It’s time for another panel discussion in our series covering the Property Core Skills. Joining me to talk about managing our property budgets and cashflow are Dominic Hardy, Sergio Grande and Jeff Unsworth.
The panel share their own use of budgeting and cashflow management in their both their own portfolios and in a professional capacity in Sergio’s case.
Spoiler alert: spreadsheets feature highly across the board! However, we go wider and deeper than this, covering routines, other technology and apps, different use cases and some more top tips to note down too.
Join us for another conversation with our everyday property investors to learn how they do it and why it helps them on this topic.
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Transcription of the show
It’s time for another panel discussion in our series covering the Property Core Skills. Joining me to talk about managing our property budgets and cash flow are Dominic Hardy, Sergio Grande, and Jeff Unsworth.
The panel shares their own use of budgeting and cash flow management in their both their own portfolios and in a professional capacity in Sergio’s case.
Spoiler alert: spreadsheets feature highly across the board! However, we go wider and deeper than this, covering routines, other technology and apps, different use cases, and some more top tips to note down too.
Join us for another conversation with our everyday property investors to learn how they do it and why it helps them on this topic.
Property Chatter
Welcome to the property voice podcast helping you to navigate safely through the world of property investing, get the lowdown and updates, insights and outcomes on all matters property with a splash of entertainment along the way, the property voice or voice to trust among the crowd. Now, let's get started with your host, Richard Brown.
Here we are, again, it's another week on the property voice podcast, we're in the middle of the series property core skills. And it's another panel discussion. And with this week, we're talking about managing budgets and cash flow, generally speaking, is one of the core skills, I'm really delighted to have this panel with me rather, who's got various experience, whether it's personal, whether it's professional, over many years, or over a short period of time. So we can all chip in a little bit, I'm sure. And this is all about, you know, what we do as everyday investors, rather than, you know, some sort of lofty thing that you have to have, you know, sport what Blackstone does with their portfolio, this is what we do. So we're going to, we're going to have a conversation around that. I'm happy to welcome Sergio, Jeff, and Dominic, as my panelists, guests today. Not really expecting anymore, but let's see. And what I thought I'd do is just allow you to introduce yourselves, just so that the listeners have got an image in their mind's eye, if you like, of who you are, where you come from. And so when you talk about this topic, it will be more relevant and contextual, I think so, Sergio, how would you like to kick us off and just say hello to everybody?
Yeah, so, um, so Joe, I'm a project surveyor. My day-to-day job. I have worked for the last couple of years on a big 411 presidential apartment block. And I'm currently leading a project that's 26 million pounds and 126 apartments, and on my personal investment, I have a small portfolio of properties, as well. Hmm. So yeah, that's, that's me.
So Sergio. So yeah, you've got that sort of big-ticket, sort of professional background, if you like as a quantity surveyor and looking at projects all day long. And then you probably try to even up the scales a little bit and try to bring the personal portfolio to me, maybe somewhere up there. I'll probably, Yeah, sounds good. Thanks to Jeff. Your next step. Jeff Hemsworth, I should say Sergio grungey. Jeff Unsworth.
Hi, yes. Jeff Wandsworth part-time IT consultant for large multinational. I spend my days off looking after my two young daughters. And obviously my portfolio I bought my first bicycle 10 years ago to bridge the gap or sorry, my pension. But now the last five years have increased my portfolio to six mainly by selecting the Northwest. I mainly focus on a BAB strategy and focus on letting low-income Universal Credit households.
Interesting Ah, so I've got some experience there obviously and you do a lot of project work with the BRS. So and it's interesting with the set, you know, tenant sector type is that's quite a specialist area as well. You need to know your way around that particular system deems you do in the store pitfalls. I found that with the people I'm working with, it's very satisfying. Indeed. Welcome, Jeff. And thanks for joining us on the podcast. Appreciate it. dominate Dominique hardy
aside, my name is Dominic. I'm an IT contractor in my day job. So I have a limited company now, which I run. And then I'm also an accidental that what started off as an accidental landlord back in 2012, when I moved out of my residential property into another residential, luckily enough to be able to keep the first one. And then my partner moved in with me shortly after that, so we rented her property out as well. So we kind of started with a very small portfolio back then. And since then, really, I think around 2017 I thought about investing in property full time to basically replace the day job. So yeah, since around 2017, I've been building my portfolio, got a small portfolio the minute of buy to let HMOs one holiday that actually got 2019 I think just before COVID so not the best time but since the restrictions are lifted, it's actually done really well. Yes, I've managed to get those to a combination of my own cash and some j Have a use with other people. Yeah, and then I'm looking to further invest and grow my portfolio. So hopefully, I can do that full-time.
Yeah, interesting, you know, dominate. And I guess you know, the variety that you've got there. And you know, there could be some different accounting treatment or tax treatment, that we might get on to potentially if we've got time with those different strategies. So anyway, welcome. Thank you, all of you. So we talked before we kind of hit record, officially, that we could break this conversation down into, I was thinking maybe three main segments if you like. So you know, how we might budget looking at a particular opportunity, property opportunity, before we've acquired it. So that's sort of using as a predicting tool and using budgets as a predicting tool and evaluation tool. So, you know, before we do anything, how we run the numbers, crunched the numbers, and then I guess you could, if you have some kind of project element, you Jeff, you talked about Brr, for example. So one of the principles of B r is that refurbishment bit so that refurbishment bit would be a project, most likely Sergios, you know, rather grand deal like that model that rather grand schemes that he's working on, is also there also projects or development. So you could talk about the project phase? And then ultimately, if we're going to retain properties in our portfolio, which maybe start with the first one, obviously, but then as we, as we add to them, it becomes a portfolio. So how do you manage and track budgets and cash flow for your, you know, your ongoing rental properties in your portfolio in general? So I guess the timeline is kind of a before a kind of a during a project phase, and then a long term, you know, but you know, kind of portfolio management type of approach we could take here, I'm sure we're going to drift off into technology, I'm sure we're going to drift off a little bit into maybe accounting, treatment, and taxation along the way. But let's maybe start that, that that first sort of sub-topic. So around, you know, using, you know, some kind of budgeting tool or evaluation tool to predict what property or a project might look like before we actually get into owning that property, or project. So who wants to kick us off in terms of what sort of tools or approaches to managing budgets in that context? They might use? Any, any takers?
