What makes a deal stack?

“Does it stack?” is really four questions in a trench coat. A deal stacks when it cashflows after stress, returns your cash at an acceptable rate, leaves an amount in you can live with, and survives something going wrong. Here’s each test.

1. Cashflow — after honesty

Rent minus realrunning costs (voids, management, maintenance — 12% for a single let, up to 30%+ for an HMO) minus the mortgage. Many investors set a floor per unit per month (£150–£300 is a common range) so one boiler doesn’t erase a year. The quiet test behind it is the lender’s ICR — if the rent barely supports the loan at the stressed rate, your margin is thinner than it looks.

2. Return on the cash left in

Once the dust settles — refinance done, bridge cleared — what does the remaining cash earn? Many portfolio builders want 10–15%+ return on cash, or on a value-add, most of their money back out. A deal that locks £100,000 in forever has to be exceptional on every other line.

3. Margin if you sold instead

For flips and split-and-sell plays the yardstick is margin on cost — gross profit over everything you spent. 20%+ is the classic developer hurdle; below ~15% one surprise eats the deal. Even on a hold, knowing the sell-margin tells you whether you have a second exit.

4. Stress it before reality does

Three knocks, one at a time: the end value 5–10% lower, the works 15% heavier, the rate 1% higher. A deal that survives all three is robust; a deal that needs all three to go right is a hope with a mortgage.

Kill criteria

Decide your walk-away numbers beforeyou model — minimum cashflow, minimum ROCE, maximum cash left in — and let the deal fail fast. The expensive mistakes are rarely bad maths; they’re good maths negotiated with after you’ve fallen for the property.