In the United States, there are approximately 22 million landlords. This demographic owns over 48 million rental units. Owning a rental property in Florida comes with essential property accounting responsibilities.
One of the most notable is understanding owner disbursements. We've compiled a brief guide with the key landlord advice you should know. Let's dive in.
What Are Owner Disbursements?
Owner disbursements are payments received from a rental property. They aren't classified as business expenses, and the value of a disbursement is based on the profit you earn.
Disbursements are paid to the owner of a property by a third party. The most common scenario is a property management company distributing funds to an owner.
The most common types of owner disbursements are rental income, expense reimbursements, and profits. Others include late fees, pet fees, security deposits, and application fees.
Using Disbursements as Working Capital
It's possible to withdraw profits for personal use. However, it's recommended to leave them in an equity account.
You can use this money to make further investments in your property. Keep in mind that sole proprietors can pay themselves a salary from their net income. For tax purposes, this is treated as bottom-line net profit.
This process is fairly straightforward as long as you keep accurate records. You'll need information about your expenses, repairs, and rental income.
These provide clear insight into your property's financial performance. You can use them to identify areas where you can reduce costs. This can substantially improve profitability.
At first, managing disbursements can seem overwhelming. Keeping your property finances in a separate account can make things easier. Get in the habit of reviewing your monthly statements.
This helps you catch and handle issues before they evolve. Calculate your profits regularly to get an idea of your performance.
Not every month will be a great one, so don't be discouraged if you fall short of your goals. Do your best to allocate funds for maintenance and repairs.
This means you should view your true profit as the money left over after ongoing expenses. For example, let's assume you made $2,000 in rental income last month. On average, you spend approximately $200 monthly on repairs and maintenance.
Set aside at least $200 from your rental income and treat your profit as $1,800. Otherwise, you might not have the money required to make emergency repairs.
This could damage your relationship with your tenants and lead to vacancies. In most cases, even a single month of vacancy costs thousands of dollars.
Get Started Today
Dealing with rental property owner disbursements can be stressful and time-consuming. Working with a professional will streamline this obligation. You can invest the time you save in other areas of your life and explore different pursuits.
Gulf Coast Property Management strives to bridge the gap between landlords and tenants. We offer professional Leasing and Management Services to make owning a rental property as easy as possible.
Our main areas of service are in Bradenton, Lakewood Ranch, Sarasota, and Venice. Reach out to a representative today to see how we can help with your project.