Did you know that the average yearly salary for landlords is $87,280 (ZipRecruiter)? When done well, the job can be very lucrative -- but have you ever wondered exactly where the money comes from?
Landlord profit optimization is more than just renting properties and making money. Property management requires you to spend money to make money.
Read on to learn more about owner disbursements for landlords. We will discuss where a landlord's money comes from and proper disbursement management.
What Are Owner Disbursements for Landlords?
Owner disbursement is a payment the landlord, property owner, or management company receives from property-generated income. Put another way, this is the money they get to keep from their jobs.
Disbursements are landlords' net income once deducted for other business-related expenses. Said expenses include:
- Property maintenance costs and fees
- Repair costs and fees
- Taxes
- Yes, landlords are required to pay taxes on their rent
- Utilities
- Whether the landlord pays for the utilities depends on:
- Property type
- Local laws
- Types of utilities (shared ones like water and trash)
- Whether the landlord pays for the utilities depends on:
- Mortgages
- Legal fees
- Insurance
Types of Disbursements
The most commonly known kind of disbursement is rental income. It's the money received from tenants and is the primary source of a landlord, rental property owner, or management company's revenue.
The second type is expense disbursements, payments made by the landlord or owner for expenses incurred while managing the property, including repairs and legal fees.
The third most common type of disbursement is the profit -- the monthly balance left after expenses are paid from the income balance. Other types of disbursements include:
- Pet fees
- Application fees
- Security deposits
- Late fees
Discussing Good Disbursement Management Practices
We've talked about disbursements. Now we'll discuss landlord profit optimization, or how to get the most out of your earnings. The first piece of advice is to keep separate accounts.
You need a business account and one for personal expenses, this makes it easier to keep track of business expenses. You should also keep accurate records of transactions related to your investment property.
Separate accounts help, but knowing where your money goes makes tracking funds easier for budgeting and tax reporting. Monthly cash flow statements will help identify if there are any financial issues.
You should also set a budget for maintenance and repairs (for expected items and emergency events). For example, you might want emergency funds for a broken HVAC system or a sudden leak.
Calculate your profits regularly to understand property management finances. Stay aware of tax implications and follow tax laws to avoid legal trouble.
Why Understanding Landlord Disbursements Matters
Understanding owner disbursements for landlords can help you create rental income strategies. Distinguishing personal earnings from business funds allows you to keep track of expenses and profit.
Of course, you don't have to manage your earnings and expenses alone; PMI Lynchburg can help. Our residential property managers make real estate investment easy for you.
We'll handle marketing, tenant screening, maintenance, and accounting and reporting for you. PMI Lynchburg even offers a no-guarantee rental analysis. Contact us today to get started.
