Category Archives: Credit Crunch

Say ‘NO’ to Voids!

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One month of lost rental income can knock your property cash flow and profitability for SIX! Minimising the void periods is essential if you want to maximise your property cash flow. There are three common instances when you are most likely to experience void periods:

a) when a property has first been purchased and is getting ready for let
b) when your current tenants are moving out and new tenants are due to move in i.e. between lets
c) in the quietest months i.e. summer holidays and Christmas time Continue reading →

Landlords and the Economic Crisis

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The current global economic crisis presents trying times for all of us. It is an especially trying time for landlords, with property prices in the United Kingdom falling towards 2003 levels, thus reducing the value of your portfolio by significant percentages in a short period of time.

But these tough economic conditions also present the watchful and serious property investor with an opportunity to buy property at incredibly discounted rates.

How do you make the best of the current situation?
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Time to come clean about property valuations!

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As you are well aware, mortgages have been withdrawn in the thousands by lenders in recent months.

With property prices having fallen an average of 10% in the past year, lenders are still holding back on borrowing to would-be buyers. This has particularly been the case on new-builds (especially new build apartments) because of the way the prices have plummeted over the past months.

The valuations on new-builds have caused great concern to lenders. This is because lenders have never known what incentives, such as cash backs, discounts, stamp duty, fully furnished, fitted kitchens etc.. have been included in the sale.

The concern is that many lenders believe properties have been sold for more than they are really worth. This has led to many outstanding mortgage amounts on new-builds being greater than the actual value of the property (i.e. negative equity).
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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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Minimising Your Property Management Costs

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As I identified in my blog on 3rd July, the number one issue now facing landlords is cash flow. It is essential that as landlords we try and keep each of our properties in positive cash flow where ever possible.

Ask yourself “how much money am I making from my portfolio?” What does this break down into with regards to individual properties?

Now ask yourself “how much money am I losing?” Hopefully the answer to this last question is NONE!

But what if you find you’re losing money? What simple steps can you take to eliminate this loss?

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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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Is Now a Good Time to Invest in Property?

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Interesting question, isn’t it?

The doom mongers (many who missed out on the property boom) say property prices will fall dramatically (and so do most newspaper columnists), yet the property ‘optimists’ say that now is a very good time to start buying.

So who is right?

Everybody has an opinion but what I always say to myself is “look at the person who is giving the opinion and what their motive is.” For example, if someone is selling property, will they say prices are going to fall? And which headline sells more newspapers? Prices to Crash by 30% or Prices to Drop by 3%?

Nobody knows how far property prices will fall (if they do) and how quickly they will recover. The important point is that if your property investment deal stacks up, there is no reason not to buy in the current market for the long term.

In fact, experienced and smart investors are starting to see some GREAT deals coming through now!

The important thing now is to make sure you can answer ‘YES‘ to the following three questions:

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