Deal appraisal

How a rent-to-rent deal is appraised

Six short lessons, one worked appraisal and a practice deal. The arithmetic a unit has to survive before a lease is signed.

Wilton Property Partners

Lesson 1 of 6

Three numbers that decide a deal

Every appraisal comes down to three figures. Get them right and the unit carries a margin. Get one of them wrong and it does not.

NUMBER 1

Rent-to-Revenue Ratio

Realistic margins on a serviced rent-to-rent unit sit around 25%. On a £3,000 a month rent, gross revenue usually lands between £4,000 and £4,500. That is a rent-to-revenue ratio of 65 to 75%. Tight, but workable. Ratios below 40% exist mainly in tourist-heavy prime locations at premium pricing. Do not model them on an average deal.

Formula. Monthly Rent ÷ Monthly Revenue × 100

80% and above65%55%

Target band 55 to 65%. Above 70%, walk away.

Worked figure. 1,100 rent against 2,592 revenue is 42.4%.

NUMBER 2

Effective Nightly Rate

This is revenue per night as it actually lands, not the listed price. It has to account for weekday dips, seasonal drops, gaps between bookings and longer-stay discounts.

Formula. Monthly Revenue ÷ 30

Listed rate 120 a night

Effective rate 86 a night

A different deal entirely. Run the appraisal at 85 to 90% of the listed comparable rate.

NUMBER 3

Cost Per Turnover

What it costs each time one guest leaves and another arrives. Cleaning at £40 to £70, laundry at £10 to £20, consumables at £5 to £10, and your own time. At £70 a turnover across ten turnovers a month, £700 leaves before anything is earned.

Pass the cost to the guest. Set a cleaning fee that covers the cleaner, the laundry and the consumables. A flat turnover fee means every turnover is covered, not only the long ones. Add a pet fee of £25 to £50 where pets are allowed, and an extra-guest fee above base occupancy. These are not extras. They are how a short booking stops costing you money.

The correction

Hold average stay at 2.5 nights or more. Set two-night minimums. Offer weekly discounts. Charge cleaning, pet and extra-guest fees per booking so each turnover is funded by the guest.

Which figure screens a deal first?

Rent-to-Revenue Ratio

Effective Nightly Rate

Cost Per Turnover

Rent-to-Revenue Ratio. Margins sit around 25%, so rent is typically 55 to 65% of revenue. Aim for the low end. Above 70% the deal is finished before the other levers matter. It is the first filter.

Lesson 2 of 6

The Wilton benchmarks

Five benchmarks applied to every deal. A property that misses them is not taken forward. Tap a card to turn it.

Break even at 50% occupancy, 60% in a weaker area

Tap to see why

Do not think in pounds of profit. Think in occupancy. A deal should cover every cost at 50% occupancy in a strong area, and at 60% in a harder one. If the numbers only work at 75% and above, one poor month puts the unit into loss.

Rule. Break-even occupancy at or below 60%. If not, walk away.

A margin of at least 25%

Tap to see why

Below 25% the work outweighs the return. A 17% margin means almost all revenue goes to costs. One rent increase or one dip in occupancy turns it into a loss.

Worked figure. £2,592 revenue against £2,148 costs is a 17.1% margin. Profitable on paper, with no room for error.

Setup capital returned in six to nine months

Tap to see why

A sound unit returns its setup capital in six to nine months. Under six is exceptional and often unrealistic. If the model shows three or four, check the occupancy assumption again. Over twelve months means the deal is too thin. Negotiate the rent down or reduce the setup cost.

Realistic window, six to nine months. Aim for the low end.

70% is the London occupancy benchmark

Tap to see why

70% is a realistic London blended average across high and low season. Model that as the baseline. 75 to 80% is strong. 85% and above is a prime-location outlier, not a forecasting assumption. Below 55% in London usually means a listing or pricing problem rather than a market one.

Rule. If the deal does not work at 60% occupancy, it does not work.

Rent below 65% of revenue

Tap to see why

Margins on a serviced unit are typically 25%, so rent usually lands between 55 and 65% of revenue. Below 55% is excellent. Above 70%, walk away or renegotiate the rent. There is nothing left for costs, platform fees or a poor month.

Red flag. More than 100 listings within a mile at low occupancy, or setup costs above £5,000.

Lesson 3 of 6

The field guide

Every field in the appraisal, where the figure comes from, and a note on each. Tap to expand.

Property Details

Property Address ▶

The full address of the property under appraisal.

Source. The listing, or the landlord directly.

Note. Short lets rarely need planning permission, but you do need to know the area. Put the address into a mapping tool, drop into street view and walk the street. Look at the shops, the parking, the condition of the housing, the clues to noise and the quality of the block. The problems show up before you visit.

Monthly Rent ▶

What the landlord is paid each month.

