Did you know that 20% of American households earn passive income through interest or dividends? Among this group of people, they earn a median amount of $4,200 each year.
There are various ways to earn passive income and one of the most profitable is through rental property investments.
How much rental income can you expect to learn and what exactly should you be tracking if you go this route? Keep reading to find out.
How Much Rental Income to Expect
Real estate investors can profit from the cash flow that their properties generate. How much rental income you can expect will depend on various factors, such as:
- Price of the property
- Mortgage payment with interest and principle
- Gross rental income
- Property management fees
- Vacancy rate
- Operating expenses
- Property taxes
If you work with a rental property management company, they will prepare statements for owners that track all expenses.
Cash flow is the amount of money you have left over each month after paying your expenses. Cash flow might not be the same each month because of variations in vacancy rates and repair fees.
The amount of rental income you receive will also depend on how many rental properties you own.
What Do You Need to Track?
Rental property owners need to track two types of records: a record of income and expenses and supporting documents. You'll need these statements for each of the properties that you own.
To get into more detail, these are some examples of records you need to keep:
- Settlement statements
- Inspection documents
- Tenant leases and applications
- Proof of received rental payments
- Property account bank statements
- Copies of expenses
- Copies of tax returns
Rental property owners will have general operating expenses that they need to pay each month.
Some property expenses are tax deductible. However, if you don't accurately track your finances and file your taxes, you'll miss out on much-needed deductions.
How to Track Rental Property Expenses
Manually tracking rental property expenses is a good way to make mistakes throughout the process. There are multiple online software programs available for real estate investors to use and track their expenses with ease.
Although you can do this on your own, the best choice is to hire a rental property management team.
These companies are equipped to handle finances so that property owners can spend more time looking for additional investments. Hiring a rental property management firm provides you access to top talent and tracking software.
Generating passive income is much easier with professionals on your side. Each month, you'll receive statements regarding property income and expenses from your property manager.
You'll get a detailed overview of your finances without having to lift a finger!
Rental Income: Keeping Track of Finances
Understanding rental income and expenses can keep your property on track. If you have more than one rental property, it's especially important to organize your income and expenses to generate passive income.
With this guide, we hope you understand cash flow, know what you need to track, and hire a rental property management team.
We are here to help! Contact us today to learn about how we service rental property owners like you.