Yeah, we're gonna start with that. So, Jeff, it's when I'm looking at a project B. Project, I'm always looking at defining and looking at what what, what is in that area? What are the potentials? What Where do I need to go? What are the limits of ceilings for that particular area? So I always like to put those numbers in, get official, big surveys, valuations, and then look at what they say you're doing at the time. So then you've got the then the experience of quotes, past experience of how you budgeting the final project. So how much do you spend 10 2030 50,000 pounds?
who's counting things out? It's just one big honor. So the first thing is you put it in? So what do you put it in? How do you run your numbers through an Excel filled Excel with? It's something I've worked on for years. Some people have ROI assessments and things like that. So it depends on on what you're doing. There are software platforms out there that do deal analysis now. Things like Glen Nord, is one that I've come across that deal analysis. I think it was Tama ti, ti. So P. A, Batman. Yeah, yeah. So that's done some deal analysis in there as well. So we're all different things. But I stick with my original spreadsheet I created five years ago, and it works pretty well. And as long as you you account for all the numbers. That's the big thing is you got to look at everything. You got to have a contingency, you got to have rental voids, you've got to have all of those things. You never know what's going to happen in any project. So having those contingencies is vital. I
couldn't agree with you anymore. You know, Susie, my hobbyhorse has to go on about those extra items that people forget. So he made the point so that I don't have to say, Thanks, Jeff. You talked about the experience to be able to put accurate numbers in. So what do you do when you don't have the experience? Perhaps you know, other people could join in as well.
generally ask my network. If somebody has an idea like to talk about a refurb basement or something, generally are somebody who knows how much it might cost to tank, the basement and things like that. There are tools out there as well. Yeah, I came up with the code now, but there are some tools out there give you estimation prices. Not sure how accurate they are, to be honest, I don't tend to use them. But if I'm quite far along, when I do, I also asked builders quite I've got some good builders that I work with. So I can generally go to those to get an idea, but they're not. They might not be in the area of the property that I'm looking at. But you know, if the deals quite far, and we're close to completion, or you know, or have completed then yeah, builders around, obviously, one day, spreadsheets before a complaint or exchange probably go too far along, but I've got, I've taken pictures and stuff and drawn up for plan and asked builders to kind of give me a rough idea of how much they think something will cost. Yeah,
we've got a que es at our mid. So what do you do in your professional day job? Sergio, did you just guess he stuck his finger in the air there while they were over? Well, he just say, you know,
hopefully my buzzer here. Listen to this. I think it was a joke. Yeah, yeah. Yeah, it was definitely a joke. Obviously, budgeting is probably one of the most important things. For us, quantity surveyors can obviously after look after the money once you set your budget. And as us as my colleagues were saying here, so one of the things that you can do, if you don't know the price is it's search for books, there is this for instance, response database of prices. And the ICS also has their own, which is called BCI. Yes. So you can also refer to those you have to pay for them on they're not cheap. But if you're going to do this seriously, you can refer to them. And also, ideally, what you want to do is you want to test the market before you do your project. So get a contractor in there, whether it's a big project or a small one, and ask them to give you a cost. If you have time. That's that's what I would say more than any database book because everything is backward-looking. Whereas if you talk to a contractor, it's current data. And you know, you can get them to commit to it if you're going to do the project within the sensible timeframe, even though these days, they might not want to agree to material costs. But that's a different story.
Well, it is a different story, but I was just about to make that very point because, you know, think Dave, who's one of our mastermind members posted on just on our group just the other day, saying what is everybody doing in the current climate? You know, he said, My 10% contingency is being blown away already with 30% material price increases midway through my project, you know, so we've got a very fluid marketplace at the moment. So in terms of, certain materials, and also to some extent, labor costs as well. So if you're in a project, whether it's a small project, refurb project, or a large development project, there's a degree of uncertainty there. So I think coming back full circle to what Jeff was saying about making provisions, you know, maybe there's a call for a greater level of provision or contingency in the current market, then perhaps it was just just a year or two ago. So
for that, as well. So what Jeff was saying about spreadsheets, and when I do my analysis, use spreadsheets as well, and certainly a lot easier to add and configure it however you like. But I also like to have a like a reasonable best and a reasonable worst case. Best is like, you know, if everything goes according to plan, worst is obviously, you know, some things go wrong, but if the worst still kind of comes out, okay, then go, you know, worst case and still, hopefully, you know, make a profit. Yeah.
And what sort of things might you flex between your best and worst
refurb instances? That's probably the big one. Obviously, like you said, at the minute, it's a bit hard to gauge that. Because of the material prices go up to 30%, in a space of I don't know how, how many months, that's obviously something you're not really going to factor in at the outset. But that's one thing, obviously, you can increase the cost of in your worst case. When I was things like mortgage rates, yeah. The time is taken basically, to the project and the tenant of the property afterward into Brr. Things like that, you know, ideally a tenant in one month, but maybe it takes three-four months. Yeah.
