As a real estate investor, you’re not only managing your property - you’re managing your finances, too.
To be effective and to earn what you’re hoping to earn, you’ll need a plan for tracking income and expenses, and you’ll want to be able to budget for the future needs of your investment.
We’ve been professionally managing Sacramento rental properties for investors over the last many years, and financial management is a big part of what we do. Here are some of the key steps for budgeting and tracking the expenses associated with your rental property financial management.
Develop a Budget
The first step in financial management for rental property investors is to create a budget. You’ll want to do this even before you buy an investment property. Budgeting will help you avoid overspending, and it will give you a clear idea of what you’ll actually be earning on a rental property. Talk to a Sacramento property manager so you can estimate what you’re likely to earn in rent on a particular property. Then, get an idea of what your expenses will be. Budget for the fixed costs: mortgage payments, insurance premiums, property taxes, and professional fees for property management, landscaping, pest control, etc. Don’t forget the variable costs that will also require a budget: maintenance, vacancy, marketing, and turnover. What if you have to evict a resident?
Tracking Your Investment Property Expenses
Tracking expenses will help you budget, and it will also give you an idea of what you’re really earning on your investment property in both the short term and the long term.
By carefully tracking expenses, you can identify areas where you can cut costs, and ensure that you are staying within your budget each month. There are many tools available that can help you track your expenses, including software programs designed specifically for property management. We invest heavily in the most innovative technology, and it helps us not only track expenses, but predict them as well.
Review and Adjust Your Budget Regularly
You want to keep a bit of flexibility in your budget, even while you work hard to stay within it.
It’s important to review and adjust your budget regularly. Your financial situation will change over time, and so will the needs of your investment property. It's important to ensure that your budget is reflective of your current circumstances. Review your budget at least once a year, and make adjustments as needed to ensure that it remains accurate and effective.
Partner with Professionals
If you find managing your finances overwhelming, consider hiring a professional to help you. A good accountant can provide valuable advice on tax planning, budgeting, and structuring your business. A tax professional can help you identify tax liabilities and potential tax breaks. A Sacramento property manager can also be useful when it comes to providing the technology and the management expertise that you need to get a grip on your rental property finances.
Proper financial management is a key factor in successful rental property investing. By developing a budget, tracking expenses, reviewing the shifting needs of your investments, and hiring professionals, you can ensure that your rental property business stays on track financially.
Take the time to develop a solid financial plan, and you'll be well on your way to successful real estate investing. We can help. Contact us at PURE Property Management.
