Do you have any cash in reserve? 6m UK families don’t! Reply


I was watching the BBC news this morning and in the Reality Check report they were talking about Debt.

Obviously the biggest amount of debt is mortgages and compared to other countries we are close to the average for Debt.

But its not just an issue for families its an issue for businesses too. We often work with landlords and typically their net cash flow out of the rent received is 2% or less.

That’s the Rental Income less mortgage interest, expenses and tax.

Landlords tend to be asset rich and cash poor, liquidity is vital to cover even minor problems such as repairs and void periods. It is of course easier to have liquidity with a bigger portfolio.

Landlords are facing many problems at the moment not least the Section 24 Interest Restrictions which start this year. This will mean large numbers of landlords with high Loan to Value ratios will have negative cash flow and if the sell they face 18% to 28% capital gains tax (as buy to let get an 8% penalty).

I wonder how many landlords have the resources to handle negative cash flow, how long could they cope what are their contingency plans?

The Lenders and Bank of England have anticipated this problem and for sometime now have tightened the lending rules coverage is now 145% for personal borrowers, but its still 125% for companies as they are aren’t affected by Section 24.

Now is the time to work on your strategy!

steve@bicknells.net

 

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s