The key to riding out void periods and banking maximum property profits
When you invest in property, you might be concerned about the effect of void periods. I know I was when I first started out. They terrified me. Positive cash flow suddenly turns negative. You must subsidise your investment out of your pocket. Your financial plans are shot to shreds. The thought of a void period used to send me into a cold sweat!
Now, I’m far more relaxed about void periods. Sure, I don’t want them. Who does? However, I recognise that void period are a natural part of life when you invest in property as a buy-to-let opportunity. To keep void periods to a minimum, I make sure I’ve set the right rent and that I’ve properly vetted my tenants. I use an investment property manager to look after my investment properties. They ensure all maintenance issues are dealt with quickly, and that rent is paid on time every month.
While all these efforts help to slash void periods, they won’t eliminate them. Tenants still move on, for a variety of reasons. But you don’t need to stress about void periods. With five streams of passive profit from property investment, even during a void period you’re probably still making a tidy profit.
How you profit when you invest in property
Understanding how you profit from investment property is the key to staying calm during void periods. When you’re calm, you make better investment decisions. That includes how to get your property let to new tenants and reduce the effects of a void period. Instead of getting uptight about the losses you are suffering when your property is empty, remember that:
- Your investment property is probably growing in value
- You are probably making money on other people’s money, because of the benefits of leveraging in property investment
- Any capital growth is protecting you against inflation, and over the long term rental increase will do the same for your income
Also, property is a tangible asset. All the time it is growing in value, you are building a real legacy to leave your loved ones. A legacy that could change their lives as it has yours.
When your property is let again, the negative cash flow you’ve suffered during a void period will turn positive again.
My lightbulb moment
In the early days as a property investor, I owned property that suffered a few months of a void period. I needed to make some repairs to the property, and it stood empty. As each month went by, I was further and further out of pocket. My stress levels were through the roof.
The next year, I had tenants in place, and the property was once more in positive cash flow. Things were back to normal. I wanted to buy another investment property and needed to raise the cash for a deposit. I thought to myself, if only I hadn’t had that void period with this property, I’d have most of what I needed. My property mentor suggested I consider remortgaging the first property. So, I had it valued and discovered it had increased in value by almost £30,000.
That was my light-bulb moment. Even though my cash flow had turned negative for a temporary period, the property was still making me money through capital appreciation.
A savvy strategy to invest in property
This experience also made me realise the importance of not overemphasising on one profit stream when investing in property. If you put all your eggs in the positive cash flow basket, you could make a poor investment decision.
I’ve seen investors buy properties based only on the incredible rental yield they promise. The property lays empty for a few months, and their bank balance whittles away to nothing. Eventually, they are forced to sell the property, only to find it hasn’t put on a penny in value.
Cash flow is important, especially if you are building a portfolio to create life-changing passive income. Positive cash flow pays the mortgage, covers maintenance costs, and creates the income you desire. But don’t let it be the only reason you invest in property. The savvy property investor buys property that offers the opportunity of positive cash flow and capital growth, remembering that:
- During periods when there is no capital appreciation, you have the cash flow to give you a profit
- If your property suffers a void period, you’ve still got the capital appreciation to pay you a profit
Your key to riding out void periods in buy-to-let property investment
If I hadn’t kept an emergency fund in reserve, I might have been forced to sell the property that suffered an extended void period. I wouldn’t have been able to remortgage and use the capital gain to invest in another profitable property investment opportunity.
Use all the strategies you can to get a property re-let as fast as possible. Employ an investment property manager to do all the donkey work, marketing your property, finding and vetting tenants, and conducting viewings. Be competitive with rental pricing. Maintain your property in good condition. Doing all these things will help keep void periods to a minimum.
Equally as important is to maintain an adequate emergency fund. It will ensure you can ride out a void period until you get the property let again. It will ensure you get to bank the winnings from all the profit streams of property investment, and not be forced to sell prematurely.
Contact one of the Gladfish team today on +44 (0)207 923 6100. Ask us about our current property investment opportunities for cash flow and capital appreciation.
Live with passion,