This week, we’ve got a Guest Blog contributor from – Julie Barker, Managing Director of Positive Accounting, with tips and advice on how property investors can streamline their income.
For a property investor, there’s nothing worse than not knowing what’s coming in, going out and when they are going out of your bank account. Here are some hints and tips that should help you keep track.
Do you charge your new tenants an admin fee? Admin fees are another income stream. It’s a commitment from your prospective tenant, if they are prepared to pay an admin fee they are less likely to walk away and your time won’t have been wasted. Here’s how it works:
The would-be tenant pays a £100 non-refundable reservation fee and £150 admin fee to be paid prior to any reference checking you do. On successful completion of the reference check, and providing you are happy, you offer the tenancy to the client and then deduct the admin fee from the first month’s rent.
To make your cash flow more predictable you need to have all your tenants paying rent on the 01st of every month. As you know most tenants have limited cash available, so here’s what I suggest:
How many of you start your rental date from the day your tenant moves in?
Lets look at an example:
A tenant moves in on 17th Apr and they will pay 1 month’s rent (plus deposit) until 16th May. That way you always get your first month’s rent in full so that you are ahead of the game. The tenant will then pay pro rata from 17th May to 31st May and after that the full £500 on the first day of the month.
Let’s look at the numbers:
The first rental payment will be £500 taking them from 17th Apr until 16th May. The second payment is a pro rata payment of £230.14, calculated as follows:
£500 x 12 = £6000 (the monthly rent multiplied by 12 months giving the annual rental income)
£6000 / 365 = £16.44 (dividing the annual income by 365 gives the daily rental income)
£16.44 x 14 days = £230.14 (the remaining days of the month 17th May – 31st May)
From 01st June onwards the rent of £500 is payable on the first of every month.
People may argue some tenants get paid on a strange day of the month but if the quality and location of the property makes it a desirable place to live, then most tenants would be happy to do this.
The reason for doing this is so that you know that by the 4th of every month (taking into account weekends and bank holidays) who has and who hasn’t paid their rent.
If you really want to streamline your income, although not a predictable source of income, you can use the same system for interest income that you use for your rental income.
Interest income comes from any loans you have made to other investors on the first day of the month and by the 4th you know where you are.
Next month, I’ll talk about streamlining your expenses.
To find out more about Positive Accounting, please visit here.
To find out more about a range of articles on tax-saving hints and tips, please visit here.
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