What Are A Landlords Objectives For Financial Reporting?

Having a high-quality reporting system is vital if you want to optimize your property management processes, identify weaknesses, accurately file your tax return, and otherwise analyze and project your rental business’s income.

The purpose of these reports is to examine your expenditures and cash flow and get a clear oversight of your business’s financial health and overall performance. Having this knowledge is essential for several reasons. Ultimately though, having this information allows you and your partners to make informed decisions on how to manage and improve your rental property business.

The main goals of financial reporting for rental properties

1. Tax Preparation

At the end of the year, you need to file an accurate tax return. Not doing so could result in you either missing out on deductible expenses and overpaying your taxes – or you make unverifiable claims which could leave you open to an IRS audit.

Every year thousands of people misfile their taxes, costing them thousands. With a good accounting and financial reporting system though this doesn’t have to be a period of stress-headaches and heartache. Instead, simply generate your end-of-year financial reports from an accounting system like Landlord Studio and send a copy to your CPA – job done.

2. Track cash flow

Cash flow is one of the most important metrics for landlords to track. It tells you where your money is coming from, where it is going, whether you are making a profit or a loss, and whether your rental business is sustainable.

3. Provide information to partners and investors

To get financing from partners, investors or even banks you need to be able to prove everything for your business adds up. Investors, whether these are large corporations or small individual investors want to know that their investment will be returned to them with interest.

Having detailed financial reports displaying your cash flow, efficient use of capital, high occupancy rates, and a good ROI is the only way to prove to potential investors that your rental business is performing well and they can have confidence in their investment.

4. Monitor assets and owner’s equity

By monitoring these metrics you can form a more accurate prediction of the portfolio’s financial future. This will allow you to adjust your strategy and potentially improve this future. This will also show the availability of resources for potential future growth in new investment properties.

5. Refinancing

In order to continue scaling your portfolio, you need to first prove that you can handle the one, two, three units that you already manage. After proving this and paying off some of your original loans you can re-approach your original investors or mortgage providers to refinance based on the proved potential of your portfolio. Additionally, you may be able to use these reports to negotiate more favorable interest rates by proving the risk is low for the investing entity.

Financial reporting is an essential part of running a scalable and profitable rental property portfolio. Having no reports or inadequate ones will not only hinder the day-to-day management of an operation – but prevent future investors from seeing the business as an investable opportunity.

You need to know your numbers like the back of your hand and you need to be making use of software to help keep you organized.

Landlord Studio’s central reports and what they’re used for

We have over 15 reports in Landlord Studio and are constantly improving these and adding new ones to the system. Every report is fully customizable and can be filtered by property and unit, income category, expense category, and date range.

The reports can then be shared directly from the app via email or downloaded as a .csv file or a pdf file.

Additionally, we recently launched our accountant view feature. This is a new update on Landlord Studio that allows you to invite your accountant to your organization so that they can have view-only access to your financial reporting.

A few of our reports include:

Income Expense Statement

Our income and expense statement is a central report which is designed to show your profit and loss and give you a clear oversight of your cash flow on a unit by unit and property by property basis.

This report can be used for tax time, monthly cash flow reports, and for investor information and refinancing.

Schedule E Report

The Schedule E report was created specifically at the request of our users. Our system has preset expense categories, these default categories mimic the schedule e categories. The report condenses the information in the income and expense statement to reflect the layout of the Schedule E form 1040. Meaning, you can simply print it out and copy the details directly across – making filing your taxes accurately easier than ever before.

Mileage Report

If you self-manage your properties you may need to make business trips to them for example for your bi-annual property inspection, you can claim mileage back at the standard mileage rate. However, to claim mileage as a deductible you need to have precise and well-maintained records.

Net Worth Report

Track the value and appreciation of your properties to determine your current net worth and wealth.

Rent Roll Report

The rent roll report presents a history of your rental leases and gives a clear overview of your vacancy periods over a set period of time. This is a good report to use to prove occupancy rates and reliability of your current investments when looking at refinancing options.