Ask any Olympic athlete and they will tell you that marginal gains can prove the difference between success and failure. The same is true when it comes to managing your property portfolio.
Often it’s the simple wins that can add up to success and the key to managing those wins is with access to up-to-date, accurate information. After all, if you can’t measure it, you can’t improve it.
So, with this in mind, what important metrics should you be tracking on your portfolio? Here are seven simple wins to improve your returns.
Up-to-date information on the LTV of your individual properties and of your portfolio will give you a better idea of your current position and your options to refinance. Lenders often have restrictions on the overall LTV of a portfolio and criteria can change quickly, so staying on top of this is important.
2. Portfolio Total Equity
Knowing the current estimated value of your property portfolio minus the current balance of mortgages and other loans will give you the portfolio total equity and a clearer idea of the choices you have, particularly if you are thinking of refinancing to expand your portfolio.
3. Portfolio Interest Cover Ratio
The Interest Cover Ratio (ICR) of your portfolio is based on your outgoing interest payments and incoming rental income and is used by lenders to determine the resilience of your portfolio to interest rate rises. It can be a key determining factor in your ability to secure a new mortgage, so having a better idea of the position of your portfolio will give you greater insight into your options.
4. Rental Cover Ratio
It is important to stress test each property and the entire portfolio with your current interest rate and mortgage monthly cost, just in case your tenants stop paying their rent or are only able to make payments based on Local Housing Authority rates or Universal Credit. This metric will help you understand your overall risk level on the portfolio level and how much leeway you have if your tenants stop paying.
5. Net Cashflow
This is your actual cashflow, based on the actual rental income minus the actual monthly expenses. Net cashflow is often different to gross cashflow, which is rental income minus fixed costs.
It is important to stay on top of the gross yield of your portfolio. This is the annual income generated by the assets divided by their price. The net yield is the annual profit, minus costs, generated by the assets and divided by their price.
Possibly the most important metric of any investment is the ROI, or return on investment. This is the annual profit (income minus costs) generated by your portfolio, divided by the cash you have put in. By tracking this metric, you can better understand what improves your ROI and what can make it worse.
Tracking all of these metrics on an ongoing basis is important for any portfolio landlord at any time, and it doesn’t have to be daunting or time-consuming. Technology platforms, like Lendlord, can make it very easy to track all of these metrics on an ongoing basis, helping you to make better-informed decisions, to improve the performance of your portfolio and grow your property business.