Whether you’re new to the buy-to-let sector or you’re amore experienced landlord with multiple properties in your portfolio, there are key metrics you should be keeping an eye on.
Ultimately, if you’re watchful of the market overall as well, you’ll then be able to make better decisions about your individual properties, portfolio as a whole and those investments that need careful thought.
Many of you will already have a strong grasp of many or all of the following points, however having a reference point of it in black and white is always very useful.
Portfolio Total Equity
It’s definitely worth being aware of how much equity your portfolio holds. If you know the current estimated market value of your property, then subtract the current balance of mortgages and other loans you get the total equity. This gives you clarity on any potential next steps such as refinancing to capitalise on investment opportunities or renovations, for example .
Portfolio Interest Cover Ratio
Basically, the Interest Cover Ratio (ICR) of your portfolio is based on your outgoing interest payments and incoming rental income. Lenders will use the ICR to ascertain a portfolio's adaptability to interest rate increases and can also be used for securing a mortgage.
Net Cash Flow
In terms of the hard cash you have coming in as a landlord, your net cash flow is based on the actual rental revenue from your properties, minus all monthly expenses. It can essentially also be referred to as your running profit margin.
Where as - and we are undoubtedly asking your grandmother to suck eggs here - your gross cash flow figure is your entire rental income amount before fixed outgoings are deducted.
The gross yield of your portfolio is the full annual income generated by your properties (assets) divided by their price, while the net yield is the annual profit minus costs generated by the assets and divided by their price.
Knowing the yield of your portfolio is a good way to see the overall health of your investments and how they're performing individually.
Your ROI, or return on investment is the golden goose and the term and number that's most branded around within the property lettings market. ROI is the annual profit (income minus costs) generated by your property or properties, then divided by the cash you yourself have put into each investment.
As a landlord having a clearer idea of the ins and out of how your property portfolio is performing makes you better equipped to make swift decisions and change tactics quickly as the notoriously flighty property industry demands.