It’s hard to be successful as a real estate investor if you don’t manage to keep track of the income and expenses associated with your rental properties. Sound accounting practices will show you where you’re earning money and losing money. Understanding how to position yourself and your portfolio based on your financials will also help you earn a higher return.
With the right property management accounting practices, you can make smart investment decisions that will help you earn more and spend less on a single property or an entire portfolio.
At Jacob Grant Property Management, we take our fiduciary responsibility to our investor clients very seriously. We know that good accounting isn’t just a benefit of professional property management; it’s a requirement. You need to be able to trust that we’re delivering financial data that’s accurate, detailed, and transparent.
We work with smart, transparent, and detailed accounting programs and platforms that are designed to support property management and the assets we monitor. Effective financial management requires the right accounting tools and software. When you have these processes in place and you’re utilizing all of the technology that’s available to you, it’s possible to increase what you earn and decrease what you spend.
Do you know for certain what each asset is worth? What about your portfolio as a whole? Knowing your numbers helps you to leverage your value.
Property management accounting isn’t complicated, but it can be time consuming. Here’s how we use it to maximize the return you earn on your investment.
Establish Your Investment Portfolio ROI
The first step in earning more ROI is to understand what’s being tracked. The goal of a good accounting and financial reporting process is to increase your ROI and show you where you’re performing the best. To reach this goal, we need to:
- Show you your overall rental income.
- Estimate the appreciation you’re earning on your investment year over year.
- Consider any capital gains you may earn from a sale.
- Calculate what you’ll save on tax write-offs.
Organizing expenses is just as important as shining a light on income. We help our investors to budget for maintenance, repairs, and vacancy. There may be property damage that requires additional funds. You’ll always have taxes and insurance payments. There may be HOA payments, too.
The accounting practices we have in place will allow investors to prepare for any variable expenses that cannot be planned for precisely. We utilize our data and analytics to estimate, and we’re usually very close to what the expenditure ultimately is. This saves you money; you won’t under-budget and over-spend.
Documentation to Avoid Errors and Miscalculations
To protect your investment and optimize its potential, you need to be organized.
Our property management accounting technology helps with that. For example, you’ll need accurate tax records. As you take advantage of tax deductions and write-offs, you’ll need to demonstrate you’ve spent what you said you spent. We keep good records that are accurate, detailed, and transparent.
Digital files are essential in helping to access your records and receipts from anywhere you happen to be. With the online portals we provide to investors, you can look at an accounting report or run financial records from anywhere in the world, at any time. Your property managers have a platform ready to capture every invoice, receipt, and record.
Rent collection also must be documented. Late fees must be identified. Security deposits must be accounted for. These are just the basics. We’re able to document all income and expenses, and it’s automated and efficient.
This type of documentation and electronic tracking will assist with ROI because it helps you understand your metrics. A good accounting system will provide benchmarks that demonstrate the strengths and weaknesses in a particular property or the portfolio as a whole.
Supporting documents also provide evidence if there’s an audit or questions about tax returns. The IRS may demand proof that the income and expenses being reported are accurate. With a solid and digital system, these records can be accessed and documentation provided at a moment’s notice.
Increase ROI with a Detailed Analysis of Profit and Loss
Establishing your investment goals, talking about what a healthy ROI looks like to use, and putting together a system for tracking all the information you’ll need is a great way to start the investment process and your relationship with a property manager.
Once you’re feeling comfortable with our plans and our methods, it’s important to focus on analyzing the information that’s gathered. This will include all of the data and insights around what you’re earning, spending, and how things are trending in the market in general.
Our accounting system will generate reports, make sense of data points, and use that information to make some decisions about how to be more profitable with your investment properties. Getting to know your profit and loss in intimate detail is going to increase your ROI now and in the future.
Every investor needs to run ongoing accounting reports. These financial statements can serve as an easy guide in understanding how much is being earned and spent. It helps you identify properties that aren’t performing as well as they should and it also helps to create new benchmarks and goals.
Some investors like to see a monthly report to review in detail and others are fine with a quarterly look at where things stand. This is a priority for us; making sense of the data that’s rolling in on a daily basis. The technology we’re using has given us more information that we can possibly understand; we’re using all of it that we can to inspire better outcomes.
Profit and loss statements are pretty standard for all businesses. This is a careful tracking of all profits and losses, and these reports will provide a snapshot of operating earnings, which is the money that’s earned on an investment before rental income and tax. With data that’s gathered from these numbers, investors can get creative and make digital displays and graphs that make it easier to understand where things are going well and where improvements are needed.
It won’t take you long to notice trends in where your money is going. You will quickly see which properties are losing the most on maintenance or turnover, for example. You’ll be able to see where your rental increases are the strongest.
This will help with future budgeting and forecasting. Having such knowledge directly impacts ROI and rental income. It can help investors make smart decisions about which properties to hold, which to sell, and when to engage in creative endeavors such as a 1031 exchange.
Rental Property Accounting Technology and ROI
As we mentioned, we’re able to access more information than ever before. We need help to manage the data points and process the information. We rely on our A.I. technology and our accounting software to show us what we really need to know.
Property management technology has come a long way in the last 10 or 15 years. Investors and owners now have access to intuitive, automated accounting software that has been extremely helpful with banking, bookkeeping, documentation, and reporting.
The best programs and platforms are accessible, user-friendly, and transparent. Anytime there’s an audit, a court action, or even a complaint or dispute from a government agency or a resident or a lender, having the documentation easily available will help us manage the situation for you.
Property Management Accounting
If you’ve been managing a rental property or a building on your own, and the accounting has gotten away from you, it’s time to invest in professional property management. Even if you’re working with a CPA or a bookkeeper; having a property manager take care of the financial reporting and analysis will be much better for your ROI and your peace of mind.
Higher ROI is only one of the many benefits to working with professional property managers.
We can help you with every step of the investment process, including the rental property accounting. When you partner with our team, you don’t have to worry about tracking income and expenses. We’re doing it for you. We can customize the accounting that you need, creating personalized financial reports and statements that focus on the areas most important to you. Maybe it’s turnover. Or upgraded maintenance. Perhaps it’s rental value or appreciation.
Even if you’re a real estate investor who is not yet ready to talk about full-service property management, let’s discuss what’s available in terms of accounting and technology. You’ll be impressed with how you can increase what you earn just by tracking and paying attention to your money.
Let’s talk about where you are and where you want to go, and what kind of tools and technology will help you get there. Our team has been managing assets and investments in the Pocatello and Idaho Falls markets for years. We know this market, we know the competition, and we know how to help investors like you earn more money. Accounting and financial reporting is just one part of it.
Contact us at Jacob Grant Property Management.