Cashflow is king & heres how

A recent post by Margo talks about the ticking time bomb awaiting many buy-to-let investors when interest rates start climbing from their historically low levels to something resembling normality.

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When base rates return to 'normal', then because of the banks increasing their lending margins to reflect their greater perceived risk on lending against property, landlords will get it in the financial neck. Imagine a base rate of even a relatively low 4% but then on top being charged a 3% margin by your buy-to-let lender. That means a buy-to-let mortgage rate of 7%. Ouch, thats going to hurt after the rates some of us have been used to of practically zero.

Cashflow is king & heres how to calculate it for free.

This is why landlords should keep a track of their cashflow. Remember cashfow, particularly in the current climate is king. To do this go to the Property Manager and enter in your loan costs, tenancy details and any regular expenses such as insurance for example. You then should be able to calculate your free cash each month. Then, be disciplined. Put that money aside each month. Probably best not in a bank hey. Perhaps under your pillow. Then when a landlord is confronted with buy-to-let mortgage rates of 7-8% on their buy-to-let mortgage in a couple of years time. You will have a little stashed away for these rainy days!

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