Take Care of Your Business & It Will Take Care of YOU
As a professional property investor you need to know how your business is doing. By recording your financial information and transactions you will be able to read the key indicators that keep track of your business. Don’t waste all your hard work by neglecting the bookkeeping!
Remember, there are three simple bookkeeping rules:
- Keep every business receipt
- File them in a sensible order
- Know how much money you have in the bank
Your bookkeeping could be done on a simple spreadsheet or with the help of an accounting package such as Sage or QuickBooks.
By developing a cash book you track the amount of cash going into and out of your bank account. Your cash book should show receipts (income from rent and property sales) and outgoings (costs) in dated order. There are variable costs such as phone and travel, and fixed costs such as use of home as an office, subscriptions and car payments.
Income minus costs equals net profit. Remember, if you refurbish a property and re-mortgage it you have income but not profit as the money still technically comes from the lender.
Profit and loss is a basis for calculating your worth, but it is only a snapshot of the moment and tends to shift. You also need to look at a balance sheet of your assets and liabilities. Your net worth is your assets minus your liabilities. Balance sheet items show what you owe on what you own. It is important to be clear about these when you draw up a business plan in order to apply for finance.
For tax purposes, you can claim the costs of mortgage interest payments, repairs, agent fees, travel, phones, etc. against the income of the business. Make sure you get a good accountant on your power team and get organised.
Consider accreditation as it’s another means of getting your business onto a professional footing. Being an accredited landlord gives you credibility and may help you gain access to grants and discounts. It also lets prospective tenants know that you take your role of landlord seriously, and this may motivate them to rent from you.
The beauty of property investing is that it does not matter how old you are or which sex you are – there are no age barriers or glass ceilings. The key is to know how to buy well and manage your tenancies efficiently and this is all down to effective communication, organisation and building relationships.