Property Company Balance Sheets
An analysis of the whether an investment property generates on-going profits is based on its balance sheet. A balance sheet gives the property's profit or loss for the current year and the accumulated profits and losses from the previous years. The balance sheets also gives:
fixed assets which is the current value of the property including its purchase price, refurbishments, any fixtures and fittings
current assets including money in the bank account, purchase deposits
current liabilities associated with the property such as taxation, deposits held, any short term loans repayable
long-term liabilities such as any loans used to purchase the property
For a company which has more than one property, the balance sheet would by a consolidated report on all the properties in the company's property portfolio.
To illustrate this we will consider company X which according to its profit and loss statement has three properties which are:
property 2 which was sold
The balance sheet of company X is as follows:
Fixed AssetsProperty 1 valued at $251,500
Property 2 which was sold and was valued at $450,000
Property 3 valued at $325,000
The total property stock is valued at $576,500 and this comprises the fixed assets of company X. By combining company X's profit and loss statement and its balance sheet we are able to do property stock analysis. This is based on the property value excluding fixtures and fittings.
Company X had the following properties in its portfolio which were valued using the Income (Investment) Method:
Company X has $1,200 in its bank account and no purchase deposits. The $1,200 is for unexpected sundry administrative expense as all major items of expenditure have already been made during the year. Purchase deposits are money which the company puts down towards the acquisition of a property. However, company X has no impending property purchases for the financial period.
Company X has taxation liabilities of $16,170 including corporation tax and VAT. There is no council tax as this is paid by the property tenants. The company is holding $2,040 in deposits from its property tentants which will be returned once the tenants terminate their lease and have paid their rent in full. Company X owes $3,800 to tradesmen for minor work done to its investment properties.
Company X has $500,000 in mortgages for its investment properties. The corresponding interest of $11,200 this attracts is reflected in the company's profit and loss statement.
Balance Sheet Analysis
Company X has $55,690 in net assets. Its profit and loss account for the financial period is $43,856 of which part was generated from a one off sale of a property. Hence this figure is likely to decrease for the next year. The retained earnings for the company from its previous years was $10,834. As a whole the company is an ongoing concern. However, its level of profit should be subject to a property stock analysis to identity areas of improvements.
Group Property Company Profit and Loss Statements
Group Property Company Balance Sheets
Group Company Property Stock Analysis