If you work with a property management company, you probably receive owner statements from them regularly. Don't write these off as yet more paperwork to consume your valuable time.
These documents contain important information that can help you improve your rental business. They're even more important now that the IRS has lowered its threshold for reporting rental income.
Keep reading to discover what you can learn from owner statements and reporting.
Understanding Owner Statements and Reporting
Financial reporting for landlords is an important function performed by property managers to help landlords stay informed about their rental properties. Owner statements form part of these reports and can help you understand your rental properties' performance at a glance.
Also known as profit-and-loss statements or income expense statements, owner statements summarize the expenses and income related to rental properties for a specific time frame. It's best if these documents have a separate section for each investment property.
Owner Statement Features
While the layout and contents of your owner's statement may differ depending on the property management company you're working with, they usually include three key sections. These are:
Rental Income Reports
This section of the report lists all the income received for your property during the month. It includes rental income and other amounts, like parking fees, late charges, and laundry fees.
Analyzing this part of the document can reveal habitual late payers and help you calculate past-due payments at a glance.
Property Expenses
All properties incur costs every month. You must go through these items individually with your property manager to identify areas for cutting down on expenses.
Common operating expenses include:
- Property management fees
- Routine maintenance
- Repairs
- Insurance
- Utilities
- Property taxes
Many of these are tax-deductible items, so these reports can come in handy when submitting your income tax return.
Net Operating Income
Net operating income (NOI) provides an overview of your rental properties' profitability. It's a simple calculation that involves deducting operating expenses from property income.
A negative amount in this section shows you're running at a loss. In this case, you should sit down with your property manager to find solutions.
It may be time to consider raising your rent, cutting down on some expenses, or selling an unprofitable rental unit.
The NOI is also key for calculating your debt service coverage ratio (total debt service/NOI) and cap rate (NOI/property value). These figures are helpful if you need to apply for an additional mortgage.
Getting the Most Out of Your Owner Statements
You can use the property performance metrics contained in owner statements to improve your rental business in several ways. They can help you strategize regarding rent increases, portfolio growth, and cost savings.
An experienced property manager can provide invaluable insights into understanding and analyzing your owner reports.
Pristine Property Management LLC is committed to providing our landlords with accurate owner statements and reporting at the agreed intervals. We are experienced landlords who have the skills and expertise necessary to help you make the most of this data and grow your business.
Take steps to maximize your Miami rental business today.
Eddie Miller, Partner of PPM, is the Past-President of the SE Florida Chapter of the National Association of Residential Property Managers. NARPM® promotes the high standards of business ethics, professionalism and fair housing practices. The Association has a structured educational program and certifies its members in the quality standards of the residential property management industry.
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