Three Beds and a Park View in Poplar for £330,000

Three bedrooms over two floors, 78 m² and a balcony facing a park. The asking price on Cottage Street in Poplar is £330,000.

Our model shows an 8.4% gross yield and a 13.5% IRR. The model rates the interior as fair and flags the kitchen, bathroom and floors for replacement.

Torquity rates appeal at 4.5 out of 10 and condition as fair. Light, space and the park view score well. Dated finishes in every room drag the score down.

Year one works on these numbers. Cash-on-cash reaches 7.82%, and DSCR sits at 1.76x. The 6.26% cap rate leaves a buffer for service charges and a void month.

Our model puts rent at £2,318 a month, or £30 per m². The range runs from £1,852 to £2,785. The ten comparables sit 353 m away on average, so the evidence comes from the same streets.

The estimate looks cautious. Nine of the ten comps let for £33 to £44 per m². Only Woodall Close, a 100 m² four-bed 104 m away, sits lower at £29.50.

Three bedrooms and one bathroom suit a family or three sharers. For three unrelated tenants, check Tower Hamlets' HMO licensing rules first.

Over 10 years the model shows £274,461 in profit and a 3.07x return on your money. The 17.36% IRR includes the refurbishment. Without it, the IRR drops to 13.54%.

The refurb adds almost four points of IRR for £19,100. Part of the profit still relies on London prices rising. Run a flat-price scenario in Torquity before you make an offer.

The model found ten rentals within 500 m, with an average match of 33%. Most are two-bed flats in newer blocks such as Panoramic Tower and the Delta Building.

Only one comp has three bedrooms: Cotton Street, 93 m², at £3,449. The closest match, Woodall Close, fits four bedrooms into 100 m² and lets for £2,950.

Two-beds in the newer blocks let for £1,900 to £2,600. This maisonette offers a third bedroom for a similar rent, and that widens the tenant pool.

The budget targets every weakness the model flaged. The kitchen takes £7,700 and the bathroom £5,000. New wood floors, carpets, paint for the brick fireplace and balcony decking cover the rest.

The uplift looks ambitious. £3,220 means £41 per m², above every comp except three flats under 56 m². I would plan for about £2,900 after the works, at Cotton Street's £37 per m². Even then, the extra £580 a month pays back the refurb in under three years.

As a buy-to-let, it deserves a viewing. An 8.4% gross yield and a 1.76x DSCR leave room for a void or a rate rise. Both beat our Streatham four-bed, at 7.4% and 1.54x.

Ask about the lease length, service charges and any major works planned for the block. Leaseholders share the cost of roofs and windows through the service charge.

Hidden gems

• Three bedrooms and 78 m² for £330,000 in E14
• A balcony with an unobstructed park view
• A rent estimate below nine of ten local comps per m²
• A £19,100 refurb that adds almost four points of IRR

Pitfalls

• Dated finishes in every room
• One bathroom for three bedrooms
• Only one three-bed among the comps
• The 39% uplift sits above most comps
• HMO licensing, lease length, service charges and major works need checking