16Nov

Landlords – how to keep your cash flow in shape

In this blog on cash flow we shall cover:

How to budget for income
What you should put aside for emergencies
How to reduce voids

If the pandemic taught us anything, it was how quickly things can change. As a landlord you run a business and that means you need to be aware of cash flow. If you are not on top of this, you could be in difficulty if you need to replace a boiler at short notice – believe me, 99% of boiler breakdowns are unexpected and will always come at the wrong time.

Here are some ideas to keep your cash flow positive so that you can deal with the surprises!

One: plan for tenant turnover

It always surprises me that some landlords work out potential income from their portfolio by thinking that the income will always be 12 times the monthly rent. Admittedly, we are now seeing the average length of tenancies at around 30 months, however I would always budget to see 11 months of rental income per property .

You must remember everyday a property is left empty is a day that your cash flow is decreasing. So, it’s essential to be prepared for tenant turnover periods. This means setting aside savings to cover any mortgage payments (if you have them) in months you are without a tenant. We plan for a turnover of five working days inbetween tenancies to make sure that the cleaning and little issues can be sorted out before your new tenants move in.

Two: set money aside

As well as budgeting to receive 11 months of rental a year, we always recommend that you put by at least 10% of your income to cover maintenance costs.

Three: late payments – jump on them

A vast majority of landlords that we work with are very trusting individuals. Therefore having someone looking after your back is very helpful. A late rent from our point of view is 24 hours – at that point we talk to the tenant to find out what might have happened and if there is a problem, look at solutions. Missed rent payments are an immediate disruption to your cash flow. Any hold-ups in addressing these with your tenant could lead to long-term cash flow problems

Four: property maintenance

Undertaking regular, preventative maintenance at your property can help to lower any future costs and ultimately improve cash flow. Regular visits to the property are imperative as well as having a routine of what to look for. For example this time of year we focus on the outside paint work so that we can have a plan in place to paint in the spring. By having these visits planned out, you can prevent bigger issues from occurring. Early maintenance will save you money and improve your bottom line.

Five: install more efficient fixtures

Installing high-efficiency items such as low-flow showerheads and toilets in your property can help reduce utility bills. The cheaper the home is to run, the longer the tenancy.

Six: plan improvements in between tenancies

Making even small improvements to your property will allow you to charge more rent. When they are planned in it reduces the void which will affect point one.

Seven: review paid services

If you have a British Gas or similar cover for boilers, review what you are getting for your money. In most cases we have found the annual charges are a nice blanket, but if you plan for changes to the boiler you will be quids in.

Eight review payment dates

When it comes to managing cash flow, you should always have money coming in before you must pay anything out. You should review the date mortgage payments leave your account and try to move the payment date to the few days following any rental payments, creating a buffer for yourself.

Nine: respond to issues quickly

Resolving problems quickly means you will be keeping your tenants happy while also minimising the likelihood of void periods, which creates consistency in generating income.

Any comments or more ideas on how to keep your cash flow in shape – let us know!