Assume that you are the sole owner of a company that has a turnover of €600,000 per annum, 10 staff, a rent roll of €32,000 per annum, and a profit margin of 22%. You are probably taking home, after tax, from salary and dividends, around €142,000. Not bad.
We would suggest to you to buy a listed building to house your business, reduce your salary, and increase the amount the company pays in rent. That would result in the company’s profit margin increasing from 22% to 26% and your take home compensation increasing to €186,000. That’s an increase in after tax compensation of 32%, plus you create an income generating asset with an 8% rental yield.
A listed building provides the owner with the following key benefits: a grant of up to €90,000 to refurbish it, the ability to sell any excess building density to a third party, and that any income derived from it, i.e. rent, is tax free for income tax purposes, i.e. if the property is owned by a person. There is a bit more to it than this, but the main principles are the above.
For a stylised outline of the above, see this document.
An asset manager should be an entrepreneur and understand enough about business, tax, investment options, tax, the law, etc for him to be able to come up with a plan on how to facilitate the operation of your business and to understand what your personal wants and needs are. He doesn’t necessarily have to be an expert in any of these fields; he just needs to know enough to be able to put together a plan and then coordinate the various experts so that whatever solution they come up with, works.
An asset manager should also work with you to develop an asset inventory, listing everything you own, create a “document bundle” for each asset, establish a reporting mechanism for the income you generate from any tenants, set-up a maintenance schedule, lay out a plan for any capital expenditure, and then manage any actions to remedy any problems or add value. Being tidy and well organised never fails, especially when decisions need to be made quickly.
To be frank, only those from overseas employ the services of an asset manager. That’s why the most diverse and biggest asset management departments were set up by the overseas companies (or those from overseas) who came to Cyprus over the past five years, e.g. APS, Altamira, Gordian, REMU, etc. Locals tend to either do nothing (which is why everyone ends up owning too much real estate or fights with their family members because they own properties in shares) or try and solve their problems themselves because “they know a guy” or they have a “what do they know that I don’t” attitude. That attitude pretty much summarises why half of all loans in Cyprus ended up being non-performing and why everyone who owns property with other family members at some point ends up inviting less and less people to family gatherings.
Have a great day and feel free to reach out for a coffee or a videocall. In the meantime, enjoy this rendition of Bohemian Rhapsody by Norwegian Angelina Jordan.
https://www.youtube.com/watch?v=qF0JV28vgLw (starts at 01:35)
PS: How come the Easter bunny lay chocolate eggs? And what on earth are he and his eggs doing in Cyprus!