Did you know that the real estate market is valued at over $43 trillion?
Investing in real estate can be a life-changing decision. But, being a property owner is a lot more than just collecting rental income. A ton of accounting and logistics goes into maintaining real estate.
If you're a new landlord or real estate investor, then you should know about owner statements and reporting. In this article, we'll go over both to understand why they're so important.
Reporting, or rental accounting, is how property owners and real estate investors keep track of the performance of their properties.
If you're managing your property by yourself, you can also do rental accounting yourself.
However, rental accounting is often done by property management companies. They make life much easier for you by taking care of the accounting dirty work you don't have time for.
These companies issue detailed property reports that tell you everything about the financial status of your property. Let's take a look at what would be in a typical report.
Monthly Statements (Income & Expenses)
Income and expenses statements determine whether a property is generating income or not during a given period. When statements are issued monthly, the period is over the previous 30 days.
The total income of a property is calculated by subtracting monthly rental income from monthly property expenses. Monthly expenses are spelled out in every detail and are usually shown in a line-by-line format.
More or less, owner statements show how well your property is performing.
An owner statement, sometimes called a balance sheet, is a list of financial transactions and activities for a given period. These statements show account balances, money movement, debts, and delinquencies.
Owner statements allow you to see the month-to-month progression (or regression) of the account balance for your property. Let's look at an example.
Suppose you want to see how well your investment property is doing 6 months after your initial investment. Looking at your owner statements, you notice that for two of those months, your debts exceeded your monthly income. You can now adjust your spending goes accordingly because you have a clearer picture of how your property's performance.
Ledger reports validate the transactions listed on owner statements. Ledgers a keep record of all debit and credit transactions made for a property. These records help landlords and investors stay in good financial standing.
Accounts payable are detailed reports of all payments made within a specific period for outstanding debts and financial obligations. These records are important because they get used during audits.
The Bottom-Line on Owner Statements and Reporting
If you're a landlord or real estate investor, rental accounting is not something you can afford to skimp on. Owner statements and reporting tell you exactly how your business is doing and keep you from falling behind on debts.
Are you interested in property management services for your property or properties? Contact us today to get started!