How to significantly increase your cashflow whilst you are doing developments?
If you are an existing property developer/investor then you will be heavily involved in making thousands, if not, millions of pounds each year through the property industry. This is fantastic because it allows you to make significant capital gains in each project whilst designing or repurposing spectacular homes to retain or sell.
Although this is fantastic one common problem developers face is that each project may take from 3 months up to 3 years from purchase to sale. This can be a problem because it means that there is no consistent cashflow coming in for that period. This often increases pressure on the project, the business, and the private lives of the developer and investor.
In addition, this time is very often extended. The average project takes 1.3x longer than the developer accounted for which means 30% more interest, wages, materials and other expenses that can be incurred. This can significantly reduce the profitability of the project and leave you as a developer with very little return after a significant period of time with no cashflow coming in.
The problem of time in property development is shared by all, whether that be extensions to the project or just the overall project. Therefore, it’s important to reduce the risk of time by increasing the passive cashflow coming in on a monthly basis.
We’ve identified 3 key problems that all developers and investors will face at some point in there business:
1. INCREASED PRESSURE
High pressure environments can be very bad for productivity, health and relationships both in and outside the project due to the body been more anxious. There’s lot of knock-on effects such as mistakes been made on the project, which could cause delays and thousands more pounds in development which can send you on a downwards spiral.
2. INCREASED CAPITAL FOR YOUR PROJECT
With the volatility of trade prices for materials and the unknown expenses that do occur throughout the project, projects often eat well into the contingency pot and above. This often means that more finance needs to be secured from external stakeholders that was not accounted for at the start which increases the risk and reduces the reward for you as the developer.
3. INCREASED TIME TAKEN TO COMPLETE THE PROJECT
There are many unexpected challenges that can arise that are completely out of your control such as bad weather, suppliers delivering late and further work that was not accounted for such as damp. All these factors will increase the time required to complete the project which could mean that you miss out on your next project and you pay more in interest on finance. For example, a developer we worked with missed their deadline by 3 months on 2 blocks of 25 studio apartments so 50 in total. This meant they could not rent their properties to students because they missed the start of the student year effectively meaning they missed an entire years’ worth of revenue on 50 studios.
Due to these 3 factors, we have identified that consistent passive monthly cashflow separate from your projects can help you combat all 3 of these things. This is because you will experience…
1. DECREASED PRESSURE
Having passive income from a different strategy such as rent to rent serviced accommodation means that you can relax as you know that you will be earning money regardless of the project performing exactly how you want it to. This is extremely important because this reduced pressure will make you happy and healthier and allow you to enjoy your project rather than it feeling like a chore.
2. SUPPORT THE PROJECT
The financial constraints of a project can be supported by your passive income. If you need to spend an extra bit of money on the project, the passive income you may have saved up can help towards this, so you don’t have to go to external stakeholders and pay interest to top up your project. This again reduces the pressure you have financially on the project because you are comfortable that any unaccounted-for problems that arise can be dealt with.
3. REDUCE THE EFFECT OF EXTENSIONS
Extensions to a project can be the make or break to the deal. However, establishing passive income whilst your project is finishing means that even if you do have to extend or miss a key deadline you are still making money every month. This is key because it means that you may be able to finish the project off more comfortably and to a high standard rather than rushing it and making more mistakes which could cause even more financial stress and time extensions. The passive income reduces the effect of extensions because even if a project extends you are still making money.
There are several ways that you can increase your passive income from as little as £5000 by using strategies such as rent to rent serviced accommodation. The KEY TO BEEN A SUCCESSFUL DEVELOPER IS TO ENJOY THE PROJECT AND HAVE CONTINGENCIES.. PASSIVE INCOME ALLOWS YOU TO DO THIS.
If you’d like to find out more about Rent to Rent Serviced Accommodation please check out this video which will explain in detail how you can make £600 net profit a month from as little as £5000 investment
Alternatively if you’d like to speak to a member of the team please email info@ppsltd.net or call 07976198079.
