Landlords across the country are buying up property still today and building impressive portfolios of 10, 20 or even hundreds or properties, quite often across various towns, such as Liverpool, Manchester, Birmingham, Wolverhampton, Coventry, Leeds and London and yet, what our “NET WORTH” it, is still not something we tend to go around talking about, but as your property portfolio grows, it is something that you will want to monitor, and let’s be honest, as an investor, it is why we do what we do. 

So many landlords focus on numbers of units they own, or overall value of the total property portfolio, and do not calculate the debts, I believe this could be risky as a long term strategy because things change and a ratio too highly geared on debt, can be a recipe for disaster very quickly if the winds change. It’s ok to focus on growth and scale up fast for a few years, but at some point it’s a good idea to consolidate and make sure your debt to value ratio is sensible and safe.

At the moment interest rates are very low, however I can remember as many can, when interest rates rose quickly to 15%, meaning many lost their homes, plus taxation can change... when I bought my main portfolio stock, there was taper relief in place which meant that I could get most of the value back out of my properties by holding them, but that’s now gone. Taxation can change too, and it has recently with changes to what you can claim back as expenses, the capital gains tax on sale and stamp duty, which too can all have an effect. 

So maintaining a healthy debt to asset ratio, keeps you safe in case you need to exit the market or liquidise your assets at any time.

I can remember the first time someone asked me what my net assets were, and I wished I could remember who asked me, but I had around 15 properties and a successful business at the time, and I can honestly say I had no idea, I had never sat down and figured it out! I was just buying and refurbishing properties to build up my rental portfolio and building the business at the same time... I was 27 years old, sitting in my 2 bedroomed flat, that I had just moved into, and I sat at the wooden bureau with my “Filofax” (I can here the cries of YUPPY from here) and started adding up, gross value, less mortgages/loans etc leaving NET value and I was shocked... £2.7 million...

That was in 1999, and since then, I’ve always kept a log of my current “asset” status, albeit not in a Filofax anymore, now it’s all on computer, but the theory is the same.

So how do you calculate your NET worth?

Firstly work out all of our assets, your properties and how much each is worth (you can get the current value of your property here:- Value My Property) also add in the value of your businesses if you were to sell them plus any savings or other investments you may have

Then add up all of your debts, loans, mortgages

Subtract your debts from your assets and your net assets is what’s left 

Assets less Debts = Net assets

Assets___________________________________

Debts ___________________________________

Net Assets Total ___________________________

I like to set goals too, where do I want to get to, what ratio of property and business would I like to have, and also to extend beyond the assets and look at actually how much would I get of that total value on the sale, or on death as a legacy for the next generation, because the tax element is such an important consideration. 

I hope you found this useful, and just in case you missed it, if you want to find out right now how the super powers that be of the online space reckon your property is worth, then click here to find out right NOW Value my Property 

Sally Lawson