You got your cast, you've got your timeline. I guess you'll have your source of income, whether it's rent or if you're selling you know, your sales
prices. Yeah, exactly. The rent is a bit lower than expected, maybe the league was a bit more for whatever reason, because then it goes on to be done. I mean, Germany, they might not flex too much. But you know, you still add a little bit extra on. Just to make sure the bottom line even if things do happen, it's still Okay. Cool. We're going to add to that says, Yeah, it's, it's pretty, it's pretty complete,
what Dominic said, time is mainly the one night if you get delayed, then then your worst case, obviously becomes your likely case. Yeah, yeah.
I think time is a massive one. I mean, obviously, we've talked about in the current climate, so costs are sort of increasing. But I think equally, no time is a big factor. At the moment, everybody seems to be, you know, stretching out their timelines. Then, of course, if you rely on any kind of external party, not just say, the main contractor or a builder, you might be involved with planning, for example, or professionals or finance companies, and everybody's been stretched. So a little bit extra, you know, every single one of those chunks is just stretching out the project timeline. And if you're, if you're looking at a project, which is gone, you know, financing costs, which is based on time, and you've got holding costs, which are influenced by time, these extra little things can really catch you out as well. So, just watch out for those. Now, just come back to what you said, Sergio about, you know, using things like vcis, and spaans, then that's like, kind of the professional end of the market and those sort of tools, there's a couple of tools, as you know, price your job, I think it's called, which is really useful resource, you can go and look online, it just gives you a guideline pricing for certain types of refurbishment job, that's kinda that's quite handy for people are looking at, you know, sort of more single property refurb, or just seeing even small jobs within a property, that's quite useful. And then there's some costing tools as well, as I'm sure there's more than the one I'm going to mention. But there's build aviator, which is kind of a, you can send in your plans or designs to them, I think they're the same company as Jewson. And they will cost out your project for you based on Jewson materials costs and average labor rates, probably pulling it in from people like vcis, and give you a cost estimate. But it is an estimate. And of course, you could bring in a que es, you could actually hire someone in to cost out your job, as well. But I would probably recommend if you're getting into any form of development. So there are a few ways in which we could, you know, just move beyond our own senses, if you like to get a project, you know, cost out, so probably that's enough on the front end side of it, I think the main thing is I just want to dwell really well, you picked up your best and worst-case scenarios, having, you know, provisions for every cost item that could come in trying to get as accurate as possible. And, and make those provisions that often people overlook. Good stuff. So next thing is so we're going to, it's all gone. Well, we've got your best case, pretend projection is dominant, and we're going to buy a property, we just do a Brr project, Jeff, because that's your street. And, you know, so so what happens then? So we've bought the property. And you know, so we're not projecting, we're not predicting anything anymore. It's for real now. So let's say we've got a project, what are people? How are people sort of budgeting and managing their costings and their cash flow for projects, generally speaking?
Well, if you're talking about forward forecasts and forward projections, again, when I've done that in the past has been spreadsheets. So tracked, the bank balances the moment income coming in, versus when I expect stage payments for the builder to go out. And obviously making sure that there's enough cash in the bank to go to pay the builder. Yeah.
So you set up like a project budget on a spreadsheet, essentially. Yeah.
Yes. If it's a large project, yes. You talk about larger projects like refurb. Costly refurb, then yeah, obviously need to make sure that when the payments are expected to be paid, there's enough in the account to cover that. So obviously don't want to go into any other deals, if we're expecting that payment has to go out to a builder, you know, that week or whatever. Yeah. What about the Brr? Man here, Jeff, what about you? What are you doing?
Exactly the same way as Dominic really is spreadsheets, having a project plan and using the Gantt chart, visualizing it beforehand? To get your copy project, you got property there, what it's doing, you're gonna list you've spoken to builders, you've got their timelines from them, and you estimate so you bring them together and try and compile, what needs paying when how much you're going to have, at the end of the week compared to start. A lot of contractors are very flexible payments. As long as you work with them before. You can extend things but look at all the contractors, I work with the electricians, the plumbers, are all very flexible. So it's nice to know that before you start a project, but if you bring in someone new and always be upfront with them exactly what they're doing when they need pain, what percentage and the pain point, it's always something you need to know beforehand. Okay, cool, I'm
going to ask the professional, I wonder what else we're going to get from the QRS.
So obviously, now I'm actually starting my project. So I'm at the stage where I have the project budget, given to me by the estimating department, which is just as we've been talking, just a professional guy that gets a list of prices together from history from checking with contractors, just from a few different sources and from his own experience. So once I get that, the first thing I do is test the market. Because they generally haven't had the time to do that. Because that's you know, you need to put a budget together, you're going to buy a property you want to do fast, right, you do your estimations. So the first thing I'll do is try to check the market for the main bulk items, you know, your first 899 times that will make 80% of your budget. But a Pareto rule applies to construction very much. So that's what we do. And then once you get certainty of that, you're just your best words can lie again, and you get your new, you know, magic number, and see if you still make money. And after that, yeah, it's just a green payment terms with subcontractors or, or your tradesman. And I just tried to stick to the program. Obviously, if you have all the cash in the world, it's great because you don't really mind. But if you have finance, that's when you need to start thinking about cash drawdowns paying your contractors when you're going to get paid. so on so forth. So for instance, I have a client that pays me so if I certify more to my contractors, than what I get certified, it's a risk for me and my company will be cash negative. And the same applies for me as an individual investor. So that's the point. I like to stress really
kind of wanted to dwell on that a little bit because you know, so we set up the project budget, as you say, we test the market, see how real that actually is? And but then I think it's a case of well, we don't just leave it though, do we, we have to track it against what really happens. So there's, I guess, to use the terminology, its budget versus actual, you know, and get a variance between what we planned or what we expected to happen and what actually happens. So do we do that on our projects? Do we have a budget and an actual, do we track both?
My actual would be in my accounting package, I suppose. So obviously, that's tied to my bank account, the bank account the company bank account, so and the receipts obviously goes into detail the transaction so that the outgoings will be tracked there, and then can be reported upon. So I can compare that then to the actual initial budget estimates.
