Tracking the performance of your investment with a Profit and Loss Statement is a must to ensure that the asset is performing as expected. The use of a Profit and Loss Statement takes the guess work out of the rental property analysis and provides the owner with hard evidence of the performance of the property. Comparing your investments will allow you to maximize your return by consistently replacing the bottom 20% of your portfolio.
The Rental Property Profit and Loss Statement
The easiest way to track the performance of your investment is to use an individual profit and loss statement per property. The profit and loss statement does exactly as it is titled, it tracks your profit and loss on a per property basis. All revenue and expenses are entered into the sheet and the net operating income is automatically displayed. An example is linked here or may be downloaded here.
Contents of the Profit and Loss Statement
Revenue
For a typical single family rental property, revenue will be limited to rent, but you may have other revenue as well (onsite laundry, interest, etc.) and you should account for all of the revenue. The revenue is usually easy to capture.
Expenses
The typical expenses for single family rentals are: the Principal and Interest on the loan, Taxes, Insurance, Property Management, repairs and other miscellaneous expenses.
Use of the Profit and Loss Statement
The most important use for your Profit and Loss Statement is to evaluate your investment; however, the Profit and Loss Statement is a perfect tool come tax time as well. It provides your tax preparer with all of the information that they need to complete your taxes.
After you accumulate additional properties, you can aggregate the individual property profit and loss statements into a larger portfolio profit and loss statement to track all of your assets in one place.
If you found this interesting, please subscribe.
Additional real estate spreadsheet tools may be found here:
Leave a Reply
You must be logged in to post a comment.