Renting is popular in the U.S., with around 31.7% of households renting vs. owning homes. Real estate investors benefit from this by purchasing rental properties to offer to tenants.
However, landlords must manage their properties and finances well to make money. As a result, landlords should become proficient with budgeting and financial reporting.
If numbers and budgeting don't come easy to you, find and follow some tips and strategies. Continue reading to learn the best practices for Westminster, CO, landlords.
Learn About the Key Financial Statements
First, you'll need to learn the primary financial statements businesses use. There are two primary ones you should create:
Balance Sheet
A balance sheet is a statement that shows a breakdown of your business assets, liabilities, and equity. You list each asset you own and its value on a particular day. Next, you list every debt you owe on that date.
The difference represents your equity, which is the amount of your business you own.
Preparing a balance sheet annually is helpful. However, many business owners create these monthly or quarterly. When you compare them, you'll see if you're gaining or losing equity in your business.
Income Statement
An income statement is the second fundamental financial report you need as a business owner. An income statement reveals expense reporting and financial performance metrics you can analyze.
An income statement shows your revenue and expenses for a period, such as a month, quarter, or year. The difference is your net income. However, you'll have a net loss if your expenses exceed your revenue.
You can use it to review your income and find ways to increase it. One option is offering prorated rent.
You can also use it to find ways to reduce your expenses. Cutting expenses leads to higher net incomes, and finding ways to cut your expenses is helpful for your business's bottom line.
Implement Vital Metrics and Strategies
Creating and analyzing financial reports is vital, but you must also use other strategies to manage your finances. First, learn how to handle financial forecasting.
Forecasting consists of reviewing your budget and expenses to prepare budgets for the future. This process helps you prepare for the future.
Secondly, learn to set goals. Your business needs goals to succeed. These can include long-term and short-term goals.
For example, you might set goals to pay off the financing on some properties by a specific date. Next, you might set goals to purchase other types of properties by a certain time.
Seek Help With Budgeting and Financial Reporting
Budgeting and financial reporting are crucial parts of running a rental property business. Your finances can make or break your business, so manage them well.
If you need help, hire a property management firm.
PMI Mile High is locally owned and operated and serves the Westminster, CO, area. We offer 24/7 services through our portal with a focus on excellence. We can help you with your budgeting and financing and much more.
Get in touch with us today to learn more.