I guess that's my question. Do you actually do the comparison?
Maybe at the end? afterward? Yeah, I mean, obviously, generally, remote projects are not as big as Sergio. So probably, you know, I don't have to track 26 million pounds or whatever it is. That Yeah, I'm halfway through a project, and something overruns, and there are another 3000 pounds to pay the builder. But I just bear that in mind for next time something maybe to increase my estimates by and I'm doing the analysis. about you, Jeff, do you do that comparison? Yeah. Originally,
I didn't. I had my estimates in front and then everything came to my calculating package, and I was happy with the numbers. So I didn't look back. On the last three projects. Definitely. I've had my best case, worst case probable case, than the actual case. It varies on different projects. For example, I've just completed one And it came in on my probable case. So right in the middle of my worst and best case, deal, there was some good things, some bad things. Like, get points for being connected, and things like that. So hence why you need to contingency. But then there are other things where the pastor came in, in the budget, because they ended up using a different cluster because the original one was busy and had to source others. So you never know what's going to happen, sometimes good, sometimes bad. Generally, if your department fires, every single source of resource, a plastering, electric, plumbing, General building all of those things, separate them out. Have a budget for each of those particular areas, then you can compare and contrast on your current project, what you've actually achieved on previous projects. Yeah,
so a couple of things. So one is the Compare and contrast that including previous projects, which I think gives you that experience that you can apply next time around. I think also, I mean, I'm trained as an accountant. But I hate the idea of an accountant just being a bean counter. Right? Which is basically turns out that's how much it is, you know,
I've just counted those beans and you've got 30 of them, is, that's not really very useful. Sometimes, but you
don't want a bean counter. You know, but I think just counting the beans, yes, it's useful to know how many beans you've got. But basically, for me, it's like it's a case of so long, you know, so you know, what, what, you know, I'm counting the beans with what purpose? And maybe I'm looking at you, Sergio, because you probably do this quite regularly. You just said you're a bean counter. But I bet you don't just count beans, do you? What do you do with the numbers and the things that you discover on your budgets?
So the magic word for that it's called benchmarking. And that's just an exercise that we get to do at the end of the project. So basically, you have your budget originally, and then you have your actual with all the variations or they don't talk for from which you can also learn because once you've done a few different projects, you tend to find that the variation percentage per account and per trade, generally similar. So you can say, Okay, this is 10,000 pounds for drylining. But I know from my last time projects, the average variation account is 5%. So you should have a good idea that you have to add 5%, because very likely that you're going to spend it you don't know in what way you will spend it properly. So benchmarking is very important. But I don't think it gets used as much. Because once you finish a project, you're generally rolled over to the next one. And you know, once something's done dusted, no one's interested anymore. So it's up to the individuals mostly, or in my case, the companies to push that mentality.
Yeah, and I think most of the point, I think you say you're midway through a project, and you're counting your beans, and you've got less than you thought or more than you thought in some areas, whatever. So you talked about the plaster coming in less, for example? Yeah. You know, is can you use that information? Is it helpful? If you start to see your budget? If you see your actual going higher than your budget? Is this something you can do?
Well, of course, you can. But it depends what it affects, what I'll generally do is I'll either take money from contingency, or do a budget transfer from somewhere where I've made money, or, you know, try to buy the next package cheaper. But if you're overspending, and you have a limit of cash coming your way from your client, or from, you know, from your bank, from the credit they've given you, there's not really that much you can do other than trying to find the money somewhere else. You know, another bank, for instance. Or,
you know, and this is one, this is one of the ideas here and the contingencies because sometimes the unexpected happens, you need to be able to pay for things when we do but so for example, I've got a project on the go at the moment. And, you know, we were installing a like a steel, walkway and balcony. And we're talking to the contractor who's got that particular work package. And he, he should be in it should be in construction phase at the moment to make it he's going to make our site and bring it to site and install it. But he hasn't started the manufacturer, he hasn't started the construction. And so that's already pushing the timeline out, because he should have started already. So the immediate question, so when you talked about your Gantt chart earlier, Jeff, that was like my eyes were sort of lighting up a little bit. You know, if you've got your project timeline or you've got your dependencies and when things are supposed was to happen there. So this all looks great on a Gantt chart. But again, it's this. So what? So if you start to see a slip, like in that case, I've just given as an example, on straight onto my team go, how can we try and not let the project timelines slip? Because we've got this, you know, several weeks delay in this particular work package. So is anything we can do? So I'm asking the team, can we bring back the time some other way? So they're creatively thinking, well, we could maybe swap around the landscaping to do improve for the installation of the walkway so that we can bring back some time that way? So you know, to start thinking about those things? That's what I mean, about can we use it? Is it meaningful? Can we do something about it, once we've received the beam, the beam can be a time it could be money that we're tracking, and it's using it for that purpose, then it really got any additional thoughts on that.
Just one quick one, you can value engineer things. If you have the time, you can choose to do something different, that will cost you less, obviously, sometimes, but most of the time you don't have time. But if you do, it's an option.
That's another one for Dave, by the way, Dave is not on the call. But he did ask the question about how do I have work? I just gotta suck it up. You might 30% materials price increase? Well, the short answer is probably yes. But actually, you've just given another angle, how many? Because you can value engineer, as you say, Is there another way of doing this, you know and are saying at the moment, there are people who are looking to buy, maybe, you know, you switch out the specification of your, of like a kitchen, for example, you go for an end of line unit set, you know, modern unit, or, you know, you go for reclaimed materials if they can be used? Well, you should go shopping on eBay, or Facebook marketplace, or something somewhere like that. And some parts of the country again, picking up my steel staircase example, we were lucky, I suppose you're involved because we had a conversation about this. And Mo, you know, the price of steel is going to 170 80%, the last 12 months or something like that. But this particular manufacturer had, I don't know how we had a source, which hadn't seen that level of a price increase. So we locked in the price with him. So we had to do some shopping around before we found it. So as you say, if you've got the time, you can perhaps shop around and value engineer I like that phrase.
