As a Denver landlord, now is a crucial time to get your finances in order and balance your books to ensure that your portfolio stays viable.
After all, experts are predicting yet another drop in the real estate market in 2024, with home values due to decline by more than 5%. Rental yields are also expected to remain flat throughout the year.
This means that it's time to ensure that you know exactly where your money is going, what you're earning from your portfolio, and how you can improve your return on investment.
This is where owner statements can come in handy. These widely used documents are designed to help keep you up to speed and make more informed decisions about your portfolio. Here's what you need to know.
What Are Owner Statements?
An owner statement, also known as a profit and loss statement or an income statement, is a financial document that provides a summary of a business's financial performance over a specific period.
It outlines the revenues, expenses, and resulting net profit or loss during that timeframe.
Owner statements are invaluable for assessing the health of your business, identifying areas for improvement, and making strategic decisions. Our landlord advice? Make use of these documents, and keep them up-to-date.
Income Explained
In your owner statement, the first thing you'll need to log is your income. This is essentially all of the money generated by your property or portfolio. The bulk of this is derived from rental income or the rent that tenants pay to you, the landlord.
It can also include any income your properties might generate from interest or services. Make sure to categorize your revenue streams so that they are clearly distinct from one another.
Expenses Explained
Property expenses, meanwhile, are all of your outgoings that you need to spend on your portfolio. This includes all of your maintenance expenses or repair work.
Factor in all maintenance and repair costs for the period your statement covers. Usually, this means all work that has been invoiced and paid for during the period.
Property expenses also include routine outgoings such as property taxes. Other costs such as furniture, labor, accounting services, or any utilities or amenities you are responsible for will all be grouped as operating expenses.
Net Profit Explained
In a nutshell, net profit is what you have left over once you subtract your expenses from your combined forms of income. Net profit can be calculated in an owner statement on both a per-property basis and on a total portfolio basis.
If you are generating more income than you are spending on your costs, then you have a net surplus. However, if you are spending more than you are earning, you are making a loss, and something needs to change.
We Help You Get More From Your Denver Portfolio
So, what do your owner statements show you? Are you making a healthy profit? A small profit? Or are you losing money? Whatever your situation, a full-service property management company can help.
At PMI Elevation, we help you fine-tune your portfolio to ensure that you are getting more out of it, to help you generate long-term returns. You can even conduct a Free Rental Analysis at our site to find out exactly what you could be earning from your Denver properties.
