Mastering the Art of Managing Finances in Property Business with Josh Keegan

In the latest episode of Deal Finder’s Corner, your favourite Frenchman, Guillaume Black, had the pleasure of hosting Josh Keegan, a chartered accountant and award-winning entrepreneur with a rich background in starting, scaling, and selling multiple successful property businesses. Josh seamlessly blends the disciplined world of finance with the fast-paced realm of entrepreneurship. As an educator, public speaker, founder of Ultimate FD, and host of the Ultimate FD Podcast, he brings a unique perspective to the intersection of property and financial strategy.

“The shiny deals can become poor performing liabilities as opposed to assets.” (Graphic Source: Dall-E)

Understanding Property Investment Finance Complexities

Navigating the property business is an intriguing journey that, unlike many ventures, isn’t inherently prone to failure but can easily slip into a state of mere survival. Building property portfolios often means they don’t perform optimally, and while the monthly influx of rent payments is appreciated, it raises questions about sustainability. What if we stopped renting? What if we decided to exit? The prospect of parting with diligently acquired assets is intimidating, leaving many of us merely scraping by.

Compounding this complexity is our unique situation — significant capital outflows for deposits, refurbs, and substantial cash investments yield modest returns, occasionally larger ones in the case of developments or significant refinances. The landscape is volatile, and scenarios where refinances fall below expectations lead to a constant juggle between cash flow and business performance. The property business, it seems, is a delicate dance between survival and thriving. However, it doesn’t have to be this way.

“SOS” Snake Oil Salesman

Josh introduces Property Filter members to the concept of “SOS” Snake Oil Salesman — individuals who knowingly sell fraudulent goods or are themselves frauds, using it as a metaphor for financial situations encountered during our property journey.

Josh outlines three snake oil salesmen to be aware of while managing finances in your property business:

1. The Accountant

  • He could be your first SOS. Often overworked and functioning in a model similar to letting agents, accountants can become highly reactive, requiring more money if things get more complicated. In order to have your finances under control Josh recommends transitioning from a team of one to a team of four world-class professionals consisting of a: 
  • Finance Assistant (responsible for operational finance: making payment, chasing rents, who doesn’t need formal qualifications)
  • Bookkeeper (qualified by experience or AAT qualified, a person responsible for wrecks and checks)
  • Finance Manager (preferably a chartered accountant, responsible for data to information & creating reports)
  • Tax Accountant (for tax strategy only)

2. Your Bank Balance

The second SOS can be your deceptive bank balance. It changes every minute, making it an unreliable indicator of your company’s health. Decisions based on your current bank balance can be detrimental. Josh advises moving from the bank balance to the balance sheet – a set of reports you review each month providing you with a holistic view of your company’s performance. The three pillars include:

  • P&L Profit & Loss per Property (Past performance)
  • Balance Sheet – net worth of your asset, your assets minus your liabilities (i.e loans, mortgages, interests) (Present value)
  • Cash Flow – large inflows, and large outflows in the future (Future Problems)

3. You

The third SOS could be… you. Entrepreneurs love roller coasters, the adrenaline, enjoy the ride, want to do more and more deals, but are often not so keen on details. Josh emphasises the need to work both hard and smart, stressing the importance of a future forecast.

Future Forecast – 12 months ahead

Setting rules and returns upfront, knowing what to do when unpredictable situations arise, predicting profits and drawings to the penny, and sticking to your forecast even in the face of uncertainties are vital aspects.

A final word on finance in the property business

Instead of relying solely on a Finance Director, Josh recommends:

  • Systems and Software: Utilise tools like Xero
  • The Four Professionals: As mentioned earlier
  • Three Pillars: P&L, Balance Sheet, and Cash Flow
  • Bulletproof Business Model: Establish clear rules and returns
  • Future Forecast: Plan 12 months ahead
  • Master Cash Manager: Keep your spreadsheet updated for real-time information

Dive into a wealth of expert insights with Josh Keegan as he unravels the secrets to mastering financial success in the property business. Tailored for landlords, seasoned investors, and property portfolio owners, this session offers a comprehensive guide to navigating the intricacies of financial management.

The episode not only equips you with essential strategies but also unveils exclusive tips for ensuring your property ventures thrive financially. To further enrich your understanding, Josh wraps up the session with an engaging Q&A, addressing queries and providing personalised advice. Don’t miss out on this opportunity to elevate your property business to new financial heights. Watch the full episode here and embark on a journey to financial excellence in the world of property investment.