Singing Pig

Red Shoes

I echo what carl has just said.

Patsy, I had a couple of ideas to ease the strain. You have 32 properties- tenanted with negative cash flow as I see it.

Stage 1)

Starting with the worst lossmaker, offer the properties out to the tenants at full market value informing them of any savings they will make rent versus mortgage. You may want to start this discussion by being brutally honest with them and explaining that you will be increasing the rent or being reposessed yourself. Offer assistance to them. Talk about rent increases to those who could reasonably be increased to nearer market rent levels - I wouldn't suggest going to market levels as some will just bolt. Some will threaten to bolt anyway, few will.

Stage 2)

Can you live in any of these houses? If so sell your own. And aim to move into another you can sell, or rent somewhere.

This will sound totally unpalateable, but you can get back from this position, you can't from bankruptcy

Stage3)

Take control of all outgoings and limit all expenditure to bare bones costs, avoid refurbing - you can't afford it.

Stop thinking of your business in emotive terms and move on - quickly.

 

Red Shoes

It is not necessary for everyone to go into that level of detail, but it is entirely sensible to do so.  I should be more organised, but I am fairly organised and I am a much smaller player.

One thing you did not mention was "realisable cash".

For example on each property, and cumulatively, what would happen if you sold.  I would assume 4 months from marketing to completion (if you take longer you are being greedy holding out for an unrealistic price) and the tenant moving out after 2 months (you may wish to move them out prior to marketing dependent on the porperty, area, tenant etc).

So you decide to sell property 1.  You get £150k, less 1% EA fee, less x amount CGT, less solicitors fees etc.  The remaining equity goes in the bank at 5,6% whatever.  What does that do to your cashflow?  You then do the same with a second property etc etc
 

Wow this post has really moved on. I think the last couple of posts highlighting the importance of having an idea of your cash flow position over the next few months is of CRITICAL importance. You know what they say: If you don't know where you're aiming you'll always miss? You have to have a handle on your cash position. Pointless targetting small increases in rent if your re-mortgages are re-setting to SVR's above 7% - if you were on 5.5% - that means an estimated 30% increase in mortgage costs. So you'll need to look at other ways of improving your position. Self manage your portfolio -can save up to 30% of gross rent? If anyone is interested I have a speadsheet layout which enables pretty easy manipulation of key figures i.e. rents, costs, interest rates etc which enables cash flow forecasting. I know some folks might not know enough about Excel to do it themselves.

 

One tip that I have actually done myself - I have rented a room out in my house. Not only do I get some tax free (up to about £4250 I think) rental income cause of the rent a room scheme - but the tenant also helps with bills etc. Will certainly help with re-mortgages re-setting. I would say - I have been fortunate in that the tenant is a family member and is relocating. Will be difficult finding the right tenant to share your house with? But still it is an option to look at.

Two things not covered so far in this thread - Deposits & Inventories. To ensure you don't have losses from rent arrears make sure you ask for higher deposits (where possible and be reasonable). Also, ALWAYS HAVE A DECENT INVENTORY DONE WITH TONS OF PICTURES! The number of landlords I know that have not been able to prove damages by tenants and subsequently lose money?

As for Patsy - woul dbe good to get an update and see if any of the advice to date has actually helped - How are you getting on? Any other areas Pigs can help? 

Keep up the good idea's.

FF.

I look at patsy's situation as one of cash flow -  not equity. Irrespective of how much cash she has in the bank it will be eroded by negative cashflow and the general degrading of properties in the passing of time and tenant. Clearing out the tenants and marketing each is likely to cause more pain than it relieves as volumes of sales have plummeted. But if she can stay afloat for long enough and kill off the worst offenders (and she needs management info to be able to identify these) she can see her way to high ground, otherwise she is simply hoping for a miracle.

Realisable cash isn't really the aim - reduction of debt is.

Sorry, I was talking more about your spreadsheets for yourself... do you have an idea of your new net worth and new cash-flow were you to sell up all or part of your portfolio?

Yes I regularly monitor both on spreadsheets.

I review net worth occasionally, this may be odd as I don't consider it that important to my business. It is really simple to do take each property and put a value on it, now look at what similair have achieved in auctions - minus costs and you can now value your assets for a risk position.

I can identify cashflow after selling off the mortgaged properties, or selling off the low yielders, or both. What is surprising is what happens when you cancel off the mortgages to see what your post mortgage income is, or put another way how much the debt is gaining you.

I guess most landlords have a good idea of this anyway, I just like to have it in  easily accessible spreadsheet form.

 

I have had a few people asking for a copy of the cash flow worksheet I mentioned earlier in this thread. You can download it at: http://www.the-home-place.co.uk/page31.php - you have to register to access it but only takes a minute to register and there are some other useful spreadsheets (Net Rental Schedule / Portfolio Summary) and they are all linked with formula's