How to Create a Comprehensive Property Management Financial Report thumbnail picture
  12 Oct 2023
 2863 views

Improve Your Property's Management, Operation & Revenue With Booking Ninjas Property Management System

Schedule A Meeting
Article

How to Create a Comprehensive Property Management Financial Report


One of the most vital aspects of every business is the financial aspect. The financial health of a company can make or break it. 

A real estate business is included. 

As a landlord, property investor, or manager, it is crucial to know the financial health of your property. 

Knowing your property’s financial performance will help you understand its performance and if the investment was worth it. 

Creating a well-detailed financial report is the best way to monitor your property’s financial health. The property manager is often the one in charge of creating the report. 

In some cases, an accountant handles the report. 

I will show you how to create a comprehensive property management financial report in this article. Whether you are a property owner or managing a portfolio of properties, you need a detailed property financial report to make informed decisions that protect the business. 

What is a Property Management Financial Report?

A property management financial report shows a property's financial performance (or a real estate business). It is a detailed account or document that provides a financial overview of a property. 

The financial report breaks down the rental income, operations costs, maintenance expenses, and any other financial transactions related to the property. 

These reports vary in complexity. They can range from straightforward spreadsheets to documents generated by property management software. 

Importance of Property Management Financial Report

A financial report is a vital tool in effective property management. 

1. Informed Decision

An updated financial report gives accurate information on your property’s financial data. Therefore, you will be able to make informed decisions. 

You should only make important decisions like setting rental rates or deciding on property improvements after seeing your property's financial health. 

2. Risk Assessment

With a detailed financial report, especially on the expenses and income, you can assess risks. 

Part of your property management role is to identify potential risks and opportunities. This means you need to take active measures to reduce risks and maximize your income or ROI (return on investment). 

3. Resource Allocation 

Being a property manager or even an investor means you most likely have the properties in your portfolio. Hence, a comprehensive financial report allows you to allocate resources effectively. 

4. Transparency

In cases where investors are involved in the property, for example, a commercial property, a financial record provides accountability. 

The report offers a clear, standardized view of financial data. This is crucial for building trust and attracting investors.

Let’s be honest: Investors like seeing where their money went. A bad investment is a bad portfolio and has many losses. 

Your investors want to know how the property performs and whether it can bring a significant ROI. 

Note: Keeping an updated financial report of your properties is essential. You can do this quarterly or every six months. 

5. Tax Reporting

For every business, the law requires a detailed financial performance report. This is mainly for tax purposes. 

The reports are used to accurately evaluate a property’s tax income by reporting the income and expenses to the tax authorities.

6. Settle Illegal Dispute

You’ll be surprised how disputes between landlords and tenants are common. In cases of legal disputes, the financial records can serve as vital evidence in court. 

It will provide a documented history of financial transactions. 

7. To Pitch to Investors

If you own a real estate company and need more investors, you need to present a detailed report of your property’s financial health.

The financial record will serve as evidence as you demonstrate how profitable your property is. This will help the investors see how their investment will generate returns. 

It will also show them the possible risks involved, which is good because they can make proper estimates of what to expect. 

Components of a Property Management Financial Report

The property management financial report contains various financial aspects of a property investment. Each aspect provides a comprehensive overview of the property’s financial health. 

Let's take a look at each one.

1. Income

This refers to the monetary gain the property owner receives from the property. It is the lifeblood of any real estate investment, including rental properties.

In real estate rental properties, there are various sources of income. 

It is very vital to include these sources in your financial report. This will give you a clearer understanding of the property’s revenue streams and which stream flows most. 

Rent

Rent is the primary source of income in rental properties. Landlords generate most of their property income from their tenants' rents. 

If you are recording the financial report for a portfolio of properties, you should categorize the income by property unit or tenant. 

The report often contains specific details like rental rates, lease durations, rent per tenant, and outstanding rent payments.

Fees

Another common income source for rental properties is through various fees like parking, application, and late rent fees. 

Including the fee type, amount, and collection frequency is essential. 

Additionally, you can get more income from utility charges like laundry facilities and vending machines. This is more common in communal residential properties like apartments, hostels, and condos. 

If you own a short-term vacation rental property, you can earn more income from added services like room services, breakfast buffet, spa treatments, etc. 

2. Expenses

Every business has expenses, including rental properties. Expenses refer to the property's costs. 

It refers to money spent on maintenance, operations, tax, and insurance. 

When documenting the expenses in your report, break them down clearly so you can know which aspect of the property is taking the most money. 

Operating Expenses

The operating expenses are those expenses incurred from the daily business operations. 

These experiences are ongoing, meaning that you incur them frequently. 

For example, if you hire a property manager or property management agency, you need to pay for their services. 

