Do you or someone you know watch the stock market reports? Do you understand the feeling of constantly checking to see if an investment went up or down in value?
Any investment needs this type of careful attention if it's going to stay profitable. That includes real estate.
There is a simple way to track your property's profitability. Read on to learn what owner statements are and why they're so important.
What Are Owner Statements?
Owner statements are also known as owner reports, profit-and-loss, or income expense statements.
They summarize your income and expenses over a specified time. The most common timeframe is every month.
What Are Their Components?
If you own more than one property, your owner statements need separate sections for each one.
There are also different sections for different types of earnings and expenses. Understanding them helps you gauge the financial health of your investments.
Rental Income
The rental income section shows the total income generated from the property. This includes:
- Rental application fees
- Rent payments
- Late fees
- Income from amenities such as laundry or parking
Reviewing this section can help you identify tenants who've been paying late and calculate how much they owe you.
Expenses
The expenses section covers everything you've spent to keep your property up and running. The total maintenance cost is often the largest portion. It includes things like repairs and cleaning.
It's not the only cost you need to track. Additional property expenses may include:
- Property management fees
- Insurance premiums
- Property taxes
- Utilities
Net Income
The net income section of your owner statement is the one that lets you know if your property is profitable. It's calculated by subtracting your expenses from your total rental income.
A positive net income indicates profitability. A negative one indicates a loss on your investment.
Why Are They Important?
Owner statements let you evaluate your property's performance in real-time. That helps you make changes to increase profitability and reduce expenses as soon as possible.
A recent survey found that 37% of small businesses are anxious about filing taxes. 25% don't know how to file. A third don't know what they have to pay.
Owner statements make tax reporting easier for landlords. They keep you from misrepresenting your income and getting audited or facing penalties. They also make sure you get all the deductions you're eligible for.
Owner statements can even help you decide if you should encourage tenants to renew leases. If the data shows they haven't been paying rent, it may be time to let them go.
Who Can Help Me Manage Them?
Owner statements are a critical piece of financial reporting for landlords. They give you a broad view of your finances to see how you can reduce your expenses, increase your net income, and give accurate tax reporting.
Metro Residential LLC has been providing real estate management services since 1996. Our knowledge and experience allow us to provide positive financial results. Our willingness to treat each client individually and focus on their unique goals is what's kept us going for so long. Contact us today to see what we can do for you.
