With banks still tightening lending regulations and the possibility of an interest rate rise soon, losses might start becoming a reality for a lot of landlords. Losses are not always a disaster, but you do need some way of remaining in a good cash flow situation in order to ensure you’re not forced to sell up or, worse, you find your property repossessed.
Retained Savings
The best place to start might be in your savings account. It’s good business practice to keep a small amount of reserves for times of emergency and if you find yourself struggling to keep up with the mortgage then that might just qualify. Usually cash savings are the first port of call because they’re cost effective: the interest you lose off your savings is probably cheaper than the cost of borrowing.
Talk to your Bank
Many landlords, however, are working on tight margins and the idea of putting up some savings is ludicrous: sometimes there just isn’t enough money. If this is you, the best place to go is to your bank who can talk you through the options. An overdraft, extension on the mortgage or perhaps a switch to a different mortgage package might be best.
The Small Things
Sometimes the best way to cover losses is to look where the little savings can be made. It might be a good time to chase up that tenant who’s in arrears, that old Landlord Insurance claim you never got round to filing or that tax rebate. Even if you only recover a partial amount of what you’re owed it’s usually better than borrowing expensively.
Losses are something that’s a part of the risk of the property business. Just because your let is making losses at the moment doesn’t mean it’s a bad investment, so long as the long term prospects look better, but you do still need to consider how to fund deficits. The worst thing you can do is just let things happen: bounced cheques, direct debits and unauthorised overdrafts can cost you even more than you expect.
