How to Manage rental property finances
The main goal of most rental property owners is to have a stable income and profit. As a real estate investor, there are loads of things that need to be kept in mind to achieve a profitable and successful rental business.
Even though rental business is considered as a passive income business, rental business owners still need to ensure that money is rolling in.
It might not have as much interest as payday loans, but it has produced a lot of successful and wealthiest people around the globe. It’s not really much of a surprise that countless people want to enter this industry.
Whether an owner is managing his own rental property, or he has a property manager, managing the finances of his rental business should be his top priority. Rental business owners must find a strategy to keep their business running smoothly.
They have a lot of financial transactions to keep up with, like payments coming in (rental payments), and finances coming out (repairs and maintenance), most especially if they own several properties.
According to Erin Yurday, Co-Founder and CEO of NimbleFins, the average monthly rent in the United Kingdom is approximately £868 for private renters and £442 for social renters (local authority or housing association).
With that said, it is no surprise that the largest cut of the population’s income, if they are renting a living space, definitely goes to their landlord.
The cost of housing depends on the location, the renter’s age, and the type of household that they have (e.g., single, couple, or family). Obviously, couples with children pay the most compared to singles and couples.
Rental property accounting is not the main attraction in this business. But handling the finances well may result in higher rental income, lower unwanted expenses, tax savings, and a faster return of investment. Here are some money-saving tips for landlords:
Online record-keeping
There are some tax benefits to owning a rental property and some of those require qualifications. Keeping stellar records is one of the most important things to remember.
With the help of technology, specifically artificial intelligence, there are countless ways to digitize every important record and access it easily.
Keeping a physical receipt and record of transactions can be stressful especially when there are so many transactions to keep track of. Rental property owners can use one of the many software applications that can help with this matter and establish a system of record-keeping techniques of their own.
Owners can also try doing online rent collection. Through this, they can automate the management of their property’s finances. Good property management accounting can let them know how much profit each of their property is making per month or quarter.
Screen possible tenants
Troublesome tenants can cost a rental property owner to incur a loss if they don’t pay rent on time or damage in-house equipment and facilities. Having said that, rental property landlords need to screen their potential tenants and do some background checks.
As a technique, landlords can have their personal list of qualifications about their potential tenants.
Landlords should review a tenant’s application thoroughly. Check their creditworthiness, their past rental history, criminal background, and most importantly, income verification. Doing such things can prevent future innumerable headaches.
Evaluate rental rates regularly
To avoid under and overcharging tenants, it is important to check the current market rates in the area, especially for similar properties. By doing that, landlords can decide whether they need to adjust rental rates to safekeep tenant retention and profit potential.
Overcharging, on the other hand, can drive tenants away that can result in much more money at the end and a slower return of investment.
Keeping personal and business accounts separately
Rental property owners often mix their personal and business accounts together because it is more convenient. Paying rental property expenses out of their own pocket seems a lot easier but it can cause trouble in the long run.
Aside from it being such a huge waste of time, mixing personal and business accounts can end up losing out on business-related deductions and paying more taxes.
Landlords should be aware of this because renting can sometimes last for a short period of time.
Regular maintenance
Repairs and maintenance are necessary parts of owning a rental property. Performing maintenance jobs regularly doesn’t only make tenants happy but it also protects the property. A win-win situation for both the tenant and the landlord.
Regular preventive maintenance procedures can reduce the chance of experiencing more costly damages in the future. This can be achieved if landlords know their financial capacity well because choosing the types of materials to be used is also a part of proper budgeting.
Landlord insurance
Last but not least is getting landlord insurance. This type of insurance is more expensive than regular homeowner insurance. However, as a landlord, it is important to have security in the knowledge that the property and its interests are insured.
Finding the right and qualified insurance professional is the first step of getting all kinds of insurance. As business owners, they must find an insurance professional from whom they can learn how to budget and can also help them find insurance that best suits the budget that they have for their property.
Author: Katreena is a scientist and a life hack specialist. She’s authored scientific journals on biotechnology and molecular biology. To take a break from scientific journals, she puts her mind into writing about lifestyle, health, and sustainability. She strongly believes that kindness makes the world go round.
Read our other top Blogs:
Is our housing market about to crash?
Landlord Electrical Safety inspection report (EICR) 2021 Guide
How to deal with a tenant deposit dispute | Fair deposit deductions 2021
