Accountancy and tax advice for property investors
Property and Wealth
Owning a property portfolio is an aim of many people. Whether the portfolio runs alongside a trading business or becomes the main focus, the appeal is to accumulate a capital asset which can produce a stream of income.
Because ad+ has so many clients who own property investments, this is a topic in which we have a special interest.
We have designed several different ownership and tax strategies for investment property portfolios. Once we understand your individual situation and long-term aims, we will recommend the most appropriate strategy for you.
The Financial Model of Property investment
ad+ helps all clients to understand property investment as a business. We provide solid financial management advice and sensible tax planning on a regular basis.
As you may be aware, during the past few years various forms of property investment have been subject to many changes surrounding letting regulation, building safety. Planning consent, mortgage finance, and taxation. These changes make it essential to review structure and operation of your property investment business on a regular basis.
Because we produce the accounts and tax returns for so many property portfolios we can that it is getting harder to financially manage a property business. Candidly, as a type of business, investment property is less profitable and involves more regulation than many realise.
It is the proportion of borrowed money to your money (debt gearing) that has the biggest impact on the net cash-flow and net profit. ad+ will help you to calculate the figures for your portfolio.
A source of extra income?
We will help you understand the accounting and tax realities of an investment property business.
One aspect which is often surprising is how little additional net income a property portfolio produces when it has been purchased with a loan. That is especially true during the early years of ownership. Conversely, when the property has increased in value and the loan has reduced or been repaid the net income increases significantly. We will show how to reduce the tax bill so that you enjoy the most of the income produces.
The net income (or profit) is affected by running costs, including repairs and management fees. These costs can diminish as a percentage of income as the portfolio grows, and so the profit margins of your property business will increase accordingly. This requirements diligent management and financial control which we will help you to achieve.
Larger portfolios require more sophisticated financial management
Regulatory changes made to lending criteria have resulted in the need for much more detailed and sophisticated accounting and cash-flow reporting. ad+ has helped many clients to meet these stricter new requirements, and we will ensure that your portfolio meets all the regulatory and lender requirements.
Balancing expansion and extra income
We see many property investors reach a point where they have to balance the continued expansion of the portfolio against the desire to draw extra income. Buying more properties is a capital hungry activity. Adding more debt to acquire those properties alters the gearing, the risk/volatility, and net income/profit mix. We will help you to calculate the financial consequences of the various permutations.
Begin with the end in mind
Before we get bogged down in technical detail we want to understand your ultimate objective. Why do you want to invest in property? What is your end goal? That will influence many factors, including the rate of growth, the degree of gearing, and one of the most important – the legal entity that owns the portfolio.
Your property portfolio can be help within a Sole Trader, Partnership, Limited Company, SPV, or pension scheme (details vary according to the type of property and the type of pension arrangement).
Your next step
Additional information about property investments:-
Tips to achieve a successful property business from Nicole Bremner
What income tax allowances are you entitled to when you rent out residential property?
Special Purpose Vehicle (SPVs)
Small-Scale Property Development: Another source of funding?
About the Author
I really enjoy helping ambitious entrepreneurs achieve their business and personal goals. I have 30 years business experience, including 25 years hands-on practical experience running my own business. AD+ is an ambitious company, and so we relate exceptionally well to ambitious entrepreneurs.
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