Source. The tenancy agreement, or the listing on Rightmove or OpenRent.

Note. Benchmark the rent against the area. Set a 0.25 mile radius around the target and look at five to ten comparable listings, same bed count and similar condition. If the asking price sits 10% or more above the local average, there is leverage. Most landlords will move £50 to £100 a month for a reliable tenant on a twelve-month lease, and £100 a month is £1,200 a year.

Revenue Projection

Average Nightly Rate ▶

The average nightly charge to guests.

Source. AirDNA, Mashvisor, or comparable listings on the platform itself. Filter to the same bedroom count and a similar standard, then average five to ten comparables.

Note. Run the appraisal at 85 to 90% of listed comparables. The listed price is not what a unit takes once gaps, discounts and quiet periods are accounted for.

Expected Occupancy Rate ▶

The percentage of nights actually booked.

Source. Market-intelligence tools give a reasonable area average. The real work is your own comparables. Search the target area, filter to the same bed count and standard, and read ten to fifteen live listings. The area average hides everything. Some run at 40% on poor photographs, thin reviews and slow management. Others run above 85% on strong reviews and dynamic pricing. The difference between them is visible within the same postcode.

Note. Use 70% as the London baseline. Check seasonality, because a 75% annual average can still fall to 45% in January. Model the worst month alongside the average. Compare like with like, and if the strongest listing has a hot tub and yours does not, its 85% is not your ceiling.

Monthly Costs

Council Tax ▶

The monthly council tax payment.

Source. The local council website, under council tax bands. The landlord can confirm the band.

Note. Band D and above is a warning sign. It takes a visible share of the margin. Bands A to C are far more workable.

Utilities ▶

Gas, electricity, water and broadband combined.

Source. Quotes from the suppliers. Budget 120 to 180 a month for a two-bed. Broadband is typically 25 to 35.

Note. Smart meters make usage visible. Guests leave the heating on and the lights running. Budget for it.

Insurance ▶

Short-let or serviced accommodation insurance.

Source. Quotes from Guardhog, Pikl or Proper Insurance. Budget 50 to 80 a month.

Note. Standard landlord insurance does not cover short lets. The cover has to be specific to the use. Do not skip it.

Cleaning Costs ▶

Cost per clean multiplied by turnovers per month.

Source. Local cleaning companies. Typically 40 to 70 a clean for a two-bed. Average stay is two to three nights, so eight to ten turnovers a month.

Note. This is almost always the second largest cost after rent. One and two-night stays compound it. Set two-night minimums.

Platform Fees ▶

Airbnb host-only fee, around 18.5% plus VAT. Booking.com around 18%. Vrbo around 8%. Direct bookings nil. Earlier educational material quoted 3%. That is the old guest and host split, not the current host-only model. Use 18.5% as the default for platform-led operations.

Source. A percentage of gross monthly revenue. The appraisal applies it automatically.

Note. On £2,500 a month of revenue, 18.5% is £462. That is the second or third largest cost after rent. Model it in full.

Maintenance Reserve ▶

Money held back for repairs and replacements. Budget 5% of monthly revenue.

Source. 5% of monthly revenue.

Note. Things break, and guests are not always careful. A bed frame, a stained sofa or a failed appliance will come up. Reserve for it, or it comes out of the margin.

Setup Costs

Furniture and Furnishing ▶

Everything the guest sees and uses.

Source. IKEA, Facebook Marketplace, B&M, Dunelm. Budget 2,000 to 4,000 for a two-bed.

Note. Do not overspend. Guests do not price designer furniture. Clean, functional and photogenic is what registers. Marketplace can halve the bill.

Professional Photography ▶

Professional listing photographs. Budget 100 to 200.

Source. Local property photographers.

Note. This is not optional. Professional photographs can raise bookings by 20 to 40%. It is the best-returning line in the setup budget.

The remaining lessons

Enter your details to continue to the worked appraisal and the practice deal.

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Lesson 4 of 6

Worked appraisal, a two-bed in Manchester

The appraisal step by step. Reveal each calculation in turn.

The property

Two-bedroom flat, Dale Street, Northern Quarter, Manchester. Modern build, walking distance from Piccadilly Station. The landlord accepts short lets.

Step 1

Property details

Monthly rent 1,100. Two-bed flat. Manchester.

Step 2

Revenue projection

Nightly rate 120, taken from comparable listings.
Occupancy 72%, the Manchester average for a well-managed two-bed.

72%x30 nights=21.6 nights/month

21.6x120=2,592/month

Step 3

Monthly costs

Rent	1,100
Council Tax (Band B)	110
Utilities	150
Insurance	60
Cleaning (60 x 8)	480
Consumables	40
Platform Fees (3%)	78
Maintenance (5%)	130
Total Costs	2,148

Step 4

Setup costs

Furniture	3,000
Photography	150
Initial Supplies	300
Listing Setup	50
Total Setup	3,500

Step 5

Profitability

2,592-2,148=444/month profit

444/2,592=17.1% margin

3,500/444=7.9 months to break even

The appraisal

Reading

Marginal

444 a month reads acceptable. A 17.1% margin and an eight-month payback do not.

