One challenge that every landlord faces is how to assess their portfolio cashflow.

Cashflow is the heartbeat of any business and this single piece of analysis tells you how well your property business is performing.

Only last week I was reading an article on the BBC website where they said property owners were preferring to reduce debt rather than having savings.

Figures from the Bank of England showed that in the last three months of 2010, the UK paid £7bn off its mortgage debt, the highest sum since records began in the early seventies.

I outlined 'debt reduction' as an important strategy for landlords last year. I said the worst thing a landlord could do in the low interest rate climate was to see the increased cashflow as a source of spending more extravagantly!

If you are content with your portfolio size then it makes sense to reduce the debt on your portfolio. This is particularly the case if:

- You can't find any alternative high-return investments
- You want to reduce your debt amount so you can sleep soundly at night!

Personally I have focused on debt reduction as well as investing into other areas outside of property. Having said that I am still looking at 'property deals' and had two offers rejected last month :-(.

Interest rates are widely expected to start increasing so managing your cashflow like a hawk is going to become more and more important. If you don't then you may end up 'unexpectedly' falling into negative cashflow as the interest rate increases start to bite.

Amer Siddiq www.propertyportfoliosoftware.co.uk

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