Managing Cash Flow
Growing Your Portfolio
A property portfolio can provide you with a good combination of capital growth and regular income. However, no investment is without risk. Property investment could have more potential pitfalls than traditional financial investment. This can be countered by a sensible approach and proper planning.
When you have a larger portfolio, your rental profits can help ease you through cash flow difficulties. Having a smaller portfolio makes you more vulnerable and means that alternative sources of income can be vital. You can mitigate cash flow problems by ensuring you have a good balance between capital growth and rental yield. If your properties are increasing in value, you may have the option of releasing further equity. If your rental yield is higher, you will have higher rental profits. Run all your property transactions through a separate bank account. NLA research shows that on average landlords spend 12% of their income on repairs, 7% on letting agent fees and they budget 17% for voids or other unexpected events. Your rental income should exceed the cost of your mortgage payments and it’s a good idea to allow a surplus to build up in your property account. It’s better to have a buffer budget to protect yourself for those unexpected costs that could arise. The tenant’s financial situation can change anytime, so it is recommended you account for a rental collection of 10 out of the 12 months to ensure you have funds to cover rent arrears. We strongly recommend that landlords consider protecting themselves against possible rent arrears. Visit NLA Rent Protect for details.