The trick to tracking tenant money
In the first part of this buy-to-let-landlords series of articles discussed rent arrears and how to avoid them, I introduced the concept of protection against and prevention of rent arrears. Buy-to-let landlords use several strategies to do this.
One of those strategies is tracking tenant money. Read this and learn why and how to track tenant money and stay on top of your investment property finances. I’ll also introduce you to some of the benefits our landlords receive from our property portfolio management software.
Why you need to track tenant money
Residential investment property has the power to make you very wealthy and to make your lifestyle dreams a reality. Keeping on top of your cash flow is one of the keys to unlocking this potential. It’s a business that you’re running, not a hobby.
Buy-to-let landlords have bills to pay every month: property management fees, maintenance, and, of course, the mortgage. If your tenant is late paying you, it could affect your ability to pay those bills, and that could damage your profit and future investment. For example:
- You don’t want to upset a good tradesman by getting the reputation as being a late-payer, someone that needs chasing for money owed. If this happens, you’ll soon find it difficult to get work done promptly, and you might not be given the best quote.
- If your mortgage payment bounces because of a lack of funds caused by late rental payment, you’ll find your credit score takes a knock, and the bank might not be quite so keen to lend money on your next property investment.
- Late payments and overdrawn accounts attract interest and charges too, further damaging your property investment profits.
As you can see, if your tenant is late paying or falls into arrears it could affect you in a big way – and that’s without considering probable emotional strain.
How can you keep a track on the money?
Before computers, the best property investors would spend hours every week writing their income and outgoings in ledger books. A small mistake carried forward would multiply in importance. I’ve seen an annual profit almost wiped out because of such errors.
The desktop computer made tracking and recording money in and money out far easier. Microsoft Excel is still one of the most powerful tools on my computer. That single piece of software transformed property investors’ ability to keep on top of cash flow. Accuracy skyrocketed, and time spent on entering data and crunching the numbers plummeted. Excel can also be set up to give you visual alerts of upcoming events (such as rent due). For those investors that are a bit more tech savvy, it’s possible to set up to receive email alerts for these events.
Using software and technology to track your money
Most bills and rents are due on the same date every month. By using Google Calendar(or any free online calendar), you can input these important dates and set reminders. This is pretty good at keeping you on top of your payment and receipt schedules, but you’ll still need to look at your bank account online and chase the tenant for any rent outstanding.
You could set up a worksheet in Excel to do the same job. One of the worksheets I use gives me a colour-coded alert – a blue background for payments due in seven days, and red for a payment that is due in one day or is late. Though I haven’t done it myself, it is also possible to set an email alert triggered by date in Excel.
The terrific thing about using Excel for this is that once payment has been made or received, the application does all your number-crunching for you. If you’re good with equations and Excel functions, once you mark payments and receipts as complete the worksheet can calculate balances, tax owing, and make cash flow projections. If you want some help on setting things up, just give us a call, we’ll be happy to help. You can compare directly against your bank statement, and keep on top of your property portfolio by habitually doing this administration every morning.
Using the alerts function, you’ll be reminded that a tenant’s rent is due on your property. When this happens, check your bank balance and transactions daily to ensure that the rent has been paid. If the rent is a day late, contact the tenant to remind them that it’s due.
If this all seems like too much work to you, there is now another smarter way to track your property portfolio.
Real-time portfolio and tenant money tracking
With the advent of the Internet, cloud computing, and mobile devices, it’s now possible (and really easy) to track a whole property portfolio in real time from anywhere in the world. You can buy specialised portfolio management software, too, and have it link with bank accounts to provide real-time financial information about your property investments.
How Ezytrac landlord clients benefit in real time
We use the latest property management software to bring more effective and efficient portfolio management services to our buy-to-let landlords clients. The software is accredited by the Institute of Chartered Accountants and the National Approved Letting Scheme. It’s compliant with the rules and regulations of UK national property associations including:
- ARLA (Association of Residential Letting Agents)
- RICS (Royal Institute of Chartered Surveyors)
- NFOPP (National Federation of Property Professionals)
This software simplifies the financial administration of property investment for buy-to-let landlords. Whether it’s a single property or a portfolio of hundreds of properties. You’ll receive:
- A consolidated statement of your accounts
- Payment of rents received into your account within 24 hours of hitting our account
One of its most powerful features, especially for buy-to-let landlords, is its tenant money tracking facility.
When your property manager signs in, they view rentals due and rentals past due from a single list. From this, it’s a single-click process to remind the tenant that rent is due. This reminder can be by SMS / text message, email, hard copy letters, or all three. Of course, the property manager also has the option of calling the tenant. With this level of automation you’ll see an immediate and direct benefit:
- First, your exact portfolio financials are updated real time
- Second, rental arrears percentages are slashed – meaning your finances are improved
In addition to all of this, the software integrates with our in-house systems and Calendars. Your property manager can access the system from a tablet or smartphone. And help you control your property portfolio from anywhere with an Internet connection. No tasks are missed, and no missed payment goes unchased.
Buy to let landlords must be up to date, every minute of every day
When your property is tenanted, it’s important to remain vigilant. Buy to let landlords need to spot the early warning signs that a tenant is having financial problems that could impact you. Tracking your money and your tenant’s money is the easiest way to spot impending problems.
Our systems and software allow us to keep a track on your tenant money, and to monitor your whole portfolio. The moment a rent payment is missed, your property manager will be reminding and chasing.
A late payment is usually no more than a question of absentmindedness. Tracking your tenants’ money ensures that it doesn’t become something more serious.
If you don’t currently track your tenants’ money, or your current property manager doesn’t have the systems in place to do so, contact me or one of the Ezytrac team on +44 1522 503 717 to find out how you can benefit from our state-of-the-art technology for buy-to-let landlords.
Yours in effortless property management,
Brett Alegre-Wood MARLA MNAEA