At a nightly rate of 130. Revenue 2,808. Profit 624. Margin 22.2%. Closer.

At a negotiated rent of 1,000. Profit 544. Margin 21%.

This is why the arithmetic is done before the lease is signed.

Illustrative only. Every figure above is worked from the inputs shown and is not a projection of what any particular unit will return.

Lesson 5 of 6

Seven errors that break a deal

Each of these has cost someone money. Move through them in turn.

Error 1 of 7

Modelling on best-case occupancy

The error

Assuming 85% occupancy. Not in the first three months. Not in January. Not without reviews.

The cost

Revenue overstated by 20 to 30%, which turns a losing deal into a winner on paper.

The correction

Start at 65% and work up. If the deal does not hold at 65%, it is not a deal.

Error 2 of 7

Ignoring seasonality

The error

Appraising on summer numbers and treating them as the annual average.

The cost

A unit taking 2,500 a month in summer may take 1,200 in winter. That gap draws down the reserve.

The correction

Model a worst month alongside the average. The deal has to survive January and February.

Error 3 of 7

Leaving platform fees out

The error

Treating 3% as nothing. On 2,500 a month of revenue it is 75 a month, or 900 a year.

The cost

900 a year off the bottom line. Across three units, 2,700 unaccounted for.

The correction

Carry platform fees in the cost model from the outset. The appraisal applies them automatically.

Error 4 of 7

Underestimating cleaning

The error

Not accounting for how cleaning scales with turnover frequency. Short stays mean more cleans.

The cost

Ten turnovers at 60 each is 600 a month, which can be the second largest cost after rent.

The correction

Set two-night minimums. Offer weekly discounts. Cost cleaning on realistic turnover rates rather than the best case.

Error 5 of 7

Ignoring void periods

The error

Assuming the unit is booked every available night, with no gaps between stays.

The cost

Gaps, maintenance days and cancellations remove a further 5 to 10% of revenue on top of the occupancy estimate.

The correction

Build in a 5 to 10% void buffer above the occupancy estimate. Better to be understated than caught out.

Error 6 of 7

No date on setup cost recovery

The error

Assuming the setup capital returns eventually. Month three, month twelve, month twenty-four. You need the date.

The cost

Capital held for months with no stated return date. Several units compound the problem.

The correction

Calculate the break-even point before signing. If it runs long, negotiate harder on rent or furnish for less.

Error 7 of 7

Appraising a single deal

The error

Committing to the first property you find and forcing the numbers to fit it.

The cost

A mediocre deal taken while a better one sat two postcodes away.

The correction

Appraise five to ten properties before committing. Judgement comes from volume, not from one.

Lesson 6 of 6

Practice appraisal

A property with raw figures. Complete the appraisal below. Your answers are checked against the arithmetic and scored out of 100.

The property

One-bedroom flat, Broad Street, Birmingham city centre. Modern apartment, five minutes from the Bullring and New Street Station.

Monthly Rent	850
Average Nightly Rate (comps)	95
Expected Occupancy	70%
Council Tax	90/month
Utilities	120/month
Insurance	55/month
Cleaning Cost	45 per clean
Expected Turnovers	9/month
Consumables	30/month
Setup Costs	2,800 total

Your appraisal

Nights Per Month

Occupancy x 30

Monthly Revenue

Nights x Nightly Rate

Total Monthly Cleaning Cost

Cost per clean x turnovers

Platform Fees (monthly)

3% of monthly revenue

Maintenance Reserve (monthly)

5% of monthly revenue

Total Monthly Costs

All costs added together (rent + council tax + utilities + insurance + cleaning + consumables + platform fees + maintenance)

Monthly Profit

Revenue minus total costs

Profit Margin (%)

Profit / Revenue x 100

Rent-to-Revenue Ratio (%)

Rent / Revenue x 100

Months to Break Even

Setup costs / monthly profit (round up)

Completed

Rent-to-rent deal appraisal

Attendee

Score

Six lessons and one practice appraisal, complete. The method is yours to apply.

Apply it to the next deal you look at.

Wilton runs a live session on how a rent-to-rent portfolio is sourced, set up and operated. Consultations are arranged separately.

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Wilton Property Partners

Wilton Property Partners provides property education and operational services. We do not provide regulated financial, investment, tax or legal advice, and nothing here is a recommendation to invest. Direct property and rent-to-rent arrangements are not regulated by the Financial Conduct Authority. Returns are not guaranteed and your capital is at risk. Any results described are individual and are not a projection of what you should expect.