I went through a stage where I was buying properties like my life depended on it. How much money I had in the bank (or more correctly – how much overdraft was left over!) was never considered. Whether you are pushing it to the edge or whether you are going along sedately, it is worth implementing this now just for the peace of mind and simplicity it brings!
Pushing it to the edge
On two occasions my wife got to the till having done the weekly shop only to have her card declined for insufficient cash. She was worried that this property things wasn’t working – I was ecstatic on the other hand with what we were buying.
At one stage I have every credit card and every overdraft except one maxed out. The one overdraft not at the limit still had £700 available – enough to cover a car repair if needed. I was comfortable with this as I had a good grip on my cash flows and knew I could ride it out.
You may not push things to the edge quite like I did – it is not for everybody! But, you should start to manage your cash flow with the mindset that you are running a big property business! With time and persistence, you will get there!
Mortgages
I have all my mortgages going out of my bank account on the same day.
When I started, I had lot of professional tenants with rent due on the 1st. If they were late in paying I could chase them and thus could expect to have all the rents in by say the 6th or 7th of the month.
I thus had all my mortgages being collected on the 10th of each month to give me a bit of extra breathing room.
Now that I have a largely social housing based portfolio with rents all over the place, the date isn’t all that important but having all mortgage paid on the same date it critical.
Quick Check
I usually do this on the 8th or 9th of each month. I pop into last month’s bank statement on my phone and see my balance on say the 9th and then compare this with my balance on say the 11th. The difference is my total mortgage cost for that entity.
I then compare that with how much money is in the account. Where I have stopped buying in that entity, there is usually surplus funds that get moved out of the account to another entity that needs the funds.
Where I am still buying in an entity, I will usually need to top up the bank account so it has sufficient cash to pay the mortgages. I can then ignore it for (almost) a month.
What day of the month is right for you?
I don’t think this makes a huge difference and is just a business decision. Pick a day and stick with it.
Making a nightmare for yourself
We had one client that was trying to spread his mortgages out over every day of the month.
This means you have got to constantly keep an eye on how much is in the account and you end up having to keep surplus cash lying around as a safety net as not all mortgage amounts are the same. It is also hard to pick up changes from month to month as the amounts are spread over a long time and can be skewed by rents coming in, other expenses, etc.
HMO & other regular costs
Where you are paying council tax, utilities, broadband and other HMO running costs, it is worth getting these all aligned as well.
You could align all these for another day in the month or use the same date as chosen for the mortgage and keep it simple. The latter would be our preference.
Where you have other costs, like insurance, boiler cover, etc these should also be aligned.