As the landlord, you can bypass management fees if you manage the property yourself. 

Another example of operating expenses is utilities. You offer your tenants or guests these amenities to make them comfortable. 

You must pay for utilities like electricity, water, gas, and other essential services. 

Maintenance Costs

These are the costs incurred from occasional property maintenance to ensure that the property is in good shape. 

You should divide the maintenance costs into 'Repairs and Upkeep' and 'Capital Improvements.' 

The repairs and upkeep category includes your expenses on routine maintenance and repairs. This category can consist of repainting the building, cleaning the parking lot, etc. 

Capital improvements deal with higher maintenance like renovations and HVAC upgrades. They enhance the property's value. 

Taxes

According to the law, you should pay property taxes and income taxes. 

The property tax rate differs in location. So, if you own properties in different areas or states, the property tax you pay for each one may differ from the other. 

To accurately document how much tax you pay, ensure you contact your tax accountant/officer. 

Insurance

To be safe from any unforeseen hazard, it's vital to have an insurance cover. However, insurance doesn't come free. 

The amount you pay for property insurance covers potential damages to your property. Insurance is a great way to safeguard your investments; hence, it's vital for keeping your business/property afloat. 

Miscellaneous Expenses

These expenses do not fall into any of the earlier-mentioned categories but are incurred nonetheless. 

Miscellaneous expenses are incurred occasionally—for example, legal and professional fees, advertising and marketing, employee payroll, and HOA fees.

3. Net Operating Income

This refers to the income left after you minus the operating expenses from the gross income. 

It represents the property's ability to generate revenue from its core operations, excluding costs related to debt service and taxes.

The NOI is significant because it shows a property's operational efficiency and profitability.

A negative NOI means the property faces financial challenges and may become severe if you don't sort them out. 

Investors often use NOI to compare the financial performance of different properties within their portfolio. This allows them to identify the most profitable properties and which may need optimization.

4. Cash Flow

It is calculated by subtracting all expenses (operating costs, maintenance, taxes, etc.) from the rental income generated by the property.

Cash Flow = Rental Income - Operating Expenses

Cash flow represents the actual cash available for immediate use. This liquidity is essential for addressing unforeseen expenses, making timely repairs, or seizing investment opportunities.

5. Debt Service

If you purchased/built your rental properties on a mortgage loan, you need to include the amount you pay on debt service in your report. 

As a property owner, you are entitled to pay debt service to cover the principal and interest on a mortgage or property loan.

Including debt service in your financial report helps you know whether your property generates enough income to meet its debt obligations without straining its cash flow.

You need to calculate your debt service coverage ratio to evaluate your property’s ability to handle its debt. 

This ratio compares the property's net operating income (NOI) to its debt service payments.

If the value is greater than 1, then you are positive. But if it is less, your property has a financial challenge. 

6. Vacancy Rate and Occupancy Rate

The vacancy rate is a percentage that shows the number of unoccupied units or rental properties within a given period. 

It is important to add this information if you manage a hotel, apartments, townhouses, condos, or multi-family homes. 

There are certain periods where hotels, resorts, or guest houses are filled up and other periods with fewer guests. 

The vacancy rate reflects how efficiently your property is attracting and retaining tenants. Therefore, a low vacancy rate indicates that your property is in high demand. 

However, a high vacancy rate means your property is not selling out or generating enough rental income. 

Occupancy Rate

The occupancy rate is more like the opposite of the vacancy rate. It measures the percentage of units or properties that tenants currently occupy.

This rate shows your property's ability to maintain a stable tenant base. A high occupancy rate indicates that your property is successful at retaining tenants. 

7. Reserve Funds

Your reserve funds are the liquid (cash) funds you set aside for future unexpected expenses. 

You keep these funds in your business's savings account in case of unforeseen expenses. 

Reserve funds are just like your property’s financial safety net. They prevent you from scrambling to find funds when unexpected large-scale repairs or replacements become necessary.

Adding information about your reserve funds to your financial report shows your property's financial preparedness for future expenditures.

Also, when your investors look at your property’s financial report, they want assurance that it is well-maintained and financially sound. 

Types of Property Management Financial Reports To Create

There is not one type of financial report to create as a property manager. You need different financial statements for various purposes. 

These financial reports are also known as financial statements. They are essential in determining your property’s financial health.

Source: NuventureCPA

Profit and Loss Statement

This is also known as the 'Income and Expense Report.' It provides a detailed breakdown of a property's financial activity over a specified period, typically a month, quarter, or year. 

Creating an effective profit and loss statement involves several key steps:

1. Gather Income Data

Start by collecting all sources of income related to the property for the chosen period. This typically includes:

  • Rental income
  • Late fees
  • Income from amenities (parking, laundry, etc.)
  • Any other revenue streams specific to your property

It is important to state these sources as they can differ from each property. 