Sometimes a false economy, Value Engineering, and is a term very, very popular, very trendy. declines like a lot, especially for main contractors, we can do lots of things when we are buying jobs, which in reality have repercussions that might hinder some other areas. So what is value engineer this risks as well?
Or in one case, I had a project manager working for me, and I think round figures is paying about 220 pounds a day. And he's getting came to me one day. So what have you done today? So I've been working really hard trying to save some money for you? Well, great, I like the sound of that. What did you do? Well, I've managed to save 200 quid, I forgot what it was, I've managed to save 200 quid on something. blinds, I can't remember, you know, I was like, okay, and that's what you'll do. Yeah. It's just spent children 20 pounds for him to save 200 pounds. So, you know, it can be a false economy. And of course, in our own case, we don't necessarily value put a value on our own time. But it does have value. And a lot of people just ignore that. But you should put a value on your own time as well, so, so very well to go shopping around to get cheap screws somewhere else. But you know, is it really worth it with the opportunity cost of your time. And as you say, there are other risks that can potentially come in with maybe inferior quality or something like that. Go anyway, just thinking about is the more that we want to add in terms of managing the budgets. And actually, I mean, cash flow on a project basis. Anything else that we should really talk about here? Okay, so we move on then. So now we've gone through predicting and managing the project. Now I think it's the case, right? We're going to, let's say we've got long-term ownership of properties now. So rental properties, we might start with one, we all have to start with one. And but maybe we'll grow that into becoming a portfolio. What's the definition of a portfolio? Would it be two and three? Will it be four or more? But basically, once we started to have several together so what are we doing round the table you know, to track what's going on with the income and expenditure that we've got on our long-term buy and hold type of properties.
So, for myself, I've built something in air table, techie it kind of background, so I do my day job. So I tend to like using some of the fancy tools that are out there, you know, able to manage that. So in air table, I've got that base. So I've built a base of the properties, mortgages, the rental income. As I can see in there, we have it all kind of streamlines every month, I can go and basically rent, he didn't ever rent roll. So basically, when they get an income, and I just go in there and new line with all this property, and it kind of works out and he got what the blockages and what my cash flow is, then for that month for that property. Yes, the net after the mortgage is taken out. So basically, sometimes additional expenses, which I have to go back to wave, my accounting package to look at, but on a pure income, rental income minus management fee is minus mortgage. They're all in a table. And also, because I have some jvzoo other people, it also breaks down by percentage, so no kind of percentages my profit versus somebody else's profit. So now I can see every month quite clearly how each property is doing or overtime as well. Page property is doing by, by property by month, it's quite useful. I think I've built a table itself, just to clarify, so a table is something like a cross between a database and a spreadsheet, isn't it? Yeah, it's a fancy spreadsheet. But it's got some database features. And I'm just using the free package in a minute. So there are extra things I'd like to do. And I think after an upgrade to be able to do both at some point, I probably will. But yeah, yeah, it's like it's just a bit of a fancy spreadsheet, a bit of a nicer spreadsheet. And then you also because I think between, like the sheets easily. And it can just pull things in, like I said, so my rent roll sheet automatically pulls in the mortgage and everything else from other places, other sheets I have. But are you putting in? Are you entering the data manually? Yes, this is one thing I like to automate, which of course, I haven't yet extra money to upgrade. But yeah, basically, I just go in and add a new line. So I basically copy the line for the previous month, and then just type in the income match. Everything else is pretty much done.
And I'll stick with you for a minute on your whole system. And then we'll have all the other guys are doing but and then you talked about using accounting packages. Why?
Yes. So that is the list of books or records, right? That's pure. That's what I use for my accounts. So that's the guest version of the truth. The ultimate version of the truth is his way of things waive the accounting back in. So that's, I saw that I loaded my bank statements into there that's actually been robbed, what comes out of the bank account. And then also my expenditure as well. So when I get a bill to pay, I upload the receipt into wave. And I can track that against the transaction and when it comes out.
Yeah. As you said, I think you were saying before we came on air, that wave is no longer really offering the service to UK customers. Is that right?
I don't think so. I think I focused on us because I had because I opened my account with them before they changed. It's still open. Yes. I'm not sure. I don't think it is open to UK customers now.
kinda know it isn't because I used that as well for a while I think they're offering it Zoho. accounts. They're wanting to transfer people to Yes, I'm not Yeah. I think it's Zoho. Not so Zoho. So that's an alternative. And do you have you said you you put in your bank statements? It's not an integrated feed.
So that was one of the things they disabled I think when they stopped the UK customers signing up. So that was I guess that was partly because they didn't want to maintain some UK EU standards. I think they were trying to focus on us. And also maybe to incentivize people to switch out something else. The open banking standard, actually. And so that's what they kind of disabled. Yeah.
Yeah. So just wanted to get your system out before we could talk about other people. So you've got you're using air table as sort of a general management tool, using wave as an accounting package.
And so I was just gonna say air tables, like my, where I'm at the minute gives me a high-level overview, like because I every time I get like, income, rent income, I don't know in tracking. That gives me like a real-time view of real-time high-level view, I should say, income minus agencies minus rent. That's a minus mortgage. Yeah, but then once a month or once every two months, I'll update way with my bank statements everything. And then any other expenses on top of what I've already on top of my mortgage in favor of deducting I think from the rent. There are other things that we need to pay for as well.
