Why simple systems are so important!
Hey guys,
Well it's Sunday morning and I am in London at home. This may not be of significance for you but for me it is a disappointing fact. You see on Friday I was due to fly to Spain for the weekend and go Scuba Diving of Costa Almeria about an hour south of my house.
At least I was due to fly if I had remembered that you need to take your passport in order to leave the country.
On this occasion I got all the way to the Gatwick airport check in counter and realised that I had left my passport at home. (A little tip: it's no use trying to talk your way into traveling, they simply won't let you.)
Anyway so I have spent the weekend in London instead of Spain. There is a lesson here and one that can easily be applied to building your portfolio.
Set up simple systems so you don't forget your passport
Whenever I leave my house, I have a simple system of checking that I have everything I need. If I'm traveling overseas, it's 5 things. passport, wallet, house keys, mobiles x 2, journal. On a normal day as I leave the house, it's 3 things: wallet, house keys, mobiles x 2. As long as I have these things I lock the door and get on with the day. Obviously in this case I didn't follow my own system so I deserve to be reminded of the lesson.
So how does this relate to your property portfolio?
Knowing when your rents and mortgages have been paid
On the 10th of each month I go into my bank account and check that I have received the rents from all bar three of my properties. The other 3 happen at various times throughout the month and the letting agents were not very helpful in changing my payment date. At the same time I check that the mortgages have actually left my account too. It's a simple system and so far has worked wonderfully for me because I can all but forget about the my portfolio for the rest of the month.
<>
Never pay the standard variable rate...
Another simple system I have is once a property "completes" I set a reminder in my outlook (which goes onto my blackberry) three months before the discount period on the mortgage is to run out. This will give me enough time to arrange a remortgage to a lower rate. This way I never have to pay the standard variable rate on my mortgages.
Paying your bills on the day they arrive...
This is definitely one of my favourites. As long as you have done your mortgage cost averaging and have set up your provision account correctly, you'll have the money set aside to pay each of the bills as they arrive. Don't leave them sitting around - write the cheque out and put it in the post immediately. This way it's off your mind and you can get on with more enjoyable things. I swear by this one and let's face it: if you are concerned about paying it then you need to do something drastic to correct your cashflow position. Holding off paying is not the answer.
Filing all of your property related correspondence only once per month
I am definitely not the person to be giving advice on filing. I am a sort of planned neglect filer. That's someone who rather than just neglects something, they actually plan to neglect it. That way it takes away the bad feelings of 'Oh... I must do that this week.' :) For the first year of owning property in the UK I did no filing whatsoever. Everything just went into a box in order of arrival. Nowadays I do it once a month and it takes about 20 minutes if I am truthful.
Self insurance...
OK this will grate on some of you that love being fully covered, and in saying this I am not suggesting in any way that you should do what I do with regards insurance. I don't take out an insurance policy for any of my buy to let properties. The house insurance is covered by the freeholder, but for the contents or anything else I simply put aside an extra £20 per property per month into my cashflow provision and over time this has created a kitty of just under £5000 which is specifically set aside for situations where one would ordinarily use insurance.
Interestingly I have never had to use this money once. Not even once! When things go wrong the deposit normally covers it. This is the power of buying an everyperson house. You simply don't have the problems you do have with the lower end of the market.
There are so many more simple things that I do in running my portfolio that allow me to really set and forget my portfolio.
Live with passion,
Brett Wood