Showing posts with label Residential. Show all posts
Showing posts with label Residential. Show all posts

Residential Property Management - How to Set Up a Chart of Accounts

We have several balance sheet accounts. We have assets, cash, receivables - rent that's not been paid but is due - supplies, pre-paid rent, the value of your building less accumulated depreciation, and then you have equipment. There are some other accounts that in theory you could put in here, but it's really not required.

Liability Accounts

Property

Then we have what are called liability accounts. These are your accounts payable. These include salaries payable, taxes payable - real estate or even income taxes. If you have a mortgage on your property, mortgage payments, you would set it up as a liability.

Equity

The third compartment of all balance sheets is your equity. Your owner's equity and the amount maybe you've taken out of your business.

These are a basic, fundamental set of chart of accounts that you can take and can incorporate into your balance sheet. Things like Quicken and most of these software packages will have these chart of accounts pre-populated. You don't even have to worry about it.

A lot of times they have too much. You can start to delete some of them out, because it gets kind of confusing. In particular if you only have a few properties you want to keep it relatively simple.

Statement Accounts

The next are the income statement accounts. We talk about revenue accounts. These are obviously rent. There are late fees, application fees, and potentially interest. If you have a security deposit, then there might be some interest there, and then other. There are potentially other ways that you can earn. You might do some assignment fees and things like that. Those are our basic set of revenue accounts for most landlords to be sufficient.

On the expense side, this is the basic set that we use. There are administrative fees, bank fees, supply expenses, salary expenses, payroll taxes and fees, and things of that nature. Taxes - if you have unemployment or worker's comp you have to file those taxes. There are rent expenses. Maintenance and repairs are going to be a big one for your buildings. If you have a property manager you would have a management fee.

Insurance

Insurance is definitely another big one. You would obviously have insurance or interest expense. You're going to have marketing costs. You're going to have an office, so there are office supplies, equipment, computers, a fax, and things like that. These are all expenses.

Legal and Accounting Fees

There will be legal and accounting fees if you have an accountant or an attorney involved in your business. You would have to expense those things. There might possibly be corporate taxes. There could be court costs if you have to file evictions and things like that and then miscellaneous expenses. These are a basic chart of accounts that you can use to set up your income statement. That's really it as far as the accounting.

A couple of highlights here. Make sure that you do not co-mingle money. Keep things in nice little silos. Make sure if you've got payroll that you take money from the operating account and move it into the payroll account. That way things remain fairly concise.

Make sure you reconcile your accounts on a regular basis. As you grow and expand, as you get more properties, make sure that you are reconciling those accounts on a fairly regular basis. Do not wait weeks or months before you start reconciling your accounts. It will make your life miserable if you have to spend a lot of time trying to reconcile an account six or eight weeks later.

Residential Property Management - How to Set Up a Chart of Accounts

I invite you to learn more about Property Management and get a free 60 minute audio titled "Learn the 10 Success Secrets of Property Management Every Real Estate Investor Must Know to Maximum Profit and Avoiding Tenant Headaches" by going to http://www.realestatewealthtoday.com/PMS.html.

Mike Lautensack is the owner of Del Val Property Management LLC, a FULL service residential property management company located in Philadelphia, PA.

Real Estate Investing Tips - Residential Property Vs Commercial Property

The definition of residential property is a distinct property that draws an income from houses, apartments, co-ops, and apartment buildings.

Commercial property is a term utilized for the description of property that's income is drawn from non-residential such as retail space, office buildings, industrial business tenants, and all other non- residential dwellings.

Property

The Advantages and the Disadvantages

Residential Advantages:

1. Large selection of tenants to rent to, and a great demand for rental housing.
2. High brink of income from consistent cash flow from multi-units and houses.
3. Residential property is relatively easy to finance, and can simulate home-financing.
4. residential property is commonly lower priced than property that is commercial.
5. Worst case scenario, you may dwell in a multi-family property and supervise tenants.

Residential Disadvantages

1. Management and maintenance is required consistently in residential property.
2. For a house that only has a single family inhabiting it, if no tenant pays or moves there is no income.
3. Repairs are more likely in residential property.
4. Harder to dispute a residential property tenant and there are boundaries that need to be adhered to.

Commercial Advantages:

1. Commercial properties offer long-term leases that provide consistent income and stability in the investment.

2. In commercial property management is not as demanding, because most leases state that is responsible for damage and repairs.

3. To fit up the space in commercial property the tenant can pay the landlord a flat rate fee and discount rent.

4. Commercial property owners flourish with steady incomes that increase as the value of the properties skyrocket.

Commercial Cons:

1. Commercial property loans are more difficult to obtain, because lenders require up front down payments that can be rather high as well as Adjusted rate loans can rise to unreasonable affordability.

2. Commercial spaces often are difficult to lease, and can sit empty for long periods of time; this is not positive for an investor who has limited funding. It also often takes attorneys to draw up the leases that commercial tenants must abide by.

3. Inexperienced individual's who want to invest in commercial property should be forewarned that it is not easy just to jump into, and can be overwhelming to a new property owner.

There is not a perfect answer on what property is right for a certain purpose or person, however whether it be commercial or residential an individual who is seeking this sort of investment need to consider all aspects of the venture. Ask yourself what you really want to accomplish and do not haste into making an ultimate commitment until you are well aware of every worst case scenario that can occur. Once you have really thought about it all you will recognize what option suits you best.

Real Estate Investing Tips - Residential Property Vs Commercial Property

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