The number one issue currently facing professional property investors is cash flow – and there are five things they can do to improve it by cracking the credit crunch.
The credit crunch and downturn in the property market is currently having a big impact on landlords.It has prevented many landlords from completing or starting property investment deals as they can no longer secure the finance. The credit crunch has therefore knocked the cash flow for many landlords.
My top five tips for cracking the crunch are:
1. Don’t fall into the dreaded variable rate: If you are on a fixed, discounted or tracker rate mortgage that has tie-ins then always make sure you are aware of the expiry dates. Setting up a reminder system to notify you of when your fixed rates expire will help to avoid unnecessary high repayments by falling on to the variable rate.
2. Scrutinise all costs: Property housekeeping is a great way of realising where you could reduce your expenditure and increase your cash flow, so start scrutinising all your income and expenditure and draw up a profit and loss sheet. The key is to make sure that you are keeping your properties’ cash flow positive by getting rid of unnecessary costs. There’s no need to accept negative cash flow!
3. Lower your tax burden and keep receipts: In order to boost your cash flow it’s vital to lower your taxes, so it’s important to keep all of your property receipts. Expenses like decorating, repairs and phone calls do not seem like a lot at first but by the end of the year you will see they add up significantly.
These expenses could be offset against your rental income, which could be the difference between paying a tax bill and having no tax to pay at all.
4. Don’t be scared to raise rents: As a landlord, letting a property is your business. This means that you should be making profitable income from your property. Make sure you are charging market rents for your property and remember to give your tenants plenty of notice before any rent increase is set. Always explain the reasons for your decision.
5. Minimise void periods: Once your tenant hands you their notice, agree an initial inspection of the property and make it clear you expect to show prospective tenants around the property immediately. By following this simple procedure, you should be able to get back-to-back lets to help you receive maximum rental income while minimising void periods.
Property Portfolio Software’s flagship product Landlord’s Property Manager tracks all property-related income and expenditure and helps landlords to get better organised.
