more likely unplanned for, poorly performing asset, find yourself over budget and desperate for cash short term. You then are looking to borrow cash, either through loans, or overdrafts at less acceptable interest rates. However if this runs out you can be left with difficult decisions that are forced onto you by poor planning. This usually involves selling an asset, at a price below its value, as you are desperate for cash short term to support your property investing business overall.<I spoke to an investor 6 months ago who told me he was asset rich but cash poor.

What did he mean? He had bought several investments off plan, and several low yielding deals which he hoped would have good capital growth. Therefore while he had several good assets on paper, these assets were actually costing him money each month, meaning he had a negative cashflow.

This can be ok, if some areas of your life, or investments, are making a positive cashflow to balance this. However this investor did not have this, and he ended up being forced to go back to work, and selling a couple of these low yielding assets for a loss – as he was put in the position of being a desperate seller - that is, desperate for cash.

It is crucial to always be aware of how important cash is when running a business – which property investing is.

The reality is that without cash, you won’t last very long. This may seem obvious, however it is very easy to buy assets, and then realize you do not have enough money coming in each month – which can leave you in a very difficult position. Property investors must try and plan and prepare for all potential future events and market changes. This can include interest rate changes, economic changes or market sentiment changing, as well as changes in your personal life which you may not immediately associate with your property investing – such as promotion at work, or worse, being made redundant, or having children which can all make big changes to your cashflow as a whole.

So I would suggest, the most important aspect of planning, for a property investor, is not expected capital growth, historic data, cost of borrowing, or yields but is effective cash flow management.

Failure to properly plan cash flow is one of the leading causes for failure. I know how tempting it can be to overstretch yourself and put all your liquid cash into assets – and then due to an unexpected, or more likely unplanned for, poorly performing asset, find yourself over budget and desperate for cash short term. You then are looking to borrow cash, either through loans, or overdrafts at less acceptable interest rates. However if this runs out you can be left with difficult decisions that are forced onto you by poor planning. This usually involves selling an asset, at a price below its value, as you are desperate for cash short term to support your property investing business overall.<

this investor did not have this, and he ended up being forced to go back to work, and selling a couple of these low yielding assets for a loss – as he was put in the position of being a desperate seller - that is, desperate for cash.

It is crucial to always be aware of how important cash is when running a business – which property investing is.

The reality is that without cash, you won’t last very long. This may seem obvious, however it is very easy to buy assets, and then realize you do not have enough money coming in each month – which can leave you in a very difficult position. Property investors must try and plan and prepare for all potential future events and market changes. This can include interest rate changes, economic changes or market sentiment changing, as well as changes in your personal life which you may not immediately associate with your property investing – such as promotion at work, or worse, being made redundant, or having children which can all make big changes to your cashflow as a whole.

So I would suggest, the most important aspect of planning, for a property investor, is not expected capital growth, historic data, cost of borrowing, or yields but is effective cash flow management.

Failure to properly plan cash flow is one of the leading causes for failure. I know how tempting it can be to overstretch yourself and put all your liquid cash into assets – and then due to an unexpected, or more likely unplanned for, poorly performing asset, find yourself over budget and desperate for cash short term. You then are looking to borrow cash, either through loans, or overdrafts at less acceptable interest rates. However if this runs out you can be left with difficult decisions that are forced onto you by poor planning. This usually involves selling an asset, at a price below its value, as you are desperate for cash short term to support your property investing business overall.<

, and then realize you do not have enough money coming in each month – which can leave you in a very difficult position. Property investors must try and plan and prepare for all potential future events and market changes. This can include interest rate changes, economic changes or market sentiment changing, as well as changes in your personal life which you may not immediately associate with your property investing – such as promotion at work, or worse, being made redundant, or having children which can all make big changes to your cashflow as a whole.

So I would suggest, the most important aspect of planning, for a property investor, is not expected capital growth, historic data, cost of borrowing, or yields but is effective cash flow management.

Failure to properly plan cash flow is one of the leading causes for failure. I know how tempting it can be to overstretch yourself and put all your liquid cash into assets – and then due to an unexpected, or more likely unplanned for, poorly performing asset, find yourself over budget and desperate for cash short term. You then are looking to borrow cash, either through loans, or overdrafts at less acceptable interest rates. However if this runs out you can be left with difficult decisions that are forced onto you by poor planning. This usually involves selling an asset, at a price below its value, as you are desperate for cash short term to support your property investing business overall.<

ildren which can all make big changes to your cashflow as a whole.

So I would suggest, the most important aspect of planning, for a property investor, is not expected capital growth, historic data, cost of borrowing, or yields but is effective cash flow management.

Failure to properly plan cash flow is one of the leading causes for failure. I know how tempting it can be to overstretch yourself and put all your liquid cash into assets – and then due to an unexpected, or more likely unplanned for, poorly performing asset, find yourself over budget and desperate for cash short term. You then are looking to borrow cash, either through loans, or overdrafts at less acceptable interest rates. However if this runs out you can be left with difficult decisions that are forced onto you by poor planning. This usually involves selling an asset, at a price below its value, as you are desperate for cash short term to support your property investing business overall.<

more likely unplanned for, poorly performing asset, find yourself over budget and desperate for cash short term. You then are looking to borrow cash, either through loans, or overdrafts at less acceptable interest rates. However if this runs out you can be left with difficult decisions that are forced onto you by poor planning. This usually involves selling an asset, at a price below its value, as you are desperate for cash short term to support your property investing business overall.

Cash flow serves several purposes.

Firstly it is used for meeting normal cash obligations such as paying mortgages, buying costs, development costs and covering voids.

Secondly, it is held as a precautionary measure for unanticipated problems. This is the area that usually is forgotten by investors. A cash reserve should be available for these unforeseen problems – this can be actual cash, or a flexible mortgage or overdraft, but must be available.

Thirdly it is held for potential investment purposes. The term "cash" refers to those assets that are liquid and have immediate cash redemption value.

There is not a problem with buying a property or land that costs money in the short term ie a plot of land to develop on, or a property off plan, indeed this can be very profitable – but it is clear that this will not generate cash in the short term – and therefore you must make sure this is properly planned into your overall strategy.

I always think it is important to have a good level of cash generating assets – ie generating more money than the costs involved with borrowing and maintaining the asset.

This gives you a positive cashflow which can help balance out less well performing assets, or can be held in reserve for emergencies or future investments.

The other attraction of holding cash positive assets is that if you are ever forced to sell an asset due to an unexpected change in your professional or personal life, there should always be demand for cash positive assets, and therefore you should be able to sell this on relatively easily.

For example, if a property development you are carrying out goes wrong or over budget, and you need extra cash – if you own a buy to let in the UK which is generating a gross yield of over 8% - or a net yield, ie after all costs, in any country of at least 2% - then this should be attractive to other investors and you should find a buyer relatively eas