Next, ensure you categorize each income. Common categories include "Rent," "Fees," and "Other Income."

Then you can calculate the total income, the sum of all the revenue from the various categories. 

2. Collect Expense Data

Compile a comprehensive list of expenses incurred in managing and maintaining the property.

These costs include: 

  • Property taxes
  • Insurance premiums
  • Utilities (electricity, water, gas)
  • Repairs and maintenance
  • Property management fees
  • Advertising and marketing
  • Legal and accounting fees
  • Mortgage interest

However, just like the income, ensure you categorize each expense. Then, you sum them up to get the total costs. 

3. Calculate Net Income or Net Loss

Your net income or loss is your total income after deducting your expenses. 

To calculate the property's net income or loss, subtract the total expenses from the total revenue. The formula is:

Net Income = Total Income - Total Expenses

You will have a net income if the income is more than the expenses. But if the costs are more, you already have a loss. 

Whatever result you get becomes the final result in your profit and loss statement. 

Balance Sheet Statement

This financial statement deals with more data than the profit and loss report. It shows an overview of your property’s health as it deals with assets, liabilities, and equity. 

Insert designed template for a balance sheet statement here, with a Booking Ninjas Watermark

Here is how to create your balance sheet statement:

1. Calculate Your Assets

When creating the balance sheet, list the property’s assets first. The assets are divided into two categories: current assets and non-current assets. 

The current assets are assets you can easily convert to cash within one year. 

The non-current assets take a longer time to convert to cash. They are also known as long-term assets, like fixed and intangible assets. 

2. Calculate Your Liabilities

After the assets come the liabilities, just like your assets, your liabilities should be divided into current and non-current liabilities. 

The current liabilities are expenses (or debts) that can be settled within one year. For example, short-term loans and unpaid bills are current liabilities. 

However, the non-current liabilities are long-term debts like mortgage loans or deferred tax liabilities. They take a longer time to settle. 

3. Get Your Equity Value

From the total assets and liabilities, you can get your equity value. 

Equity reflects how much value the property owner has in the asset. 

The total equity value is the total assets minus the total liabilities. 

The assets and liabilities are often calculated at the left side of the balance sheet, while the equity is at the right. 

But the calculation is: Assets = Liabilities + Equity

Account Ledger Report

The account ledger report provides a detailed record of all your property’s financial transactions chronologically. 

This report tells the financial story of the property, documenting income, expenses, and other financial activities. 

Insert designed template for a account ledger report here, with a Booking Ninjas Watermark

The transactions are entered in chronological order. This means you should start the entry from the earliest transaction to the most recent one. 

Ensure you include the date, description, and amount for each transaction.

You can also attach supporting documents like receipts and invoices to validate the accuracy of the recorded transactions. 

Then, present a summary section where you summarize the total income, expenses, and net cash flow. 

The account ledger is very vital. Hence, it requires more accuracy and precision. 

Owner Statement

The owner statement is a financial report that provides a detailed breakdown of the financial transactions and activities related to a specific property.

You should prepare the owner statement report monthly or quarterly. 

The property manager prepares this document for the property owner(s). So, if you are a property manager, you must provide this financial report to keep the owner updated on what is happening. 

This report allows the property owner to track the financial well-being of the property. 

It should include:

  • Rental income
  • Expenses
  • Reserve fund contributions 
  • Net income
  • All transaction details

Creating a Comprehensive Property Management Financial Report

Now you have seen the key information you should include in your financial report, you can now create it.

Accurate Data Collection

The accuracy of your data collection is very important when drafting your report. Any misinformation can affect the final report and its presentation. 

Your report will be used to make important decisions. A slight mistake in the figures can cause you to make the wrong decisions. 

With a property understanding of the report, you can set rental rates and handle your expenses appropriately. 

Finally, accurate data helps you in your budget planning. 

Insert designed Chart of accounts here, with a Booking Ninjas Watermark

How to Collect Accurate Financial Data

  1. Organize your financial records: These include rent receipts, utility bills, maintenance invoices, and any other financial documents related to the property.
  2. Maintain a chart of accounts: Create a well-defined chart of accounts specific to your property. This chart should categorize income and expenses in a way that makes sense for your property type (e.g., residential, commercial, or mixed-use).
  3. Regular data entry: Ensure you regularly update your accounts. Depending on your property's size and activity, this might be daily, weekly, or monthly. The more frequently you update your records, the more accurate they will be.
  4. Reconcile bank statements: Reconcile your property's bank statements regularly to ensure that your recorded financial transactions match the actual transactions in the bank account. This will help you catch inconsistencies and errors.
  5. Clearly document all income sources and track all expenses: Ensure that all sources of income are documented. Each entry should be date-stamped and labeled accurately. Also, be thorough and consistent in categorizing your costs to avoid mistakes.

