Some key actions that you can take in your property business, move forward, and to Survive, Adapt, & Thrive through 2020.
Number One: SURVIVE.
Survive is about ensuring that your business comes out the other side of this. That is Priority Number One.
1. Risk assess your customers. Look at all the tenants that you have across your portfolio. Find out and collate the list of different professions of those renting from you (e.g. what percentage of their rents are supported by benefits). Get that data into a spreadsheet to see the percentage of your overall rent roll you feel is at risk.
Make sure that you've assessed that and saw how much you feel is at risk of deferment. When you've got that risk assessment and you've got that figure for what percentage you feel is at risk, you can make decisions around it.
2. Risk assess your deals. What were the risks that you had on that deal pre-Covid-19 and what do they look like now?
For example, the risk of down valuing is probably way higher than it was before.
Look at (or remember!) your risk assessment of the deal that you did before coronavirus, what has changed?
Probably a lot of the risks that are there now were actually there before... but the PROBABILITY of them affecting you are much greater.
In this case, are there additional steps you can takes or different ways of doing the deal that would de-risk it? If not (or if not enough), maybe now is not the right timing to be executing on this deal, or you may need to renegotiate the price when the time is right.
3. Decision to not take action can also be an action. This is not me giving you permission to bury your head in the sand, let's be clear on that ;) This is to say if you go and risk assess everything and you decide that the best thing for your business right now is to not do anything yet, and to hold fire - that is an action.
Don't feel like you have to be doing things just to make you feel good - that's pointless. Decide how you want to play it. If that means to wait and watch for the next one or two months (or more) - that can be an action too.
4. Ensure you have a quality cashflow forecast. You probably have a cashflow forecast already, which is great. Now is the time to look at how you can actually improve that as it's a really good time to do so. We need to be able to look ahead for your business.
What is happening over the next nine to twelve months? From a financial point of view and how is that impacting your bank balance? You need to know.
You need to know when the economy is in good shape... you REALLY need to know it more than ever right now.
5. Improve your arrears management process. What happens when someone can't pay their rent? What's the process? How do you manage it? How do you communicate with your tenants?
Now is the time to improve your arrears management process to ensure that you're coming out the other side of this with your portfolio in one piece. It could take a couple of years to bring the deferments back up to date. But if you've got a good process, it need not be lost revenue.
6. Build your cash reserves. This is something that our business mentors told us back in 2015 and we have focused so hard on it ever since then, and it is really hard to do in property! We see £100k in the bank, and we go, "Could put that into a property deal." And then there goes the cash reserves!
It's really hard to keep cash in the bank. If you have cash in the bank, well done! Make sure you are holding on to as much of that as you can, particularly in this really uncertain period. We've bolstered our cash reserves by just drawing down on various lines of credit we had available. We grabbed it while it was there, paid a couple of percent in a fees to do it, shoved all in the bank account and it's like an insurance policy.
You can also do that by cutting down your expenditure. Spend less now to build up that pot, even if it might seem so small and inconsequential, every little cent helps so build those cash reserves as best you can.
And if you don't already, start building a bigger strategy for bolstering those cash reserves over the years ahead!
7. Get communicating with all your stakeholders to reassure them and to gain Insight. The stakeholders are your team, your tenants, your investors, your long-term guests or your landlords. Whoever it may be, pick up the phone and get talking to everyone. Just be a lovely human and check-in to make sure people are okay - it counts for such a lot.
Get communicating, but also use that to find out how they're doing and use that to build into your risk assessment. Maybe it's not the answer that you want to hear because maybe things are worse. But at least if you know, you can actually do something and plan for it.
Number Two: ADAPT.
How can we look at adapting and adjusting our businesses at this time?
First and foremost, do some assessment and make changes & adjustments. Adapt NOW.
Secondly, the world has changed so carrying on with the deal at the current price is not going to be good for the long-term health of your business. Renegotiate your current deals and TIME IT RIGHT to make sure you are not overexposed.
Thirdly, streamline your overheads. Think about the things that you can and are able to cut back on, both from the business point of view and the personal point of view.
What can you cut back? What can you push forwards? What are the non-essential things that you planned on spending money on, but don't really need? BE RUTHLESS. Streamline how much money is going out, which can actually feed into the Thrive pot (the 3rd part this series!).
Lastly, adapt your Investor Avatar. Shifting the way you are doing your deals and your business model may mean that the sort of investor you normally work with may not be so keen with the adjustments or changes that you have implemented.
You may need a slightly different type of investor who would be interested to carry on buying deals in 2020. Determine what type of investor or person would be the right fit, focus your attention on building up that pipeline of funds, and time it right.
Build your own risk assessment strategy and how you can adapt. Communicate and share that with your existing and prospective investors. It will eventually reach someone who has thought it through and has a plan to mitigate the biggest risks as people still want to invest.
Number Three: THRIVE.
Thriving is not about sitting on your hands, but about being realistic and practical. To help you with this, here are my key actions and things you need to consider:
1. ASSESS, ANALYSE, and CREATE A PLAN. . . then EXECUTE it at the RIGHT TIME
2. Purchasing your deals at the right time in 2020 could be the making of you! You just need to find the right balance between that and patience. Make sure you communicate these plans, particularly to your deal source and investors; doing so will let them know that you are not going to be sitting on your hands in 2020. Let them know that you want and will be purchasing deals when someone is ready to sell, but not at pre-pandemic prices.
3. Build on your streamlined overheads. Review the numerous overheads you're taking on, go through each and every one and think about the necessity of each. If you're paying for an office, for example, when all your staff are currently working from home then try and find a way for everyone to work remotely. Think about how much cash-flow that could add to your property business. Do not just come out of the other side of this and find yourself back at where you were before, you want to keep those overheads streamlined and see a dramatic increase in your net profit.
Yes, turnover is a sexy number, and so are your total rent rolls! However, what really matters is the NET effect of all of that. Streamlining your overheads can result in you having far more than what you already have.
4. Keep building and strengthening relationships, use this time as the beginning of a new chapter. Reach out to everyone more, whether it be your deal source, your investors, your banks, your tenants, and your team. Being there for your team and communicating with them at this point will help in building that relationship and ensure that you are going to come out on the other side stronger together.
5. Focus on improving your systems and infrastructure during this quiet time so you are ready to scale-up when the timing is right.
2020 isn’t panning out like we expected and we’re all having to make a lot of changes and decisions at the moment, but if we do this right, we can make sure that we will have a business that is thriving at the end of all of this!
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