Financial reporting tells you about the health of your Las Vegas investment property. You should be able to look at your income and expense statements and know exactly what you’re earning and losing. With the right reporting, you’ll know how well your rental property is doing or whether a shift in course is necessary.
As a rental property investor or landlord, you need to keep track of your finances for a lot of different reasons. You’ll be required to report your earnings and losses at tax time, for one thing. You’ll also need a clear idea of where you stand so you can make changes and budget for the future. You need to know what’s working and what isn’t.
With the right management of your rental property finances, you’ll increase what you earn and have a far better investment experience.
You’ll need two important tools to effectively manage the financial reporting of your investments:
- Good technology
- Experts in accounting and bookkeeping
Technology will help you organize, streamline, and automate many of your accounting practices and financial reports. You’ll get more transparency, better accuracy, and a lot of detail when you use the right software and technology platforms.
Expert help is essential, unless you’re an experienced CPA or accountant yourself. We recommend working with a financial professional unless you already have a Las Vegas property management partner. Your property manager should be able to generate all the financial reports and accounting statements you need.
Here’s a look at what you need and why you need it.
Financial Reports You Need (and why you need them)
Not sure where to start? Make sure you have these five basic financial tools ready to review at any time.
- Balance Sheet
Your balance sheet is the first and possibly the most important financial report you’ll need. It reflects the monthly state of your finances as they pertain to your rental properties. You can easily see your assets, liabilities, and the equity of your property or your entire portfolio. Some financial professionals will refer to it as a statement of financial position, but if you’re ever asked for a balance sheet, you’ll want to make sure it reflects your strengths and your weaknesses. It should give a real-time snapshot of where you are financially.
An accurate and complete balance sheet will include debts, actual balances, and security deposits. Assets might include cash, land, buildings, appliances, furniture, or other equipment. Anything that generates cash flow and increases the value of your portfolio will be considered an asset. The liabilities are likely to be anything you owe to others. Your mortgages, loans, and debts are liabilities.
Equity is essentially whatever’s leftover once you subtract the liabilities from the assets. This is why you have a balance sheet.
- Income Statement
Also called a profit and loss statement, your income statement will reflect your Las Vegas rental property’s cash flow. It is usually prepared monthly, quarterly, and annually. We itemize every expense and evaluate them next to the budgeted goals that were set for the property. You’ll see how much you’re earning over an established period.
With your income statement, you can calculate what you spent and see the profits you’ve earned on your investment. The income statement contains useful information on gross income and operating expenses.
When you see significant increases in expenses on your income statement, investigate why you’re spending more than expected on a rental property. This is a good example of why financial reporting is so important: it lets you catch some potential trouble spots in a single property or your entire portfolio.
- General Ledger
Your general ledger keeps track of all individual transactions that are on your balance sheet and income statement. There’s more description and detail, and you’ll put together a record of transactions pertaining to your investment property. Each of those transactions will be designated as a liability, asset, revenue, expense, or equity.
With your general ledger, you get an overview of your rental property’s transactions. It is essentially a long list of every transaction associated with your property.
- Accounts Receivable and Payable
You’ll need a good accounting of your accounts payable and receivable.
Accounts payable is a report showing all of the financial obligations and short-term debts for which your property is responsible. You’ll know who you need to pay, how much you need to pay, and with what frequency you need to make payments. This report helps you stay ahead of your bills, protecting you from delinquency or additional late fees and charges. On your accounts payable report, you’ll see your mortgage, advertising costs, property management fees, and invoices from vendors like landscapers and pest control companies.
An accounts receivable report will reflect the money you receive from your tenants. Basically, this will be rent. There might also be deposits, pet fees, late fees, and money owed to you for things like utilities, if you include utilities in the rent and charge your tenants for them. You’ll see, on this report, whether any rent is late or delinquencies are outstanding.
- Las Vegas Tenant Rent Roll
The rent roll is a financial report you need to plan for things like lease renewals, rental increases, and other future projections. You’ll use the information in your rent roll to make smart decisions about the future of your property. This is a clear look at your property’s financial position. You’ll use the rent roll to calculate your ROI.
Las Vegas Rental Property Bank Statements
A bank statement isn’t necessarily a financial report, but you’ll need to reconcile those statements every month.
Your business funds, meaning those associated with your investments, should be separate from your personal funds. Keep a separate account for your rental property. Some owners will even keep a separate account for each investment that they own. This will prevent confusion and co-mingling. It will also give you separate financial reports and bank statements for each property.
Not only do separate personal and business banking accounts help keep you organized, but it can also offer you a level of protection that you need in the increasingly risky world of rental property investing. You don’t want your tenant’s security deposit to be mistaken for your own personal money. With separate accounts, you’ll also be protected if a lawsuit is brought against you by a tenant or a vendor.
Keeping your funds separate is also going to make it easier for you to claim those tax benefits as a real estate investor.
Rental Property Accounting Technology
If you’re still using a legal pad and a pencil to keep track of your accounts, it’s time to modernize.
Effective financial reporting starts with the right technology. There are a lot of great software programs out there, even for individual landlords who only have one property or a handful. If you keep everything digital, you can access it from anywhere in the world, and that can be extremely helpful when emergencies pop up.
You want a system or even an app on your phone that’s accessible, user-friendly, clear, and transparent. If you find yourself having to go to court, for example, you’ll want to be able to share an accounting breakdown for a tenant you’re evicting for nonpayment of rent. Dragging your paper ledger into the courtroom is not as convenient as printing a spreadsheet.
Investing in good accounting technology will help you avoid mistakes and provide an immediate look at where you are financially. A lot of your data can be automated, which is a time saver.
The right tech will also help you audit yourself while you track income, expenses, and other financial details. You’ll have an objective look at your financial tracking and plenty of checks and balances that will help you avoid costly mistakes and missteps. A good program can help you ensure you’re following all the legal requirements for how money is collected, spent, and returned.
Look for technology that will help you audit your security deposit process and integrate with your entire bookkeeping process. Electronically generated reports and statements will provide credibility to all your financial statements. It also gives you a chance to examine and perhaps improve your internal controls and procedures.
Professional Las Vegas Property Management and Financial Reports
There are a lot of excellent reasons to use a professional property management company, and accounting services are one of them. A smart Las Vegas property management company will provide accounting and keep you in the loop. You should expect monthly financial statements, reports when you need them, and an online portal that allows you to view maintenance invoices, lease documents, and security deposit funds at any time.
Property managers can be your best financial stewards when it comes to the money you’re earning and spending on your investment properties. With professional management, the accounting technology is already in place.
You’re trusting your property manager with one or more of your largest assets. You’re also trusting your management team with all of your financial information. We know that providing accurate and consistent information is critical.
At Strawberry Property Management Las Vegas, we deliver online accounting statements every month, and we’re happy to provide them more or less frequently, depending on what you need. Some real estate investors are only interested in quarterly reports and others like to see what’s happening week by week. We can easily customize how and when you receive your reports, depending on your own unique needs and preferences.
You don’t have to manage all the financial reporting on your own. Please contact our team at Strawberry Property Management Las Vegas, and we’ll be glad to help.