This week in the Property Investment Mastery Facebook Group I was asked the following question:
Heres a Q: For every house you BTL (with 60k down on a 190k house, at say £340pcm mortgage cost and 800pcm income) how much capital should you reserve as cash in the bank per house?
Currently we have a year’s worth of living expenses in premium bonds as our contingency. For each of my properties I have two month’s worth of costs put aside then all my other net rental income goes into a stocks and shares ISA until the time that I want to buy the next property or invest elsewhere.
In terms of recession proof, I know that worst case scenario I could accept a rental income of my mortgage payment + 10% maintenance (plus service charge) so there’s a minimum figure I could accept and to do that I could put in the AST the full price rent and then discount it with a rent free period, so that I wasn’t shooting myself in the foot when the market starts to rise again… usually in a boom period and that would be a good time to sell if I really didn’t want the property anymore. Also keeping the rent at market levels means my mortgage lender doesn’t panic if they ask to see the AST.
You should also save a pot for any renovations / larger costs. I transfer out all of my excess net profit into an ISA so I’ve got a pot building there as well!
Finally, interest rate rises. I have a policy of only remortgaging a property to take out £’s once. After that as the property price rises over time, at the end of my fixed term I’m usually able to reduce the LTV and get a better interest rate, and also pay less on the interest!
It’s about being smart with the money that you’ve got so that you always have a back up! If you want you could also get renters insurance to help out if anything goes wrong.
What do you do to recession proof your property portfolio?
P.S Remember the Members Club is opening again soon, so don’t forget to get yourself on the waiting list here: https://ncrealestatemembersclub.com