Every business needs balanced books. They need to know how much money is coming in and going out. It’s the only way to know if your business is successful.
Property management is no different. As a top-notch property manager, you want to keep track of everything you can to make sure the properties are making money.
Unfortunately, not everyone knows what they need to keep track of when it comes to their rental properties’ financials. Keep reading for everything you need to know to stay on top of your properties’ financials.
Always Pay Attention to the Trend
When running a business, we always need to keep track of our numbers. That means keeping up with your income and expenses and knowing which is going up or down at any time.
This gives you a chance to stay on top of the trend. You should know whether you’re gaining or losing income at any point. With good records, if your business isn’t profitable, you’ll know where to make changes.
Here Are the Stats You Need to Know
The most important financial figure for you to keep track of is the net income of your property. Net income is calculated by subtracting expenses from gross income.
Your gross income is the total income for each property. Your expenses are everything you spend money on for that property. When you subtract expenses from gross income, your net income will reveal how profitable each property is for you.
Which Expenses You Want to Track
As a property manager, there are three main expenses you need to track. These are:
- Maintenance fees – the fees associated with the maintenance of the property. These include upkeep, recurring payments and additions.
- Vendor payments – what you pay to outside vendors who work on the property. This can be for routine maintenance or additional construction.
- Salaries – what you pay members of your own organization who assist with the property. This includes other brokers, office managers and secretaries.
These are important items to keep track of because they’re what you’ll subtract from your gross income to find your net income. And your net income is how you’ll keep track of how profitable your business is.
Why You Need Two Ledgers
Every property owner or manager needs to keep two ledgers for their transactions: an owner ledger and a tenant ledger. The tenant ledger is for tracking fees accrued by and paid to the tenant. Whereas, the owner ledger is for tracking fees accrued by and paid to the owner.
It’s imperative these two ledgers remain separate. It keeps you aware of how much is owed to you by the tenant and how much you owe or are owed by the owner. This way your finances stay straight. You stay on top of what is owed to you, and you know what you owe.
Always Keep Tabs on Your Property Financials
Of course, we all need to stay on top of our finances, especially when we’re running a business. And property management is a business. We always want to know how much money is coming in and going out. This way we know whether our business is profitable.
Following these simple guidelines keeps you on top of your financials. And that brings you one step closer to running a profitable business.