Tag Archives: Credit Crunch

Landlords: Crack the credit crunch and maintain positive cash flow

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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.

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Number One Priority for Landlords is now Property Cash flow

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Gosh, how the property market has changed and continues to change rapidly!

As you will be well aware, the credit crunch has and continues to have a sever impact on the property market. It has already caused:

  • Thousands of mortgage lenders to withdraw their products or dramatically increase the lending criteria
  • The number of house sales to dramatically decline month on month and year on year
  • House builders share prices going into free fall and offices being closed
  • House prices falling at the fastest rate in years

What about existing landlords?

Most of the press seems to focus on those who are trying to buy property, but what about those existing landlords who already own property? How are they fairing with the current turmoil?

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Are you tracking your mortgage rates?

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With the credit crunch in full swing, more and more landlords are falling into negative cash flow. This occurs when their rental income can no longer cover their ongoing property-related expenditures.

For example, if your rental income is £500 and your property expenses are £600, then you are making £100 negative cash flow on your property business. This means that you have to subsidise you property through other means.

The biggest expenditure landlords have is the cost of finance on the property (i.e. their buy-to-let mortgage) and the single biggest factor that is turning positive cash flow properties in to negative cash flow is the increase in interest rates!

How do I avoid falling into this trap?

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