What You Can Learn from Property Management Statements and Reports
How to Review Property Management Statements From Your PM
You are an investment property owner. You own rental homes, townhouses, or apartments that are run by a property management service. Property managers handle the daily and monthly routine of keeping your tenants happy and your properties in good condition. This generally involves both collecting rent and covering expenses.
The business partnership relies on transparency, achieved through the monthly reports you receive from your property manager (PM). But how do you read the property management statements? Learning to read these statements with clarity can help you keep tabs on your business and understand when everything is going well or when there are signs of trouble.
Anatomy of a Property Management Report
A PM report usually comes in the form of a financial statement. This statement gives you a summary of income, expenses, and final balance for each month. The best place to start is by understanding what each typical segment of the report means in relation to your rental home business.
The anatomy of a PM report includes:
- Revenue
- Expenses
- Net income
- Owner Distribution
There may be other details depending on your property manager and their reporting system. Here’s what each of these sections means:
Revenue: Total Earnings
Revenue is your total income or earnings for the month. It includes the income from the rent roll (everyone’s rent payments) along with any other sources of income like fees or deposits. Like any business, however, revenue is only the starting point.
Expenses: Itemized Costs
After revenue, expenses are listed. Expenses are often itemized with one or two words of detail explaining why the cost was accrued. Expenses represent your routine and one-time operational costs spent each month.
Expenses can include:
- Maintenance and repairs
- Utility bills
- Landscaping services
- Tenant turnover (marketing/screening)
- Property management service
Net Income: Revenue – Expenses
Net income is your realistic profits, calculated by subtracting expenses from revenue. Net income is how much cash your property managers have at the end of the month after collecting rents and taking care of costs.
Owner Distribution: Take-Home Income
Lastly, “Owner Distribution” represents how much you are paid as the property owner at the end of each month.
Business As Usual
The best way to determine if everything is going smoothly is when your monthly statements are all about the same. If your rent income remains stable and your expenses stay within an expected range in terms of cost and frequency, then your properties are operating in a steady fashion. Occasional unexpected repairs are also par for the course when operating rental homes.
Indications of Potential Problems
When it comes to reading your property management reports, consistency is key. When something changes, look closely to determine if it is a one-time anomaly or indicates a new problem. Signs of potential problems in your PM statements include:
- Inconsistent income or expense trends
- Unusually high additional income from fees
- More repair orders than usual, especially if they focus on a single property.
- Unexpectedly high maintenance costs
These and other inconsistencies should be paired with communication. Often, there will be a reason that will fit into a larger pattern, like replacing old appliances, tenant turnover, or repairs after a local storm.
Asking the Right Questions
When reading your property management statements, you will get the clearest view by asking the right questions. Don’t hesitate to get in touch and talk about how the reports are laid out, what is included in each summary, or an itemized list of specific income sources and expenses. A good property manager is always ready to explain their process and help you understand what is going on with your properties in terms of both cash flow and context.
An initial discussion about your PM statements can help you keep a clear view of your properties through future statements and over time. Should anything unexpected appear in your PM statements, you can always inquire, verify, and make sure that your properties are still being managed in a practical and profitable way.
Mastering Your Investment Finances with Leaf Management
The best way to achieve full understanding and confidence in your property management reports is to work with a skilled PM team. Leaf Management always provides detailed monthly statements and full transparency regarding how your properties are managed and the effects on your cash flow. Contact us to learn more about how we provide clear and helpful statements.