Hi, Peter Jones, author, property investor, ex-chartered surveyor.
In the last video, we were talking about lessons from 2008 saving up cash to cover you through the hard times having a little bit set away for a rainy day but actually not a little bit because I’ve heard and I’ve been adviced that to be totally secure you probably want to have about a years worth of money saved away. A years worth of business expenses, and a year’s worth of personal expenses.
Now for many of us then it’s going to be a real stretch until our business is at a level where you can actually start saving that kind of a money. It may taken even many years even if you have a sizeable business with a sizeable cash flow so i would suggest starting at three months. Even for the three months it can be a stretch for many of us, particularly if we’re used to spending every penny that we earn but it’s a goal which is worth setting. When you get to three months then set six months and build up gradually over a period of years if you have to.
But saving up is only one way of making sure that you have the money that need in case of a downturn or in case of hard times.
The other way is to have access to credit. Now if you’ve heard my story, if you’ve heard any of my trainings you’ll know that one of the things which i’ve done over the last 20 years is that i’ve collected credit cards.
Now i’ve got access to a number of credit cards and those credit cards give me a reasonable amount of credit. I didn’t go and apply for all the credit cards at once because that would have hit my credit score, my credit rating, and would have made me not lendable when I was going out to buy my buy to let properties so I’ve done it carefully over the years. Perhaps just applying for one credit card a year or one credit card every six months.
Now I’m not saying use credit cards in a reckless way sometimes when people mention credit cards it’s almost like they’re evil. They’re not evil. I know that some people have abused credit cards and they’ve got themselves into trouble but I’m suggesting using them in a very strategic way. Most of the time I don’t use them at all but if anything were to happen and if I needed an emergency line of credit they are there for me.
Another positive way in which I use credit cards is I have a British Airways American Express card which I use for business expenses when I can but particularly I use it for paying my premium when my portfolio insurance becomes due.
Now I get a very good deal from my insurance broker so it’s not because I can’t afford it but because I’ve negotiated with my broker to be able to pay by American Express it means that I can get loads of Avios points, basically air miles, which means if I want to go somewhere nice with a bit of planning I can quite often fly there business class for free which is great.
From a business point of view though it makes sense because it means that if I needed to, for example, if there was a bit of a hiccup and my cash flow took a temporary hit I could choose to spread the payments for my portfolio insurance premium which is quite hefty, it’s a good deal but it’s quite a hefty bill to pay as a one-off but I can choose how many months I can pay it out over which actually helps my cash flow within the business. And of course that could apply to any business expenses that we may have.
By the way if you also fancy the idea of flying around the world business class then if you email me thepropertyteacher@gmail.com and I refer you I think that we both, as your my friend and are being referred I think we both, get extra free Avios points so that could be worth doing. So if you want to try it then drop me a line and I’ll pass you on to American Express.
How else can we get credit? Well possibly through overdrafts. Although they’re a bit old-fashioned nowadays but some bank accounts come with overdrafts. I think a couple of my Natwest accounts still have overdrafts attached and I can get some credit that way.
Lines of credit via private finance. Who do you know in your network? Who do you know who may be prepared to lend against some of your assets? Maybe you’ve got assets you haven’t even considered. Maybe if everything went completely to pot and you really needed to maybe you could use equity in your own home as credit for somebody who’s got a private line of finance or maybe one of your properties may have equity and you can use that as collateral for some kind of private finance. But there’s ways and means when you think about it.
Now I’m not suggesting that you go out and raise loads of money and then to spend it recklessly. Please don’t misshear me. But I’m just saying that to supplement your cash should you have to in an emergency because of the times we live in it can be good to have that kind of credit.
Now one thing, of course, which is easy to say in hindsight but if you can see the storm clouds gathering you know somethings coming and you’re thinking about refinancing some of your properties, for example, it can be a good time to actually crack on and get it done so that you’ve got credit coming through. It may be that even during the good times if you refinance a property you always set some of that money aside in your business account as a business savings account so you’ve always got cash so you’re not always spending all the money that you have. It can be very tempting, for example, when you refinance property to take all of the money and go and buy another property with all the money but if you actually keep a proportion every time you refinance a property or if you keep a proportion every time you sell a property, you will know what it means to you, but the key thing is having available credit.
And there’s many, many other ways probably of getting credit which I haven’t even mentioned because I probably don’t even know about them if you know some really good ways of getting credit then do let me know. Maybe I’ll do another video on it.
But those are just some of the ways that I’ve used, you will have your own ways and it’s worth doing and with that, a combination of that, and having your own cash in the bank then hopefully whatever life throws at you financially you’ll be able to weather the storm.
Until next time, here’s to successful property investing.
Peter
Peter Jones
(ex) Chartered Surveyor, author and property investor
https://thepropertyteacher.co.uk
PS. By the way, I’ve rewritten and updated my best-selling e-book, The Successful Property Investor’s Strategy Workshop, which is an account of how I put together my multi-property portfolio, starting from scratch and with no money of my own, and how you can do the same.
For more details please go to:
https://thepropertyteacher.co.uk/the-successful-property-investors-strategy-workshop
