It is often much easier to gauge rental income, there are a lot of market comparable, supply and demand, performance reports readily available to help get an accurate idea of how much rental income you will receive each year. Estimating expenses, is where it gets harder for landlords simply because there are a number of variables to factor in.
Having an efficient system in place is imperative for recording rental income and expenses. This includes major expenses such as mortage, taxes and insurance and also smaller and unexpected expenses such as monthly water bills, repairs, upkeep of the rental property etc. A landlord should account for the rent received and the expenses paid when they occur, a delay only adds to complicating matters.
Here are 3 things you can do to keep track of your rental property expenses:
Talk to the local utilities company: Do thorough research on what the monthly utility bills on your properties look like. The utility company may be able to help you with estimates that can be very useful to gain an understanding of the kind of expenses you can expect. Even if you decide that your tenants will be handling these expenses, such information can come very handy when the property Is vacant or when you approach new tenants.
Make a rental property operating costs list: Operating expenses include all the costs associated with managing and maintaining a property. This includes fixed costs (electricity, insurance, property taxes, water, heating) and variable costs (vacancy, repairs, capital expenditures). In addition to these costs, there are other soft costs associated with rental properties.
Here are some examples:
Pest control: Routine pest inspection is something most landlords forget to factor in while renting a property. Pests like termites can do serious damage to the property and make living miserable for the tenants as well.
Legal advisor expenses: Any rental agreement requires legal overview both from the tenants and the property owner's side. It is always a good idea to seek for legal advice while renting out your property to avoid any complications in the future.
Marketing costs: Marketing your property is essential to find good renters. There are numerous ways to market your property from digital ads of social media and other websites to flyers and much more.
Emergency costs: Maintaining a property means always being prepared for situations that require immediate attention. For e.g., water leakage, air conditioning goes out etc. Always put some money aside to cover such costs to avoid much bigger obstacles in the future.
Set recurring payments: It is easier for landlords to keep track of rent payments, by setting up automatic payments. This also reduces the chances of late rent payments. Additionally, setting recurring payments is an ideal solution for making mortage payments, and other fixed obligations like the ones listed above; it is one less thing to worry about.
An integrated software like RealCube is the one stop shop to manage and track all rental property incomes and expenses. With its effective cost center management, it enables landlords to structure their costs, allocate them by using percentage or ratios, and calculate profitability.