PINTECH FINANCIAL MATRICS

7 financial metrics you need to
know when investing in property
Helping you make
better, faster, property
investment decisions

Introduction
Most investors and potential investors
understand the importance of numbers
in analysing property deals, but how
many truly understand the meaning
behind those numbers and context of
the financial metrics?
In this ebook we’ve broken
down the 7 most used metrics
to explain what they are and
what they represent.

1
Gross Yield
Gross Yield is a number that reflects the
gross rental income as a percentage of
the property value. Yields are useful as
they allow for direct comparison of
similar properties to assess whether your
returns are in line with, below or over
expectations. You may have a Yield in
mind that you need to achieve, however
you also need to understand if this is
realistic based on the performance of
similar properties in the area.
Formula:
(Gross Annual Rental
Income
Property Value
X 100

Helping you make
better, faster, property
investment decisions
Contact us to find out more

2 Net Yield
Net Yield works in the same way as
Gross Yield a measurement against the
value of the property however this stime
we are looking at the net rent achieved.
After deducting you operating costs for
the property you will be left with a net
rent position. This number is harder to
use as a comparison to similar
properties in your area as your costs may
be very different to someone else’s.
Formula:
(Gross Annual Rental
Income – Operating Costs)
Property Value
X 100

3 GDV
Gross Development Value. This is relevant
in property transactions where you intend
on adding value to the property. The GDV
is the end value of the property once all
works have been completed.
Having the correct GDV will inform you on
whether your project is financially viable.
As we can see in the next few formulas, it
plays a significant role in understanding a
projects overall outcome.
Helping you make
better, faster, property
investment decisions

Helping you make
better, faster, property
investment decisions
Contact us to find out more

4 ROCE
ROCE stands for Return on Capital
Employed and is presented as a
percentage. Percentages are very good
for the use of comparisons but can also
make a return sound much greater than
it actually is. There are two different
scenarios which will change how
this is calculated:
1. Property Flip
The net profit from the sale is assessed
against the amount of capital used for
the project. Investors often use this
metric as it demonstrates the return
that has been received on the capital
that has been invested.
Formula:
GDV - (Purchase Price +
Purchase Costs + Build
Costs + Finance Costs)
Capital Invested
X 100

4 ROCE
2. Holding the property
The net or gross rental income is
measured against the amount of capital
needed to be ‘left in the deal’. If you are
only measuring against the amount that
is left in the deal, this may not be true
reflection of the actual return as you
may have needed to deploy more
capital at the start i.e. in a Buy, Refurb,
Refinance transaction.
Formula:
Gross or Net Annual
Rental Income
Capital Invested
X 100

Helping you make
better, faster, property
investment decisions
Contact us to find out more

5 Profit on Cost
This is an expression of your returns
against costs. Often used in developments
on a larger scale, many developers will use
this metric to control and measure
project budgets. If managed well this
metric can make a project very successful.
Factors that can affect this which will be
outside of your control are labour and
material costs, therefore it is a good idea
to have a sensible contingency built into
this of c15%.
Formula:
GDV - (Purchase Price +
Purchase Costs + Build
Costs + Finance Costs)
Build Cost
X 100

6 Profit on GDV
This represents your returns against the
end value of the property. When
assessing a property transaction this
element can make or break you deal,
especially if you are using external
finance. Most developers will aim for
25% Profit on GDV. This number is
relevant as often the maximum
mortgage you can secure against a BTL
property is 75% (if you want to keep the
interest rates sensible). This means that
there will be 25% equity in the property
when it comes to refinance, meaning
that you would be able to leave as little
as possible in the property on refinance.
Formula:
GDV - (Purchase Price +
Purchase Costs + Build
Costs + Finance Costs)
GDV
X 100

7 Cashflow
Cashflow means different things in
different strategies. For the purposes of
this we are focusing on properties that
you intend on holding. Cashflow is
simply the net monthly return that you
will receive on your property investment.
This is similar you net yield however this
number is expressed as the £ amount
you receive monthly. This will show you
the actual return that you can expect.
Formula:
Gross Monthly Rent (£) –
Monthly Operating Costs (£)

Summary
It is important to remember that
financial metrics alone do not make a
great deal. Understanding your area,
demand, demographics, relationships
with vendors, agents, planners and
many other aspects need to come
together to be able to deliver your
desired outcome.
Helping you make
better, faster, property
investment decisions

Pintech is designed to speed up the due
diligence by bringing together
high-quality property data and coupling
this with, comprehensive, easy to use
financial models to enable you to spend
more time on the deal that offer more
potential and less time on the ones that
will end up going nowhere.
We’ll keep you update on our formal
launch date which can be expected very
early in 2022.
We’ll keep you up to date.
To learn more please visit:
www.pintech.io