Craig Hopkins - CA(SA), ACA

Director

I am a South African qualified Chartered Accountant. I did my articles with BDO in Cape Town and was amongst a select few who did academic articles. This means I was seconded to the University of Cape Town to teach accounts and finance to both undergraduate and postgraduate students during the first year of my three years of articles.

 

In Cape Town I ran a short term bridging finance entity for around 10 years that used residential property as security for the loans provided. I also ran and consulted to bodycorporates – these are non-profit legal entities set up to manage residential complexes and blocks of flats.

 

Since coming to the UK in late 2006 I have worked for 2 of the Big 4 Audit & Accounting firms: Ernst & Young LLP in their real estate division (London) & Deloitte LLP in their real estate division. While at Ernst & Young I had "The Shard" in London as one of my more well-known and interesting clients as well as an AIM listed property investment vehicle.

 

I have also worked for Drivers Jonas (one of the oldest firm of chartered property surveyors in the UK) and Knight Frank – in both cases as an accountant in the commercial property management division of the business. In these roles I have led a team that included treasury, credit control, purchase ledger and property client accountants.

 

I loved the UK and never made it back to South Africa. I was also fascinated with the UK property market as it was so different to South Africa and offered so many opportunities. I regularly attended networking events, read property books and attended various free and expensive investment property training courses to further develop my skills, knowledge and contacts.

 

MY INVESTMENT PROPERTY HISTORY

I built up a small portfolio of Buy To Let’s in South Africa after reading Dolf de Roos’s book “Real estate riches” & Robert Kiyosaki’s “Rich dad, poor dad”.

 

In the UK I started investing in 2008 – at what would turn out to be the peak of the market – in professional HMO’s. My career as a property investor ground to a halt just at it was starting! By 2009 property values had dropped dramatically, loan to values had dropped significantly, the number of mortgage products reduced radically and mortgage requirements increased to the point I was unable to get a mortgage (my South African passport didn’t help!)

 

On paper I was in massive negative equity but as I had bought the right type of properties in the right area for the right tenants, I was able to benefit from some strong cash flow during this time which really saved me.

 

I then, by default, spent a long time learning about the importance of personal finances and this is something we share with our clients as part of our working relationship and our desire to add value.

 

When I finally got my British passport, the best use of my time was finding properties for myself. I undertook some refresher property training and studied the various guru’s very carefully. I undertook some 1-2-1 coaching and personal mentorships which further improved my knowledge and skills. I (largely) did what I was told to and over time replicated their success by building up a significant BTL portfolio of my own.

 

As an accountant I did all my own record keeping and accounts. An Excel & paper based system might be fine initially (it is cheap and can be simple if set up properly) but eventually the time comes when a proper accounts system is needed. I wish Xero and Receipt Bank was available when I started - it would have made a meaningful difference to the time I spent on processing my accounts. An Excel based system is no match for a proper, professional accounting software system such as Xero.

 

HOW PROPERTY ACCOUNTS WAS STARTED

Fast forward a few years and I did what most people do as their portfolio grows – I started asking for referrals for bookkeepers from fellow investors. I was looking to outsource my accounts to someone who could keep them in tip-top shape. The first (and most important question) I always asked was “What is your hourly cost?” as I assumed that a bookkeeper of any repute would be able to accurately record property transactions.

 

Turns out – I assumed incorrectly!

 

I found a lovely local bookkeeper. Unfortunately, the accounts were not up to the standard I wanted them to be – this was absolutely crucial! 

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I didn’t have real time access to information. I was left on hold when she was on holiday. I couldn’t easily get a property by property analysis which is key as your portfolio grows. Royal mail delayed a batch of bank statements & invoices by 4 weeks at year end – because I underpaid postage by 19p! If these had been lost it would have taken a lot of time to try recreate it – not ideal!

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There were some errors with completion statements, auction deposits, non-cash costs (like finance costs added to the loan) and numerous other little things. I also had "inventory", "cost of sales" and "depreciation on land and buildings" in my accounts (amongst other things) despite requesting that they not be there!

 

Bank reconciliations where a manual exercise leading to potential errors, extra time taken and extra work to check. Extra work also comes at a cost - and even at a low hourly rate this adds up.

 

In summary – there was massive room for improvement.

 

So it turns out, accounting for property transactions is a bit specialist even for some well recommended and loved bookkeepers. I then interviewed several established property investor friends and physically looked through many of their accounts to see what they were doing. It surprised me what I saw – and it wasn’t pretty! While they were good at finding deals, most lacked the skill at the back end on the accounts side.

 

Ultimately I decided to bring my accounts function back in-house as I couldn’t find an investor that had their accounts set up correctly by their bookkeeper or at a cost that was reasonable. This had two interesting implications:

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1. After looking at lots of different software, I settled on Xero as it provided the best solution for what I was looking for (even if it wasn’t the cheapest solution!). Receipt Bank offers an amazing plug in to Xero and makes accounting so much quicker and easier as it used Optical Character Recognition. Again it was not cheap and it was an additional added on cost - but it was the best solution on the market and the best it what I wanted.

2. Some investor friends either had a solution (at an enormous cost each month) while most were a bit lost generally. They needed help and they knew it! From these initial enquiries I got my first clients – even though I wasn’t looking for any. I love accounts and property and with another kid on the way, I didn't want to travel to the other side of the country buying more properties. I would rather be at home. This seemed like a good idea to have fun, add value and make some new friends.

 

Given my skills as an accountant and my love of property the decision was made to set up Property Accounts offering a fantastic, specialised service initially to investor friends. It has grown from there and is continuing to grow.