As a property manager, it is essential to understand the different types of rental income and expenses that you may encounter in your day-to-day operations. These can have a significant impact on your bottom line and can influence your overall profitability.
In this blog post, we will take a closer look at the various types of rental income and expenses that property managers should be aware of.
Types of Rental Income:
Here are a few ways you can expect to make money as a property manager.
Gross Rental Income:
Gross rental income is the total amount of money that you collect from your tenants before any expenses are deducted. This includes rent, security deposits, and any other fees that you may charge, such as pet fees or parking fees.
Let’s break down some of the most common gross rental income sources:
Rent is the most obvious source of rental income for property managers. It is the monthly or annual amount paid by tenants to occupy a property. As a property manager, you are responsible for collecting rent payments from tenants, ensuring they are paid on time, and addressing any delinquencies.
Late fees are charges applied to tenants who fail to pay their rent on time. Property managers can charge late fees to encourage tenants to pay on time and discourage late payments.
Security deposits are upfront payments from tenants that serve as a guarantee against damages and unpaid rent. Property managers must hold the deposit in a separate account and return it to the tenant at the end of their lease term, minus any deductions for damages or unpaid rent.
Some landlords charge pet fees for tenants who have pets. These fees are usually non-refundable and help cover any damages caused by the pet during the tenant’s occupancy.
Net Rental Income
Net rental income is the amount of money that you collect after all expenses are deducted from your gross rental income. This includes things like maintenance and repairs, property taxes, insurance, and any other expenses that you may incur as a property manager.
Other Rental Income
Other rental income can include things such as laundry revenue, storage rental, and vending machine revenue. This is additional income that you may generate from your property, and it can help boost your overall profitability.
Types of Rental Expenses
While the goal is for money to steadily flow in, we also know that money must flow out for various expenses.
Property Management Fees
Property management fees are the fees that you charge your clients for managing their properties. This can include things like tenant screening, rent collection, maintenance, and repairs. It is important to set these fees at a level that is competitive with other property managers in your area.
Maintenance and Repairs
Maintenance and repair expenses are costs that you incur to keep your properties in good condition. Regular maintenance and repairs are necessary to ensure the property remains habitable and functional. This can include things like fixing leaky faucets, repairing roofs, repainting walls, and general landscaping, cleaning, HVAC maintenance, plumbing repairs, and more. It is important to budget for these expenses, as they can add up quickly.
Property taxes are an expense that you must pay to the government for owning property. The amount of property taxes that you pay can vary depending on the location of your properties and the value of the properties.
Insurance is an expense that you must pay to protect your properties from damage or loss caused by natural disasters, fires, and other unexpected events. This can include things like property insurance, liability insurance, and flood insurance.
Summing it all up
Managing a rental property requires careful attention to detail and a thorough understanding of the different types of rental income and expenses. By understanding these types, property managers can maximize their profits while minimizing expenses. It is essential to keep detailed records of all rental income and expenses to ensure accurate accounting and tax reporting.
If you need additional assistance keeping track of your income and expenses and staying on top of your bookkeeping needs, feel free to reach out for a free consultation call.