higher than those for a single-tenant flat near the city center. Existing landlords will probably have a sense of these figures—if not, there's plenty of online literature to help estimate them. These numbers don’t need to be exact; they simply help account for the additional costs of running a rental portfolio.

The third setup component defines our assumptions about market conditions over the investment period. We require three key metrics:

1. Inflation
2. Capital growth above inflation
3. Rental growth above inflation

The model is designed so that inflation serves as an anchor point, from which we derive capital and rental growth. According toTrading Economics, inflation has averaged 2.82% over the past 35 years. This seems like a reasonable starting point for our model. Of course, we are assuming that the future will follow a similar trend to the recent past — an assumption that may or may not hold true!

Historically, house prices have outpaced inflation. This graphdemonstrates the trend, showing an average inflation-adjusted growth rate of 2.3%. Similarly,rental growthhas increased by 0.91% annually, when adjusted for inflation, over the last 35 years.

Let’s use these figures as a starting point for predicting future market conditions—but remember, these inputs can easily be adjusted, and the model can be re-run. In financial modeling, this is known as an “economic scenario”, where we test multiple possible financial outcomes to see how our portfolio responds. That’s the beauty of scenario modeling!

Since most property investors use leverage in the form of a mortgage to grow their portfolios, we also need to set assumptions about the cost of debt. This includes defining our preferred loan-to-value(LTV) ratio, as well as expected interest rates and product fees. As with market conditions, these values are broad assumptions that can be adjusted to explore different scenarios and their impact on portfolio performance.

The final two setup tabs allow us to specify how we plan to manage our portfolio over the investment period:

• The "Strategy" tab defines our growth approach. There are two options:
  1. “Pure Growth” – Continuously grow the portfolio with no limit. Just keep on buying!
  2. “Growth Then Debt Reduction”– Expand the portfolio until reaching a desired cash flow goal, then stop acquiring new properties and start paying down debt.
• During the time in which you are running your property business, there’s a likelihood that you will want to draw down some kind of income from the company. The final setup tab therefore, allows you to dictate how much of the cashflow you’d like to extract, and after how many years. The "Cash Extraction" tab lets you specify how much income you want to withdraw from the business and when.