If you have the funds available, the property market is still one of the most reliable and lucrative investment opportunities around as it can give you a good and steady income as well as provide you with the perfect work/life balance.
The property market is on course for its busiest year since 2007, says as new report in the Guardian* with UK house sales forecast to leap 46%. So, with the marketing in a buoyant position the time is right to follow your property passions and search out those potential investment opportunities. (*Article dated 25th May 2021)
Fusion Accountants are specialist property Accountants who will help you plan so you can grow your property growth whilst keeping complying with all tax and legislation requirements.
They provide you with all the necessary advice, accounting software and apps you will need if you are looking to expand your property portfolio or manage your business as a landlord.
What is a property business?
There are two different approaches to having a property business. One option is that you have a small number (one or two) properties that you may be using to generate an income to top up your pension. Or, you may wish to have a much larger portfolio that generates a positive cash flow business every month or quarter.
If, on the other hand, you do not have the financial collateral yourself, there is another option open to you to work as a property dealer who acts as an intermediary, but you still benefit financially from the investment.
Tips for starting a property business:
The time could be right to pick up some fantastic property bargains to start your portfolio, so if you are wondering how to start your property business, the following tips open the door to getting you started.
1. Let the property go:
There might be a number of reasons why you might decide to let your property go. You want to make a nice profit. House prices are starting to pick up again after having flatlined for most of 2019/20. You may also feel that the rental income has fluctuated too much these past 12 months, and if you haven’t factored in the ‘ups and downs’ of rental income long term then maybe holding onto the property is no longer an option.
2. Buying and selling:
Being in the property business can be a continuous cycle of buying and selling. Keep a close eye on the market. Compare recent sales in your area, particularly those that match your property both in size and amenities. If you start noticing that prices are starting to increase, this could be the perfect opportunity. The benefits of taking on the selling yourself will mean cutting out the middleman and any associated fees, but on the flip side, it may take you much longer to find a buyer as you will not have access to potential buyers in the same way an Estate agent will. Do not forget that there may also be Capital Gains Tax that needs to be paid on any profit over £12,300 (2020/21). If you are not sure, speak to your Accountant.
3. Careful choice of location:
Never invest in a location where there is less option of reselling. First of all, do your homework! Research areas that are trending as fashionable areas where desirability and demand are high. Look up the locations you are interested in on property websites, as these will provide current valuations as well as recent sales. If you want to invest your money, then selecting a suitable location according to your budget and need is a really important decision.
4. Think about the audience:
When drawing up your property business plan, you need to think about your target audience. What size of property are you looking to buy (terraced house, bungalow or flat)? Who are you trying to attract with your property? If you have a two-bedroom flat, then targeting an area with a high density of families would not be right, whereas promoting your flat to students that is near a university would probably be far more successful!
5. Rent out your own place:
The most obvious benefit to owning a rental property is that it will provide you with a source of “passive income”.
If you are considering this option, the first thing you need to do is check whether you need a license from your local council as it is illegal to operate a landlord without one. Again, understand your market. Who is your property suitable for? Who are you looking to attract or want to live in your property? Also, decide whether having your property as furnished or unfurnished is going to be more desirable. As a landlord, there are numerous pieces of legislation to comply with, and ultimately your property has to be fit for purpose and properly maintained.
6. Investment in others:
You may find buying a property outright might be a financial risk too far and prefer to share that responsibility with another investor? Also, by pooling your expertise and resources, you should make your money stretch further and maximise profits. Depending on how your partnership is set up, you could be liable for Income tax or Corporation tax.
7. Never forget to make an exit strategy:
When creating your original business plan, make sure you also have an exit strategy for your property partnership as it ensures protection for both partners. It will also underline that this partnership is purely professional rather than a more relaxed personal arrangement.
Hopefully, this article has covered various property strategies to help kickstart your business and help you grow your portfolio and create a healthy cash flow opportunity.
Through our knowledge and expertise, Fusion Accountants goal is to make sure all our landlord clients can enjoy the maximum benefits from their properties in the most tax-efficient way.