That's kind of what it's getting out. So the degree of automation and how what frequency? So you're pulling in bank statements to upload into your accounting package. And you do that perhaps once a month or once every other month by the senator. Yes, exactly. Because I want to come out to you, Jeff, because I know that you've done a lot of research in this area. So I'm interested in hearing about that. But I'm going to go with Sergio the minute because I know that you know, you're not from your personal point of view. And this is, you know, you don't have 26 million portfolio under management personally just yet. So what are you doing with your personal portfolio?
To be honest, it's kind of similar in a way to what I do professionally. Only in a way, it's even simpler, because so my accountant has signed me up to QuickBooks, which I'm sure it's well known by everybody that has properties and has an accountant is either that or Shiro Sharon's zero. Yes, zero. And, and to be honest, it's linked to my bank account, my property bank account, and I just track everything that way. I try to label everything in a way that I understand just so then I can see where the costs go. And where I'm spending my money, a bit of a similar way that I would do like us. And then, you know, you can just keep up to date. That way, I don't do it monthly or bi-monthly. I think the last time I did it been five months or something. But I guess if you don't have a tight budget between your income and your expenditure, you have a bit more leeway. Because you know, you're gonna have cash. So yeah, if you're more restricted, I would try to do it on a monthly basis, just get that. Otherwise, he adds up, and then you don't do it, because it's too much. I can vouch for that.
So you're using QuickBooks? Yeah. Pretty much QuickBooks and you've got the automated bank feed there. presume you're using one of the main High Street banks? Yeah, yeah. Yeah. Okay, good, because that's the open banking standard that was dominant, talking about. So the accounting packages were linked best. They've linked to several banks, not just the main High Street banks, but they link best to High Street banks. So pulling the bank transactions automatically populates in your accounting system, like you say, you can label things so that it recognizes it next time around, or should make it a little bit easier for you. And there's a key bit missing in a minute, I'm going to come back to but before I do, Jeff, what do you do? And what are you looking at as well? Okay, so yeah, just as an initial start, the biggest mistake I made in accounting was not separating my account from the properties accounts. So that was one of the first lessons I learned many years ago about separating accounts, have ever gotten our business account, an account with venture another account for another property. So it's, that's I think, one key point to stress. But now, I currently use my accounting as a spreadsheet. That's what my accountant supports, it supports QuickBooks zero. And in my volume of transactions, I have a spreadsheet as all I need. It's quite simple. It does the job. But I have been looking at packages to manage my cash flow and manage my projects, manage what I'm doing. So initially, a property Hawk, which is a very basic application that manages your portfolio and tracks rental income and stuff like that, which it wasn't what I wanted, it wasn't what I needed. It didn't look right. It's looking old now. But I've been looking at landlord and landlord vision partners to see how they perform trials and roll them and the easiest for me was the Nord it just worked a bit better have the automated open banking platform, you put things into a nice dashboard, saying that you all have a dashboard to show you what you're doing. So it's that's one leaning towards to now and then Looking at then potentially using zero to automate the actual accounting part of it, I do have my profit and loss columns and my expenditure and all of those things that are automated in landlord. Now, that doesn't actually link to my spreadsheet. At the moment, it's not too big a deal to talk data towards making that future. Yeah. And I think this could this part of the conversation is really highlighting the fact that there's this kind of property management systems, and then there are accounting systems. And then, you know, the usually needs to be kind of interface or separation. And Jeff, you are like giving your views about thing packages before we came on air about, you know, can you get something that does everything? Or singing or dancing?
The quick answer is no, nothing that does end to end. The packages that do things great. They specialize in DNR deal analysis, and looking at cash flow, and looking at rental payments, or looking at tenant management, all of those things. And all these packages do great things in some areas, but none of them do end to end. And we're still working, we're still a few years off being getting that ideal solution where it all integrates from the payments coming in, go into your captaincy system, and looking at a nice dashboard to say like all my routes paid this month. And I've got nothing to do with the great.
Yeah, and we haven't even touched on repairs and maintenance and that sort of thing. So now they get managed. So adds another layer of complexity. And what about things like, you know, so even when we're running our own properties, managing our own properties, or portfolios, what about you know, how do we make sure it's all going to plan surgery, I'm in my eyebrows, my might have gone up to the sky where you said, I haven't looked at mine for five months. You know, so are those sort of besides surgery, I was pretty relaxed, obviously. But there are some standard practices that we should adopt, and what might they be to check everything's going according to plan.
First of all, check your rental income, make a diary of when each payment is meant to be there. And double-check. Obviously, I work with some local authorities. So I get emails from the local authority to say this payment is coming to you. And several days, maybe a week later, he actually comes to me. So there's always a delay. And it's something I would like to track. Usually, once the email dude to save for payment, if they're what, it's always nice to have confirmation in your account, I've got those numbers, then therefore I can update things well, with landlording actually updated for me. But then, when the rent was due, and when it was paid, there are two different things. I'm always getting alerts to say. renter, would your tenants owe you money. So it's not too good. But it's working. Yeah. Damiano is poised to speak, no similar systems. Good point. Yeah. So in a table, like my typical view in there is by month, so obviously, I know, you know, my red roll for the last month, how many rows there are. And then if I don't have the same number of rows this month, I know I'm missing a payment. So I don't put a row in that until I get a payment. So that helps me track. But I'm just gonna extend that further when you say in about how, you know, properties, performing and whatnot. So I tend to do I don't always do, but I try and like at the end of the year, maybe have some sort of analysis and work out income and expenditure. Probably property. Obviously, as the portfolio grows, that's where we get a little bit more time-consuming. To do we need to think of a way to automate that somehow, or at least make it simpler to gather all the data. But yeah, so I have tried to do that, in the past, look back over a year, see how properties have been doing. To some of that data in a table, the data that's in a table is very easy to gather, but then it's just all the additional expenses, which are in the wave, just pulling them down.
