20% of all small businesses fail within one year. 30% close by their second year, 50% by their fifth, and 70% by their tenth.
Successful rental property owners need to treat their portfolio like a business. They need to always be aware of everything that's happening at each property, especially how much money it's bringing in.
Read on to learn everything you need to know about owner disbursements.
What Are Owner Disbursements?
An owner disbursement is a payment received from a rental property. Types include:
- Rental income
- Expense reimbursements
- Profits
- Late fees
- Pet fees
- Security deposits
- Application fees
They aren't classified as a business expense, and their value depends on the profit earned. They're received at regular intervals, either monthly or annually.
Working Capital
Owner disbursements and capital gains can be used as working capital. It prevents you from taking on debt or diluting ownership from selling equity.
It's best not to do this too often. Keep the disbursements in a separate equity account that you don't reach into for personal expenses.
REITs
You can also use owner disbursements for a REIT or real estate investment trust. There are already over 200 on the market.
These companies distribute at least 90% of a property's taxable income to shareholders. This allows you to get money without managing or even owning them.
REIT income may be subject to additional fees or taxes. Get landlord advice from a manager, accountant, or other professional before you try it.
How to Calculate and Manage Owner Disbursements
Each owner disbursement should be part of an owner statement. It's an organized record of essential metrics such as:
- Income
- Expenses
- Operating costs
- Account ledger reports
- Opening and closing balances
They provide a picture of how the property is performing. They may also be part of a larger property management report. Keeping these records accurate will make it easier to calculate your owner disbursements.
It also helps when it's time to calculate what you owe the IRS. Landlords have to pay property taxes and must report any rental income on their tax returns.
View your statements regularly. It gives you a sense of how profitable your properties are and ways you can make them better. This includes creating a fund for maintenance and repairs within your rental finance account.
Using Property Management
A property management company will grow your wealth as an investor. One way they do this is by handling your owner disbursements. They'll ensure they're accurate and compliant with all local laws. You'll save time, have a better relationship with your tenants, and increase your profits.
Adding on rental management software makes the process even easier. Look for one that's automated, secure, customizable, streamlined, and easy to integrate with your other technology.
Who Can I Trust to Manage Owner Disbursements?
Owner disbursements are third-party payments for a rental property. They can also be used for capital gains or a REIT. The important part is that you manage them to keep your property profitable.
Renters Warehouse helps you succeed in the competitive Hampton Roads real estate market. We're a long-term property management partner that will connect the dots so you don't have to. Contact us to find out how much you can get for your rental today.
