If you've ever found yourself staring at Zoopla at 1am wondering if you'd be better off buying your next rental property with cash or getting a mortgage, this post is for you.
We’re diving into a real-life case study discussed in Episode 207 of The Business of Property Podcast, where Simon and Stuart break down the full nine-year investment journey of a buy-to-let property, complete with actual rental figures, sale price, profit breakdowns, and ROI numbers. (We love a good spreadsheet moment!).
Here we’ll take a closer look at the numbers and the strategy behind cash vs mortgage investing.
The Property Case Study: 2014 - 2023
- Type: Standard buy-to-let, family home
- Region: South East England
- Purchase price (2014): £155,000
- Sale price (2023): £250,000
Over nine years, this property generated:
- £66,000 in rental profit if bought with cash
- £28,800 in rental profit if bought with a 75% LTV mortgage
And here’s where it gets Interesting, capital appreciation on the property was 61%, before factoring in tax. But how does that look in terms of return on investment?
Option 1: Buying in Cash
Let’s say you’ve got around £161,000 lying around and want to invest it all into one property.
Here’s what that looks like:
- Upfront investment: £161,000 (purchase + costs)
- Total profit: £66,000
- After-tax profit: ~£39,000
- Annual ROI (rental only): 4.7%
- After-tax ROI: 2.8%
- Capital ROI (on sale): 56%
- Total ROI (rental + capital) per year: ~11%
It’s stable, simple, and clean. This is a solid choice for investors who want predictable income and fewer financial moving parts.
Option 2: Buying with a Mortgage
Now let’s say you opt for a mortgage, 75% LTV, standard five-year fixes.
Here’s the breakdown:
- Upfront investment: ~£45,000
- Rental profit after mortgage: £28,800
- After-tax profit: ~£10,000
- Annual ROI (rental only): 7.7%
- After-tax ROI: 2.6%
- Capital ROI (on sale): 203%
- Total ROI (rental + capital) per year: ~26%
It’s less cash in, so higher percentage returns. Even though your monthly income is lower (thanks to mortgage payments), your capital is working harder and your returns can skyrocket if the market behaves.
The Wild Card: What If You Buy More?
This is where the lightbulb moment happens.
If you’ve got £160,000 to invest, instead of buying one property in cash… what if you bought three properties with mortgages?
Using the same maths:
- Your capital appreciation alone could exceed £225,000
- Your rental income would come from three properties
- Even after tax, your overall profit would be far higher than the cash-only approach
This is the power of leverage, using mortgages to scale, build wealth faster, and stretch your capital across multiple income-generating assets.
So... Should You Buy in Cash or Use a Mortgage?
Honestly? It depends on your goals, risk tolerance, and where you are in your property journey.
Buy with cash if
- You want steady income with minimal admin
- You’re in or near retirement
- You want to avoid interest rate risks
Use a Mortgage If
- You want to grow your portfolio faster
- You have limited capital
- You’re early in your investing career and can handle more complexity
It’s not about which is better, it’s about which is better for you right now.
ROI Breakdown
| Scenario | Profit After Tax | Capital ROI | Rental ROI | Total ROI (Annualised) |
|---|---|---|---|---|
| Cash | £39,000 | 56% | 2.8% | ~11% |
| Mortgage (3x) | £300,000+ | 203% | 2.6% | ~26% |
Simon and Stuart cover all the details in Episode 207 of The Business of Property Podcast. They walk through the spreadsheet, explain ROI calculations, discuss the reality of buy-to-let tax, and explore how to scale smartly without overstretching.
It’s one of the most popular episodes for a reason.
Run the Numbers for Your Own Deals
Want to play out these scenarios with your numbers? Try PaTMa’s free ROI calculator and compare cash vs mortgage instantly.
It’s free, landlord-friendly, and backed by actual data.