Note: Always keep copies of the source documents and receipts as supporting evidence for your recorded transactions. These documents are essential for audits and verification.

Use Accounting Software

Technology has made even the most complex tasks seem like a piece of cake. 

Invest in a good accounting software that automates the tedious tasks. 

Accounting software performs complex calculations with pinpoint accuracy, reducing the risk of human error.

When dealing with financial data, you need to be extra careful not to make any minor mistakes. 

Additionally, collecting data and creating a detailed report can be very time-consuming. 

So, to save time and improve efficiency, use accounting software that automates many tasks, such as data entry, calculations, and report formatting. 

1. Select the Right Accounting Software

Choose one that suits your needs. Look for software specifically designed for property management or one that offers robust features for financial reporting. 

Fortunately, some property management software offers easy-to-use accounting features that make your accounting tasks more efficient. 

It's best to use property management accounting software as a property manager. It automates specific tasks and tracks your financial transactions in real time. 

2. Set Up Your Accounts

If you manage multiple (similar or different) properties, create separate accounts for each property in your portfolio. This allows you to track income and expenses for each property individually.

Even if the properties are similar, like multiple apartments, hotels, or shopping centers, each property must have its own separate account. 

This is because you need to calculate the financial data for each property. The data can be put in one or separate folders, depending on which one is most convenient for you. 

However, it is best to use separate folders to manage different properties from different clients. 

Property management accounting software allows multiple folders for each client's financial data. 

3. Categorize Transactions

As you enter each financial transaction, ensure you categorize them appropriately. Most accounting software allows you to create custom categories or use predefined ones. 

Proper categorization ensures that your financial data is organized and easy to analyze.

You can categorize them into income and expenses.

Categorizing your transactions helps you stay organized. You know the category each transaction fits under. 

4. Generate Reports

After you have entered and categorized your transactions, you can generate your reports. 

Accounting software makes it easy to generate your financial reports. Most software solutions offer templates for financial reports, including income statements, balance sheets, and cash flow statements.

Asides that, you can customize your reports. The accounting software offers a report template, so all you have to do is customize it. 

You can customize the date range, choose which properties to include, and add visual elements like charts and graphs for better visualization. 

Customizing your reports makes your presentation look more professional and neat. 

5. Share Your Report

As mentioned earlier, accounting software automates accounting tasks and improves efficiency. 

When you are done with your report, you can easily save and share them to your investors or stakeholders. 

Many accounting software solutions offer options to export reports in various formats (PDF, Excel, etc.) for easy sharing. 

Note: Before sending out your financial reports, ensure they are well-documented and organized. This makes it easy for your stakeholders to understand the property's financial health. 

How Property Management Software (PMS) Enhances Financial Reporting

Property management software has changed how property owners and managers handle financial reporting.

It simplifies the entire accounting process, from data collection and organization to the automated generation of reports and real-time insights.

A PMS makes property management accounting easier as it is a centralized hub storing all property-related financial data.

You don't need to enter financial transactions manually. It automatically captures and updates financial data, such as rent payments and expenses, directly from various sources. 

As a property manager, you need an all-in-one property management solution that helps you perform your tasks and still provides real-time business insights

Property management fused with technology is highly beneficial as it fosters high output and low manual effort when managing a property. 

Create Your Comprehensive Property Management Financial Report With Booking Ninjas

These financial reports guide property owners, managers, and investors toward informed decisions and peak property performance.

We have seen that creating a well-detailed financial report takes a lot of effort and can become overwhelming. But what if I tell you that there is an easier way you can do it and get your results in minutes or even seconds? 

Yes, it is possible. 

Booking Ninjas is the solution you need. It is specially designed to assist property managers and owners with its various features, including accounting. 

Our integrated accounting feature seamlessly merges financial data collection, organization, and reporting. 

Furthermore, Booking Ninjas is strictly a cloud-based software, meaning that all your financial data are saved on the cloud. This ensures that they are safe and secured away from unauthorized access. 

With Booking Ninjas, you can also integrate an external accounting system. This means you can synchronize your financial data from Booking Ninjas to the accounting system and vice versa. 

You can get many benefits from the Booking Ninjas PMS — from real-time business insights to increased revenue and so much more. 

You can schedule a meeting to request a demo or contact us directly on WhatsApp. Thanks to Booking Ninjas, your financial report journey just became easy. 

Improve Your Property's Management, Operation & Revenue With Booking Ninjas Property Management System

Schedule A Meeting

WhatsApp Us

WhatsApp Us