Property Investor or Property Business – Which Are You? And Does it Matter?

Answer – depends on your choices of investments really, you could be argued into one or both categories.

Generally, a property investor focuses on passive income and capital growth, and a property business is about active income generation and is treated as a trading operation.

A classic Property Investor, would build a property portfolio for long term wealth, so may have ‘buy 2 let’ properties – purchase a property, 75% interest only mortgage, rents out to individuals / families – receives income from rent and gains capital long term returns on property increasing in value over a number of years.

As you grow your portfolio, purchase further properties, you could argue you have a Property Business… so you could be into both categories, it wouldn’t be wrong to say you’re ‘in business’ – you will pay extra taxes on your investments and recurring rental income ✅

But then a typical Property Business, you could think would be more commercial building investments, a service building with multiple offices being let, a supported housing business and care homes with multiple tenants, the list goes on really with many similarities – 75% interest only mortgage, receiving regular rental income, commercial properties / HMO’s / care home properties also appreciate in value over time – so a long term investment ✅

What type of property business do you have? It doesn’t really matter, as you wouldn’t be wrong to call your Property Portfolio a Property Business, nor if you invested in commercial properties to call yourself a Property Investor – the main consideration is how you invest and how you will finance the investment. And what does the structure look like, a Limited company maybe, but this really depends entirely on how you manage your investments, and why you’re investing? What is your ultimate goal and what is your exit plan?

In our opinion, the way you structure your investments is the most important factor. It can be difficult to undo the wrong structure, very costly from an investment and tax point of view, also planning purchases and sales of properties can have a huge impact on your finances.

Lots to think about, but we truly believe investing in property is still a very lucrative and valid investment strategy.