Yeah, I'd say if you're expecting like regular rental income, which does the definition of portfolio rental property, right. That's, that's the big driver of profitability to get paid the rent to get paid on time. And it leads on to then having a process to reconcile the rents. So usually, you have to check your bank statement and you know that it's landed in your accounting system, if it's not integrated, maybe it is integrated, and then you can see how it's looking but it's having a procedure, which picks up if there's any delay in your rent payments or missing rent payments. And then That would trigger a series of actions wouldn't you know if you didn't get around? So, Jeff, you're saying, you know, you're getting your real a lot of your rent from local authorities, you know, I'm sure you probably pick up the phone or something. And if, if it didn't come through within a reasonable period of time, but those, those of us who are looking at sort of private sector tenants, particularly, or, you know, working tenants, you know, it's down to them to make those payments. And if they don't make them, then we need to have a, you know, an arrears process change, you know, so, if you wait, I'm not going to sort of say too much Sergio, but I will say just one more time, but if you wait five months, and you haven't had a rent payment of five months, it's gonna be difficult to collect that rent from that long ago, I assure you keep an eye on the income. By the way, I kind of know, when enough, I know you well enough to know that you do that.
What I meant when, when I said I didn't have an update in five months, I meant I haven't classified all the transactions, obviously, every month, on the 20th of the month, I checked my account. Anyway, there's a notification on the phone. So as long as I've been paid, I've checked the statement from the left in an agent. And all that's come out of my account, it's the, you know, direct debits that happen on a regular basis, then I know, I don't have to worry about it. So that's what I meant. And absolutely, I think, you know, after urine for the property that's just finishing now, beginning of September, what I'm planning to do is to get all the costs allocated to that property on all income, and then compare it with the estimation as I did before I purchased the property. So that's something I will do, I'm not too worried, because I know it's made money. But I know I'm going to do it. So you know, it's one of the things I like to say, yeah, it will happen, but just relaxed.
So face clarifying. So I think in my case, I think I like to do that rent reconciliation every month. And then that would trigger you know, a follow-up action or series of actions, if I'm using a listing agent, that's what they would tend to do. If I've got my own internal property manager, that will, that will be what he does. If it was me, personally, I pick up the phone or send an email or whatever I need to do to try and get the rent collector to understand what the situation was nipped it in the bud as soon as possible, really. So that's one of the main principles. The other one is, I'm glad you said that, I think a couple of you said you look at it at the end of the year and do a comparison about where you look at the performance of the property and maybe do a comparison about what you thought it might look like. So that can be running some sort of KPIs, key performance indicators, and just seeing the profitability of the cash flow, other things that are important to you, on a regular basis. I tend to do that anyway, because we all need to recall for tax purposes, so I tend to do it around a similar point in time. And, you know, you can have a red amber green system, you can have a, you know, a threshold or whatever, you can just track some key data. So that's that, I guess, you know, probably can't have a conversation about managing budgets and cash flow without having a little sidebar conversation about accounting, accounting, policies, and taxation. So what are the things to watch out for when it comes to accounting treatment and taxation, particularly when it comes to well, different tools? So we've talked about projects, we've talked about, you know, long-term rental, and we talked about, you know, short-term rental. And we've also, you know, they're the main things we spoke about. So one of the things to watch out for from an accounting and tax point of view that you've come across, and you might caution our listeners on
I think the easiest one, it's the VAT account for that crew for that when you have to pay if you have profits.
So VAT is going to occur quite a lot in you know, well, sorry.
I meant VAT I said VAT by men tax. Okay. So yeah, that's something you need to set aside money to pay your tax. Yeah, that's Yeah. Yeah. The tax man will have his piece.
Capital versus revenue costs another one. So you need to know what they are. So you can categorize those correctly in your accounting package. You've got an inky top-of-the-head example that Yeah, so the purchase. Hopefully, I get it right because I never remember the cost of financing is less than our capital revenue cost. Whereas the like, the other stuff like the legal or whatever is capital cost. I remember rightly.
That was the one that gets really great to be honest with you because you know, the law changed actually recently. So this sense of the initial setup of your financing on purchase, so use then classes capital, but your renewal would be classed as revenue. And obviously, finance interest will be classed as revenue.
Okay. But even the initial financing cost is the cost of arranging finance for the purchase is no longer at revenue. Yeah.
That's right, there was a recent change, fairly recent change. So this is what I mean, these things that trip you up, you know, so you think you won't, you won't have to pay tax on that, you know, arrangement fee that the lenders charged you when you first purchase the property, but actually, you will pay income tax on that. But when you sell that property, if you sell a property, then you could offset that cost at that point in time. But of course, that might be several years, down the line, if ever,
yes. So it's good to track that as well, the capital costs because I have those handy because like you say, you might need those in many years time to account for those when you sell the property.
There's another one related to that. So one of my properties through a purchase lease option. And the legal fees are generally capital costs, but because these legal fees were to acquire they basically management of that property during the lease option. And I could offset them within within that, within that year, that tax year. So sometimes legal costs are not capital, for instance like that.
