Financial Reporting

/Financial Reporting
Financial Reporting2019-03-15T06:26:59-07:00

Understanding Financial Reporting for a Stronger Property Investment

Here’s all you need to know about Financial Reporting — Oprah signs her own checks.  Business Insider reports “Oprah always signs all of her checks. That might not sound like a big deal if you’re a sole proprietor or run a typical small business of 10 or fewer people. But this was Oprah! She didn’t let anyone else sign her checks; she knew every single nickel and dime that went out the door.”

Bill Gates, Madonna and Warren Buffett share Oprah’s obsession for financial detail.  Why? Because at its core, commercial success depends on knowing the details.  It is the habit of monitoring those details that made these entertainers and entrepreneurs wealthy. Check signing and attention to financial reporting is only the vehicle they used.  They hover over their assets like nervous soccer moms.

Let’s break down the financial reporting for real estate investment that will make you a rock star in the industry!

Buying a property is a big investment, here at Bottom Line Property Management, we understand this. You may be acquiring a property for several reasons, be it a long-term or short-term investment, you need to do your homework first. It’s easy to “fall in love” with a property based on appearances, neighborhood, or perhaps you’ve stumbled upon your childhood home up for sale finally.  You may have fond memories of backyard cookouts from your youth, but is this the best neighborhood for the income stream you are hoping for? Think with your head vs. your heart is the better way to proceed with your investment dollars. Now is the time to do a proper pro forma on any property you are considering buying. A pro forma is, simply stated, an estimate of how you think the property will perform over a given period of time. It’s crucial that this task be done properly as all aspects of future financial reports are built upon this step.  How much risk are you willing to take? This will take the guesswork out of it so you can decide now whether this investment is indeed the one for you. We can assist you with this step and offer our insight to be sure you have a good viable investment property. Put our leadership teams’ 55 years of combined experience to work for you!

Once the purchase is made and you have one or more investment properties, it’s really important to track how well they are performing financially for you. Bottom Line Property Management has a range of reporting options available to choose from. While some investors like to dig into the specifics of their properties independently, others enjoy a little help. We are able to produce reports based on your needs to help you manage your property at a high level, and as detailed or basic as you wish. We know you want to be successful and we want to help!

There are two reports in property management that are quite informative to track how a property is performing: The Rent Roll and the Profit and Loss Report.

The Rent Roll report is essentially a ‘snapshot’ on how the property is performing at a certain moment in time. While the report can be customized to pull together the data most helpful to your individual need, most rent roll reports contain the following: unit address, resident name, amount of rent, amount of security deposit, amount of rent past due, and the lease end date. Yes, this is a lot of data, but it’s important to have all of this to analyze the financial health of your investment. A quick review of the data will tell you how much income you are scheduled to receive in a month, the overall occupancy rate, if current residents owe any back rent and let you keep an eye on lease expiration dates.

A Profit and Loss Report is just that, it’s a report that will show the investor the income and expenses from a property over a designated period of time. This report will allow the owner to see whether this property is making money or not. While it is tempting to judge the profitability (or lack of) over a short period of time (say, 1, 3 or 6 months), the best way to track investment properties is by looking at historical data over a course of a year or several years. Short term profit and loss statements should not be disregarded entirely, but please keep these in context of your long-term financial goals of ownership.

We can help you! Bottom Line Property Management has several different owner reports available to help our clients understand their financials. We also know that not everyone interprets data the same way, so we’ve put together report options to help you understand where you stand. From simple reports that will give basic data points, to a more detailed report-we want you to feel comfortable with the details. As our client, you will receive a monthly owner statement that is posted on your personal Owner Portal at the beginning of each month. You’ll get 24/7 easy access to your online portal where you can get easy access to prior months statements as well as important information like accounts payable invoices and your live portfolio balance.

Yes, financial reporting can seem overwhelming at times! It’s important to make sure you are getting the right information and you know what to do with that information, then you can make informed decisions. Before you purchased your property, you did a Pro Forma. Now that you have the property, it’s crucial you create a budget.

A budget will help you track your income and expenses but will also forecast each year what you can expect to make or lose based on your assumptions. You can adjust these assumptions annually so they remain accurate.

With any investment, there is a time to buy and a time to sell. Consider your exit strategy before you buy. How long are you planning to own this property? Are you going to sell it and buy others? Sell it and retire? Sell it while prices are high? While it’s important to acquire a property at the right time at the right price, it’s just as important to plan your exit appropriately.  

The market cycle in any given market can supply good indicators on when is a good time to buy and when is a good time to sell, but how do you know where your investment lies in this cycle? We can help take the guess work out of this as well. Our team is well versed in market conditions and can advise you.

Our core values are customer focus, dedication, and excellence. Call us today to see how we live these values in our Bottom Line Process and how this process has helped us, to help our clients, to streamline the complicated world of property management.

Whether you have an Oprah-sized budget or are starting with your first investment, we know that your rental property is unique to your vision for the future and specific financial needs. The team at Bottom Line Property Management is here, to help you on this journey and protect your bottom line.

Your investment-our priority!

Budget categories to include:

Rental Income

The key to a good financial investment formula is a strong rental income number. The keys to obtain a strong rental income: Team up with a reputable and experienced property manager. Bottom Line Property Management is the leader among property management companies in the Charlotte and surrounding market. We utilize our experience and expertise to give a qualified perspective to analyze market rents so that we can establish the right rental rate for the market. We strive to maintain our 98% collection rate monthly! Then, track your rental income and use this historical information to update your budget for future rental income collections.


Rental income is obviously important, but so is having a good understanding of expenses and controlling them. Expect to spend 40-50% of your rental income on expenses. Of course, this number will vary depending on the properties you own. Single-family homes vs. multi-family homes, old vs. new, deferred maintenance vs. newly updated—these are factors in what expenses you can plan for. Many investors make the mistake of not properly planning for expenses because most items in a home can be used for long periods of time (such as a furnace).

Initially, if you have an updated property, your expenses can be as low as 15-20%. This is one reason many investors prefer newer or updated properties. But to be prepared for the future, it’s important to have money in reserve for larger expenses.

Net Operating Income

The net operating income on your property is the difference between your rental income and your expenses. It’s important to note that this does not include your mortgage. Obviously, it’s important to factor your mortgage cost into your overall budget, but it is not to be included in monthly expenses.  Over time, your financial reporting will help you determine the net income on your property(ties). Are you getting a good return on your investment? Good! Are you not? Then this is the time to re-visit your initial pro forma assumptions and see if they are in line with the current market situation.

This is where teaming up with a professional property management company is a wise choice! You can reach out to our broker or leadership team at any time and we’ll brainstorm with you on why a property might not be producing the income you had expected.

The success of an investment property is driven by several factors and financial reporting and analyzing these reports are great tools to keep you informed on your investment.

Estimated average lifetimes of items that commonly need replacement:

Roof – every 20-30 years
HVAC – every 15 years
Water Heater – every 10 years
Siding – every 25 years
Driveway – every 30 years
Interior painting – every 6-8 years or more
Flooring – every 8-10 years

Example: A new asphalt shingled roof for a typical 2,000 square feet single-story ranch house can range in price from $8,500-$16,500 installed. All of these items are expensive, so budget 1-2% of the value of your home for long term items like this.

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