Being a landlord can be tricky, especially when it comes to keeping control of your finances.
Your cash flow is the amount of cash that comes in and out of your business over a period of time, and managing this is extremely important if you want to have a long-lasting, successful property rental business.
Here at Blue Rocket Accounting, we work closely with many landlords, and we want to help all people in this industry succeed.
You may have seen our previous article about key mistakes to avoid in landlord accounting, or our five bookkeeping tips for landlords blog.
Well, we also want to help you manage your cash flow as a landlord, and that’s why we’ve complied this list of seven ways you can do just that.
Let’s take a look.
Create a Budget
For all landlords, there will be monthly outgoings.
This will include things like mortgage payments, taxes that you pay on your properties, insurance costs, and maintenance and repair fees.
While you may feel like you sometimes want to spend more toget the best properties and have them in the best shape, this can soon start digging into your profits if you’re not careful.
Setting a budget is a great way of always making sure you stay on track and that you never overspend.
Work out your income and then choose a budget from there, leaving you plenty of money that can be counted as profit.
Set Aside Some Income in Reserve
Putting a portion of your rental income to the side every month will over time help you build a large amount that you can count as in reserve.
This means that if anything does go wrong, you will have an amount of money readily available to spend that won’t be eating into your profits for that month.
How much you keep in reserve is up to you, but it is good to add any excess profit into this pile, and how high you let it grow is up to you.
Things can go wrong when working in property rentals, such as emergency repairs that can be costly. Having some money in reserve also allows you to be proactive and be able to hire new staff or purchase new properties for example.
It is also good insurance in case you lose a high paying tenant and need to go without their payments for a while.
Manage Your Rental Income Carefully
Managing rent isn’t always easy.
The more clients you have, the more money you will be making. With this extra income though, comes more complexities.
To keep a clear track of your income, try and manage payments so that they all come in at similar times and make sure any late payments are quickly followed up on.
A well organised filing system is vital here so that no-one slips through the cracks and misses payments.
And if you have great tenants who always pay well, it won’t hurt to say thanks with a little gift at the end of the year.
Good tenants are vital to a well-run landlord company, so make sure they know you appreciate them when they pay in full and on time.
Reduce Your Expenses
A great way to maximise your profits, is to minimise your outgoings.
While this sounds simple, doing this without sacrificing the quality of upkeep of your rental properties can be hard.
Look at ways you can save a bit of money without making major changes that are detrimental to your tenants.
For example, why not look at switching energy provider and getting a cheaper rate, which can save you on average over £250 per property? Or if your mortgage is higher than the current rates, taking a look at remortgaging could prove to be very fruitful.
There are plenty of ways of saving money, so assess your spending and see where most of your money goes and try and bring this down.
If you have a long list of tenants, saving a few pounds fromeach will soon add up and could improve your cash flow drastically.
Choose Your Tenants Wisely
We’ve spoke about the importance of good tenants earlier in this blog, and we’re going to touch on it again here.
Something that you may not think has an effect on your cash flow, but certainly will if you choose the wrong person, is picking your tenants.
Common reasons for a poor cash flow are late payments, damages to your property, and evictions that mean you lose out on monthly payments, so by ensuring all of your tenants are trustworthy, loyal, and financially sound you minimise the chance of these issues.
Consider running credit checks and background checks to ensure your tenants are the perfect match for you and your business.
Schedule Regular Maintenance
Many of us have felt the pain in our finances when something goes wrong on our home.
Things like boilers breaking down which can cost on average £300 to fix, roofs leaking, and mould and damp can mean that you don’t just upset and lose your tenants, but you also have to pay for a repair which can cost thousands of pounds.
Regular maintenance will mean all of your facilities are regularly checked for any issues and serviced so that they always are in a good working order.
Not only does this reduce the chance of costly emergency repairs further down the line, but it can also help your appliances run more efficiently, meaning less spend on gas and electrics for example.
There are many companies that offer a great regular maintenance service for low prices, so it is worth signing up with one of these to have the peace of mind that all of your properties are getting a good check at regular intervals.
Your tenants are sure to appreciate this as well.
Always Keep Track of Your Figures
As an accounting firm, this is something that we tell all of our clients straight away.
Keeping accurate records of your income and expenses to help you track cash flow and make informed business decisions is key to a successful landlord company.
There is great accounting software out there that can help you with this, and other tools such as management accounts that can help you get a clear overview of your finances over a set period of time.
Accounting for landlords isn’t always easy, and if you are struggling keeping track,it is always worth getting in touch with a landlord accountant who can help you get your figures in order and get the most out of your cash flow.
<H2> How Blue Rocket Accounting Can Help</H2>
Here at Blue Rocket Accounting, we work with a large number of landlords and help them improve their cash flow and boost their business.
If you are a small business, or a global one, we can help you track your income and reduce your spending.
Want to know more?