As a property investor, you need to determine what you can do to improve the financial performance of your investment. Unlike other forms of residential property where redevelopment, alteration, and refurbishment are all options, with new build property, these are not realistic options. So, you have a relatively narrow series of options to improve performance. These are:
Free cash flow generated from your property will generate cash reserves for re-investment, reducing and rebalancing debt obligations. It is only possible to grow the investment’s cash flow by increasing income or reducing costs. Read our article xxx to learn how to increase your income and reduce costs.
Tax Costs and Benefits
Tax costs and benefits are one of the main reasons for investing in property rather than other investments. However, how income is treated can be very confusing as it uses a variety of different terminologies. Likewise, the tax treatments for investment property changes significantly between countries.
Over 30% of landlords invested for capital growth, according to a survey undertaken by the UK’s Ministry of Housing, Communities & Local Government (2018). Additionally, capital appreciation creates additional equity for re-investment. You need to understand what drives capital appreciation and how to look for signs for potential capital appreciation.
Debt Reduction and Management
Debt is a useful tool for investors to purchase an investment property and build a property portfolio. For most investors, the cost of interest debt will be their largest expense. Clever management of debt is key to cost management and driving net returns to investors. The ability to recover a debt is now changing in different countries. Therefore, the liberal use of debt is not the ‘no-brainer’ it once was.
There are significant gains that can be generated through movements in currency rates. For many investors taking advantage of opportunities for low points in currency has been the key to creating highly enhanced returns
How property is held can have serious consequences on tax from both income and any capital gain generated from a sale. Additionally, it has impacts from an inheritance tax perspective in countries that have an inheritance tax. Changing ownership structure will generally create a Stamp Duty event and therefore getting the structure right from the outset is critical for long-term investors
So now you know the six areas where you can drive the performance of your property, you can focus on improving these areas individually. We’ve written a series of articles which cover each of these factors specifically, explaining how can drive the performance of your property and help to create financial freedom for you and your family.
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Important notice: Proptech Pioneer and its associated companies seeks to provide investors with guides, information and tools, but we cannot guarantee this information to be accurate or perfect. You use the information at your own risk and accept no liability if you rely on this information. Proptech Pioneer is not a tax advisor, accountant conveyancer, lawyer, financial advisor or mortgage advisor. You should seek independent advice from independent professionals before making any investment decision