Landlord Accountants
Landlords' Accounting & Strategy
In the commerce of real estate, one person’s investment is another person’s home. While a
homeowner may be drawn to hardwood floors and panoramic views, a landlord is thinking about rent yields and cap rates.
Landlords make money from rentals in two primary ways. First, they collect rent. Second, a landlord banks on the rental property appreciating in long-term value. Averaging out the blips, house prices have gone up by 4.5 percent per year since 1975, according to Forbes. Landlords cash out the equity when they sell or refinance.
The key to making numbers stack up is other people’s money. Investors do not buy rental property with cash, even if they can afford to. They let other people — specifically the tenant — buy the property for them. When an investor finds a property he likes, he’ll buy it with a mortgage. Typically, that mortgage will cover 75 percent to 80 percent of the property’s value. As long as a landlord collects enough rent, the tenant will cover the interest and principal repayments. After 30 years or sooner, the landlord has a building that he owns outright, having contributed only 20 percent of his own capital.
Landlord Accounting
The tax system weighs heavily in a landlord’s favour. A landlord can deduct the mortgage interest, along with a number of operating expenses such as property taxes, insurance and maintenance costs from the rental income he receives. He may even depreciate the property to reduce taxes. Depreciation lets a landlord deduct a percentage of the rental unit’s purchase price from his taxable income to account for wear and tear. HMRC permits such deductions even if the property is not losing value in real life. On paper, the rental may show a loss even if the landlord turns a profit. This reduces the income tax a landlord has to pay.
Professional landlords are investors who evaluate the potential dollar return of a property before deciding whether to buy. One financial marker is capitalization, or cap rate. The cap rate is the ratio between the property’s net income and the value of the property. For example, if a landlord buys a property for £100,000 and collects £10,000 in annual rent after deducting his costs, his cap rate is 10 percent. Property values go up and down over time. By keeping an eye on the cap rate, a landlord is able to determine the best time to sell and then invest the proceeds elsewhere.
At Lanop our experienced chartered accountants are experts with Landlords, Realtors and Land developers. The range of our services include everything from book-keeping to Virtual Finance Directors (VFD).
Role of Accountants for Landlords
Accounting is the art of recording and reporting on financial transactions. Accountants are concerned with tracking and reporting the financial transactions of a business. They are responsible for managing general ledger, cash flow management, collections, recognizing revenue, analysing profitability, reporting earnings, managing debt, and paying taxes of course. Financial services firms need to fill roles like financial reporting accountants, auditors, bookkeepers, accounts receivable clerks, accounts payable clerks, controllers, treasurers, and tax accountants. Typically, the entire accounting organization will report to a Chief Financial Officer as well.
An accountant will identify potential deductions throughout a fiscal year and advise on how to make strategic decisions for year-end deductions
An audit can easily be avoided if you get the guidance and counsel of an expert accountant year-round
Investing in and engaging a professional accountant as an ongoing tactical business advisor will assist owners in maintaining focus on long term goals.
A collaborative approach toward an accountant, allows make decisions based on data and takes advantage of a consultative relationship that will help making business decisions in a timely fashion
The biggest benefit of hiring an accountant is getting advice on how to plan for the future. They can pull reports from the past and examine the seasonality of a business. This helps determine the best time to buy inventory, and budget for big investments so that it can stay competitive and viable.
Zohaib Arshad
As a Financial Accountant at Lanop, I advise landlords and real estate Read More
Zohaib Arshad
Financial Accountant
Most of my time is spent counseling limited firms on all aspects of their financial and tax circumstances as a Financial Accountant. Many corporate business owners have turned to me for help with their business formation, including any early paperwork and laws. Small business owners can benefit from my high expertise and professional advice due to my
diversified experience in a wide range of industries.
Rehmat Hussian
I am Lanop's Global Manager for VAT. Due to extensive knowledge and Read More
Rehmat Hussain
VAT Manager
I am the Global Manager for VAT Returns at Lanop with more than 5 years of experience in accounting, tax, and finance. I am responsible for providing services to help sole traders with self-assessments, tax planning and other relevant accounting services. My realistic approach, extensive experience, and successful track record makes me your business’s best friend.
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