One of the things I’ve come to appreciate from working on property projects is how easy it is to get a false sense of security from the numbers...
On paper, everything can look fine.
Profits are being generated.
Cash balances are increasing.
But that doesn’t always tell you what you need to know.
Where the problem starts
Property projects rarely follow a neat, predictable path.
There are:
periods of strong cash inflow
periods where little happens
and points where significant decisions need to be made
During some projects we’ve been involved in, cash built up over a number of months. Rent was being received, but finance costs were not yet being paid on a monthly basis.
From a cash perspective, things looked very comfortable.
That’s often the point where questions start to arise:
Should we reinvest in the properties?
Should we move onto the next project?
Should we retain the cash as a buffer?
Or take some money out personally?
All valid decisions.
But without a clear view of the underlying position, it’s easy to make the wrong one.
Why profit doesn’t tell the full story
In property, profit and cash rarely move in line.
You can have:
strong profits but limited cash
significant cash with underlying liabilities building in the background
Timing differences, financing structures and development phases all play a part.
Looking at year-end accounts alone doesn’t help much here. By the time those figures are available, the decisions have already been made.
What actually matters
What tends to make the difference is not complexity, but visibility.
Being able to see:
what cash is available
what is already committed
what is coming up next
And doing that on a regular basis.
That doesn’t necessarily require complicated models.
But it does require:
up-to-date records
a clear structure
and time spent reviewing the position
A practical example
On one project, we decided to retain a portion of the cash that had built up and leave two of the flats mortgage-free.
For us, that was about managing risk.
Another investor or developer might have taken a different view and pushed forward more aggressively.
The point isn’t that there’s a single “right” answer.
It’s that the decision should be based on a clear understanding of the position—not just what the bank balance happens to show at a particular point in time.
Final thought
Cashflow forecasting is often seen as the answer.
And it can be—but only if it reflects what is actually happening in practice.
Without that, it becomes just another spreadsheet.
With it, it becomes a useful tool for making decisions.
Share this post: