How to Track Your Rental Property Expenses Flawlessly
Even if in most housing markets buying is considered more affordable than renting, there are still over 44 million Americans who prefer renting. Plus, the buying vs renting preference changes from one market to another.
So if you decide to invest in a rental property, as long as you choose the right area and set up the correct rent price, you should be able to turn a profit. However, you also have to keep track of all your property expenses, since these are also a big part of the equation.
Sadly, tracking expenses and keeping everything under control is one of the least interesting parts of being a real estate investor. Still, if you don’t want to hire a real estate manager who can cover this task, it must be done in order to have an accurate view of the property’s financial situation.
Luckily, there are a few tricks and tools you can use to make things easier. Moving forward, we’ll list some of the most common ones used by property investors everywhere.
#1: Accurate Profit And Loss Statements
This report is one of the most important ones you’ll have to fill in as a real estate investor or landlord. The data contained in the report and the net operating income that results from it are extremely useful for a wide range of scenarios, from new investment opportunities to tax filing.
Plus, there are various real estate profit and loss statement software tools that help investors and landlords to keep accurate track of their rental income, expenses, and net operating income over a certain time period.
This report will make your life a lot easier if you have investors who want to know how the property is doing but it will also help you identify weaknesses or financial issues in your current financial scheme.
#2: Keep Your Records in Order
Good organization is one of the key concepts for a rental property owner or landlord. There are a variety of records you have to keep and if you don’t know where they’re stored or how to find them in time of need, things are going to get tough (especially when trying to monitor your financial situation).
First, here is the list of records you should keep:
Leases for current and past tenants - specialists recommend keeping these records going back several years;
Proof of rental payments from each tenant; Receipts for repairs and maintenance on the property, as these can affect both the safety and comfort of your tenants, factors that are crucial things to consider when leasing. If you have mortgages or loans on the property, make sure you also keep track of those records;
Any expense records that have to do with the leases - things like leasing commission or court fees (in case of a tenant’s eviction) need to be kept in paper format;
Bank statements from the rental property’s account - you need a separate account for it, one that has nothing to do with your personal account;
Copies of maintenance expenses, utility bills, and any other services that are directly related to the property, including marketing and advertising costs;
Property tax and any tax statements you have.
All these (and a few others that may differ for each property) must be kept in separate folders, organized in chronological order, in both copies and original. If you have these records online, it’s a good idea to have a backup stored on an external storage device, to make sure nothing happens to them.
#3: Use Various Tools
Besides the tools that let you keep accurate track of your profit and loss statements, there are other tools that can help keep track of all the expenses and records in an electronic format. Plus, once you have all the data in the system, it’s a lot easier to create customized reports and get a wider view of how your investment is going.
Wrap Up
Of course, investing in a rental property is a lot more than just tracking expenses and monitoring profit. In fact, there are quite a few things new investors should know before getting into the real estate market. So, before you make the decision to invest, do your research and make sure you understand what exactly you’re doing.
