Financial Tips for Real Estate Professionals

While it is true that the UK property market is full of opportunities, it is equally true that managing your finances is as important as closing your deals. So, if you are an estate agent, property investor or landlord, you must know how to handle your finances because it can make or break your success. After all, your worst nightmare will be dealing with unexpected tax bills or deductions you missed to save a few more pounds! So, here are some vital financial tips you should know as a real estate professional.

Keep separate accounts for your personal and business finances

Never commit this grave mistake of mixing your personal and business finances. If you make this mistake, believe it or not, you may have to face a massive headache. Also, this makes things very complicated because tracking business expenses will become tough, and your personal finances can face a risk in any case of legal dispute.

Understand your tax responsibilities

Know how much income tax you must pay if you are a sole trader or an individual landlord, as you must pay income tax on your rental profits. Again, buying or selling a piece of land also involves separate taxes. For example, when you are buying land, you will have to pay the Stamp Duty Land Tax. Similarly, when you are selling it, you may be liable to pay the Capital Gains Tax.  Also, running a private limited company makes you liable to pay the corporation tax. Not to forget the VAT, especially if you are dealing with commercial properties.

Choose the right business structure

Try to understand that having the right business structure is very important and for real estate professionals, a limited company structure is the best option. A limited company structure can offer tax advantages, especially as mortgage interest relief. However, it’s not one-size-fits-all, so talk to an expert before making a decision.

Keep an eye on your bookkeeping practice

You should never have messy accounts as that translates into financial chaos. It does not matter if you have multiple rental properties or you are running a growing estate agency. Try to use a user-friendly cloud-based accounting system to keep a tab on your rental income, expenses, and mortgage payments.

Claim all of your eligible expenses

You will not believe it, but many landlords miss out on valuable deductions because they are unaware of the expenses they can claim. These include mortgage interest, insurance costs, property repairs and maintenance, accountancy fees, legal fees, etc. 

Plan for sudden expenses

Things are not always rosy in a real estate business. So, be prepared for sudden expenses such as unexpected repairs, rise in the interest rates of your mortgage payments, rental voids, etc.

Keep an eye on evolving market trends

Always keep an eye on changing rental yields, property values, expectations of tenants, and regulatory changes. For example, if a majority of tenants now prefer rental properties with an air conditioning system, think of investing in it. 

Lastly, never shy away from hiring an experienced accountant because it is not just about seeking professional guidance to keep your finances organized. It is more about structuring your rental business tax-efficiently and staying compliant with the ever-changing regulations. At CoreAdviz, we have a team of skilled accountants to help in achieving financial success without any stress.