Approximately 36% of the population of this country rent their residences. Therefore, more than 1 in 3 people rent, which is good news for your rental property business.
As a result, finding tenants for your rental units isn't usually challenging. However, tracking your finances might be challenging for you.
One way to track your finances is by creating a profit and loss statement for rental property. Making this statement isn't overly complex, but it's extremely helpful for your finances and taxes.
So, how do you make one? Keep reading to learn the basics of creating a profit and loss form for rentals.
Understand the Basics of a Profit and Loss Statement for Rental Property
A rental property profit and loss statement contains two main details: income and expenses. You can create a statement monthly, quarterly, and annually, and companies use these for tax purposes and budgeting.
When creating an annual statement, you include the annual income you received from your rentals. Additionally, you list your annual expenses.
You can simplify this process by hiring a property management firm. They can handle your bookkeeping duties, including creating your financial statements and other duties.
List Your Gross Income
When creating your profit and loss statement, you can begin with your gross income. Gross income refers to the total amount of revenue you collected from your rental properties for the period.
Keeping good records is the easiest way to manage this information. For example, you can record the revenue in a notebook, spreadsheet, or computer program.
If you use computer software, you can print a report at the end of each month to see how much rental revenue you collected.
You should list the total revenue for the year if you're creating a yearly profit and loss statement. This amount will be the first thing you list on your financial statement.
List Every Expense
The next thing to list is your expenses. Again, finding this information is simpler if you have effective bookkeeping methods. If you're using a computer program, you can print reports to see your expenses.
You can include every expense you paid for each rental property you own. Then, when you finish listing every category, you can add up the amounts to reach a total expense amount.
Subtract the Amounts
The final step of an income statement is subtracting the amounts. You can see your profit when you subtract your total expenses from your total income.
If you have a negative amount, it means your business lost money. If you have a positive amount, it means you made money.
Seek Help From a Property Management Firm
As you can see, creating a profit and loss statement for rental property isn't difficult. However, it requires tracking your income and expenses.
If you need assistance with your bookkeeping and financial statements, contact us at Investor's Realty. We offer Denver property management services and can help you with your business's paperwork and other duties.