What are the all important measurements all Landlords should be tracking? Some are obvious and some less so. Please read on for seven that you should track right now…
Your actual cashflow is based on the actual rental income minus the actual monthly expenses. Net cashflow is often different to gross cashflow, which is rental income minus any fixed costs.
Portfolio Total Equity:
How much equity do you have in your portfolio? Knowing the current estimated property value, minus the current balance of any mortgages plus other loans. This will give you a clearer idea of the choices you have, particularly if you are thinking of refinancing to capitalise on the stagnant property market and to expand your portfolio.
Portfolio Interest Cover Ratio:
The Interest Cover Ratio (ICR) of your portfolio, based on your outgoing interest payments and incoming rental income, is used by lenders to determine the resilience of your portfolio to increases in interest rate and it can be a key determining factor in your ability to secure a new mortgage. Some mortgage providers carry out stress tests that require rental income to cover at least 145% of mortgage interest payments at 5.50% across the portfolio. Understanding the position of your portfolio will help to understand your options.
Rental Cover Ratio:
You should also stress test each property and the entire portfolio with your current interest rate and mortgage monthly cost. This is in case your tenants stop paying their rent or are only able to make payments based on Local Authority rates or Universal Credit. This metric will help you understand your overall risk level on the entire portfolio level and how much runway you have if your tenants struggle to pay.
It is important to stay on top of the gross yield of your portfolio. This is the annual income generated by the assets divided by their price, and the net yield (which is the annual profit minus costs generated by the assets and divided by their price).
Life Time Value:
To know the information on the Life Time Value (LTV) of your individual properties and of your portfolio, you will have a better idea of your current position and your options to refinance. Some lenders have restrictions on the overall LTV of a portfolio and criteria can change quickly in the current environment.
Return on Investment (ROI)
Possibly the most important metric of any investment is the ROI or return on investment. This is the annual profit (income minus costs) generated by your portfolio, divided by the cash you have put in.
Tracking all of these metrics on an ongoing basis is important for any portfolio landlord at any time, but all the more vital in the current environment when the ability to make well-informed decisions quickly can prove the difference between success and failure.
If Homesale Homelet can help you with anything in relation to your property, please reach out. We have spreadsheets that can help you analyse your current portfolio and help you with future acquisitions.
Please feel free to call us on 01244 313 900 we would love to help or pop in to see us at 18 Grosvenor Street, Chester. Alternatively you can drop me an email on firstname.lastname@example.org we would love to help.