How to compare a refurbishment forecast with the finished rental

To compare a refurbishment forecast with the finished rental, put the original forecast and the actual figures side by side under the same headings: total capital invested, the new mortgage, cash left in after any refinance, rent achieved, operating costs, and cash flow after the mortgage. Use the same definitions for both columns, apply the same void and maintenance allowances, and note the reason for every difference. The aim is not to judge one project but to sharpen the assumptions you use on the next one.

Why a post-project review is worth doing

A refurbishment forecast is built on estimates: a builder's quote, a guess at how long the works will take, a hoped-for valuation and a target rent. Once the project is let, every one of those has become a real number. Comparing the two tells you:

• how much capital is genuinely tied up in the property now
• whether the property earns what you planned, before personal tax
• which of your assumptions were too optimistic, and which were too cautious

Without this review, a project can look fine on monthly cash flow while carrying far more of your cash than you intended.

Step 1: Total the actual capital invested

Gather the completion statement, every builder and supplier invoice, the bridging loan redemption statement, council tax and utility bills for the empty months, letting fees and the refinance completion statement. Group them under the same headings you used in the forecast:

• Purchase: price, SDLT (or LBTT and ADS in Scotland, or LTT in Wales), legal and survey fees.
• Works: everything paid to builders and trades, certificates, building control and lettable items. Record overruns here, and note how much of the contingency was used.
• Finance: bridging interest for the months the loan actually ran, plus arrangement, valuation, legal, broker and any extension or exit fees.
• Holding: council tax, insurance and utilities for every month the property was empty. In England, councils can charge a premium on homes empty for at least a year, so a long project can cost more than planned.
• Letting and refinance fees.

The total is your actual capital invested. Keep invoices itemised by job. HMRC's Property Income Manual (PIM2030, UK-wide) explains that refurbishing a property bought in a run-down or unlettable state is generally capital rather than a deductible repair. A clear split will help your tax adviser.

Step 2: Work out the cash left in after refinancing

If you refinanced, cash left in = actual capital invested minus the new mortgage. This is often where the biggest gap from the forecast appears, because the new mortgage depends on:

• the lender's valuation on the day, which may have been above or below your estimate
• the lender's maximum loan-to-value and rental cover tests
• any lender-specific rule on how long you must own the property before it will lend on the new value

None of these is a fixed rule across lenders, so record what actually happened and why. If you did not refinance, your cash left in is simply the cash you have put in so far.

Step 3: Compare rent and operating costs

Set out the forecast and actual monthly figures for:

• Rent achieved compared with the target rent
• Months until the first rent, which drives holding and finance costs
• Voids, management fees, insurance, maintenance, and service charge or ground rent if leasehold
• Mortgage payment on the new loan, at the actual rate

Then calculate cash flow: rent received minus mortgage payments and operating costs. This is before personal tax.

Be careful with the first few months. A new tenant in a newly refurbished property often means no voids and few repairs, so raw early figures can flatter the result. For a fair comparison, add back the same void and maintenance allowances you used in the forecast. For a fuller method, see how much is my rental property making.

Step 4: Explain each difference

For each line that moved, write one sentence on the cause. Typical causes include:

• works scope grew once walls or floors were opened up
• a trade was delayed, pushing back the letting date
• the valuation came in lower than the figure you assumed
• the local rent you assumed was optimistic, or the market moved
• the mortgage rate on the refinance was different from the rate you modelled

Separate one-off project variances (works, delays, valuation) from ongoing ones (rent, operating costs, mortgage rate). One-off variances change your cash left in. Ongoing ones change your cash flow every month from now on.

Illustrative example: forecast versus actual

The figures below are fictional and for illustration only. The forecast is the illustrative budget from how to calculate the full cost of a buy, refurbish, rent project.

Assumptions

• Property in England bought for £150,000, SDLT at higher rates £8,000, legal £1,800, survey £600.
• Bridging loan of £105,000 at 0.85% a month, interest rolled up; other bridging fees £4,350.
• Forecast: works and certificates £31,200 plus contingency £4,500; 5 empty months; bridge for 6 months; valuation £200,000; refinance at 75% loan-to-value; rent £1,000 a month; mortgage interest-only at 5.5%.
• Actual: works and certificates came to £34,800 (£3,600 over, covered by the contingency); works took 2 months longer, so the property was empty for 7 months and the bridge ran for 8; valuation £190,000; refinance at 75% loan-to-value at 5.75% interest-only; rent achieved £950 a month.
• Holding costs £305 per empty month (council tax £150, unoccupied insurance £75, utilities £80). Letting fee £600. Refinance fees £3,300.
• Monthly operating costs, both columns: voids allowance 4% of rent, management 12% of rent including VAT, insurance £30 forecast and £32 actual, maintenance allowance £50.
• Actual first six months of the tenancy: no void and £150 of repairs in total. The table uses the allowances above rather than these raw figures.

Forecast versus actual review

How the figures are calculated:

• Gross yield on total capital invested = annual rent ÷ total capital invested × 100. Forecast: £12,000 ÷ £211,230. Actual: £11,400 ÷ £212,725.
• Actual operating costs: voids £38 + management £114 + insurance £32 + maintenance £50 = £234.
• Actual cash flow: £950 minus £682.81 minus £234 = £33.19 a month.

What the review shows

• The contingency did its job. The works overran by £3,600, but total capital invested was only £1,495 above the budget.
• The biggest change was not the works. It was the valuation. A £10,000 lower valuation meant £7,500 less borrowing, which explains most of the extra £8,995 left in.
• The two-month delay cost £2,395: £1,785 of extra bridging interest and £610 of extra holding costs.
• In the first six months of the tenancy there were no voids and only £150 of repairs, so the raw cash flow looked better than forecast. Applying the forecast's void and maintenance allowances gives the fairer figure of £33.19 a month.

Lessons to carry into the next project

Turn the review into specific changes to your next forecast:

1. Valuation. Budget for cash left in at a lower valuation as well as your expected one, and decide in advance whether the project still works if more cash stays in.
2. Timeline. If the works ran late, add the extra months to your next finance and holding cost estimate, not just to the build schedule.
3. Contingency. If you used most of it, keep the same percentage or increase it for similar property types. If you used none, check whether the survey and quote were unusually complete before reducing it.
4. Rent. Use the rent you actually achieved, and the comparables you checked, as the evidence for similar properties in that area.
5. Mortgage rate. Model the refinance at a range of rates, not only today's best case.
6. Records. Keep the forecast, the review table and itemised invoices together for each property. They help your accountant, your broker on the next refinance and your own decision on whether to hold, improve or sell.

Repeat the operating part of the review each year. The one-off capital figures will not change, but rent, costs and the mortgage rate will, especially when a fixed rate ends.

How PROXERA can help

Once the project is let, record the finished property in PROXERA so you can follow its actual rent, costs and mortgage alongside the rest of your portfolio, with documents and certificate reminders in one place. To rerun the project with your actual figures, the deal analyser in BRRR mode shows the total project cost, refinance amount and cash left in the deal, so you can check it against your original forecast.

Create a free PROXERA account to track the finished property

For more on refurbishing and holding rentals, see the refurbish, rent and hold guide. If you are weighing up a spreadsheet against a dedicated tool for this kind of tracking, read portfolio tracking versus spreadsheets.