That's right, Jeff was just going to bring your interest in case you've got anything in this area. So I was just going to point out the exact same things to understand what is capital and what is operational costs, they can save you a lot of money in the short term, if you get any operational costs, correct. So for example, if you're replacing kitchens, make sure it's the same ducks operational, if you proving things that just understand the difference between the two, speak your accountant at the end of the day. Well, I'm
glad you said that, because this is basically where I was going to go with it. So we could we could spend a lot of time trying to keep up. So we just talked about change dominating, you know, in the rules in the last couple of years, which, you know, some of us weren't aware of So, you know, staying on top of these things is, you know, can be a full time job. And I think if you engage an accountant, especially a tax accountant, you know, they usually a good accounts, which save you there, theoretically. So it's worth investing in having a good accountant who can look at these things, and perhaps give you a bit of a pointer along the way, so you don't get caught out. But if you did want to sort of look into it, there are a few things I could suggest, though, there's a couple of books out. So this I think this tax cafe do a series that's a useful one. I think this property tax guide, I think it is, Shas know, was written recently, which is pretty comprehensive. And if you really want to get into the nitty-gritty and look at all sorts of tax treatment, there's tax Insider, which is a monthly subscription, that you can get an answer just drills down into a lot of detail. We get really financially geeky. That could be Andy, I don't know if anybody else has got any other sort of resources that they can suggest. No, not really.
Tax cafe, I think, I think we've got one of their books. Yeah. Yeah, that's a good one. Coco.
So I think, you know, we've covered the ground, a lot of terms a time, you know, to a large extent, what I'm trying to say, here from, you know, predict, predicting words out, I'm not going to lose out either. So you have to live with a go server, from predicting or projecting to managing a project to managing a property, your portfolio, I guess I'm now thinking about wrapping up a little bit. So maybe while I'm giving you time to think is the things that we've missed that you think we should cover and just want to say, or are there any sort of top tips when it comes to, you know, managing cash flow, managing budgets that you would recommend people keep in mind? Yeah, what would be your golden nugget takeaway thing? So I don't know who's ready to dive in with them.
go first. I'd say try to get your estimation and your budgets as realistic as possible. If you can't get prices from your contractors, compare quotes. It's funny because I think I gave a similar similar advice in the previous podcast recording, and then yeah, stay on top of every month, don't let it slip for two, three months, because it's gonna be difficult, and try to have your system set up where you can track your current versus your previous on that, unfortunately, means linking your account to an Excel spreadsheet or to a system that allows you to link your budget, which is never in your accountancy system, to your actual costs, which all of them come from your accountancy system, so, and it's generally thrown a spreadsheet. That's generally how it works. And he worked for us, as you know, managing 100 million pound project, and we still use Excel. And that's for a reason, you know, everybody knows it, everybody worked for it. It's very, it's very user friendly. And you can do everything with it. So that's my tips really great. And other spreadsheet variations are available. Google Sheets, for example. Cool. Thanks, guys. Yeah.
And yeah, just to reiterate, choosers, thoughts, look back, write down exactly what we've done in green notes. One thing I learned in the past, because I miss things out, I didn't make good notes, I didn't make a date my spreadsheet regularly enough, says you're saying not looking at for three, four or five months, it doesn't work like that, at the end of the tax year, you're racing all this thing. Now your memory doesn't work that well, and you'll miss things out. So every time you get something in, write it down every time you pay something out, write it down. And that's the principle I work on now.
Sounds good. And, yeah, the guys already said, Yeah, be organized, I was gonna say, so I don't know systemize, or get something in the calendar to upload your things into whatever package you're using, and categorize. Because Yeah, in six months time, by the end of the tax year, and you know, that long, you're not gonna remember half the stuff, and you're going to probably forget expenditure. And then obviously, not account for news out yet. So get whatever works for yourself, you know, if you want to put a reminder in your calendar every month to upload your statements and go through and upload your receipts and reconcile or, you know, if you've got some other method, but I just say be organized, so easier to do things as you go along, rather than right at the very end.
And I learned that the hard way, because I used to have like what I call a weekend from hell, you know, once a year where I basically sit down and go through all of my records. And you know, my accountant will be screaming for them so that they could submit the, you know, the tax returns, etc. And I'd literally sit there with piles of paper around me Well, for each property, and it would just be a horrible weekend, where I would do all of that, because, you know, even though I'm like kind of Accountancy trained, I just hate the discipline of doing that. So that's kind of taught me something, which is, you know if I can't be that organized myself when really I need to get someone around me who is organized enough to do that for me. So bring in a bookkeeper, use the system, use some of the integration tools, don't be afraid to pay a little bit extra, maybe for a subscription, which gives you automatic feeds, or a bookkeeper who can just stay on top of things, just you know, maybe every quarter, depending on what you've got and if you know unless you really have got that discipline to sit down and do it yourself. So that would be my sort of biggest takeaway. It's more, it's more Do as I say, rather than what I did, you know, some painful weekends in January, we're had a year after year until kind of finally got you to know, to understand the value in being disciplined but recognizing that perhaps, you know, I've got different skill set, and then so bring other people around me who've got that kind of skillset and can spend that time. That's my little one as well. So I think there's probably more we can like all of these topics, you know, discuss. I don't know if he's got any parting thoughts. Put your hand up if you have otherwise, I'm going to do a little bit of a wrap-up. Thanks for joining me today. I really appreciate it Cosby today. I've been in Iceland. Maybe it's the Icelandic I've been speaking for the last two weeks I don't know. So Sergio, Jeff, and dominate appreciate you joining me on the panel this week talking about managing cash flow and budgets in the property. It's been fascinating as ever, I think the hopeful listeners you got some value out of that. And you know, I'll put your contacts in the show notes if you're happy to share them if, no problem at all. And I'm just gonna do this sort of wrap-up now. The show notes are going to be available on the website thepropertyvoice.net if you'd like to talk to me about anything from today's show about property More generally you can reach me podcast thepropertyvoice.net . Perhaps if you'd like to connect with one of the guests if they're happy to do so you can perhaps come through me as well. And I'll be happy to make an introduction. So, all that remains is to say thanks again for listening to this week and until next time on the property voice podcast with Dr. John.
Thank you for listening today. Now head over to thepropertyvoice.net . For more inspirational content and get updates through our mailing list, join us next time on the property voice podcast and if you enjoyed the show, please don't forget to rate us on iTunes.
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