Real estate investors in Colorado make an average of $116,437 yearly.
That's a hefty income stream you can also make by renting out your properties in Denver, CO. However, you must understand rental property accounting, including owner disbursements. Otherwise, you could lose money you could pocket or spend on discretionary expenses, thinking it's profit when it's not.
We'll give you the lowdown on real estate disbursements and how to manage them properly, so read on.
What Are Property Owner Disbursements?
Owner disbursements, or property owner payments, refer to the money a property owner receives from renting out their property. The most common examples are rental income, reimbursements, and other rental fees.
Rental Income
As of January 2024, Denver's typical one-bedroom rental fee was $1,790. That $1,790 is rental income, the most common type of owner disbursement. It's the money you, the landlord, receive from your tenants as payment for their rent.
Expense Reimbursements
Savvy landlords know they must set aside a portion of the rental fee for property operating expenses. One guideline is the 50% rule: set aside 50% of the annual rent. So, if your monthly rental fee is $1,500, you'll ideally allot $9,000 for operating expenses.
You can pull funds from your rental income whenever you need them for those costs. These costs are examples of expense reimbursements. They're the money you receive from your property's rent to cover operating expenses.
Other Rental Fees
Other owner disbursements include pet deposits, pet fees, late fees, and security deposits.
Pet deposits and pet fees are the extra charges your tenants pay you for letting their pets into your property. Late fees are the penalties tenants pay on top of their rent if they fail to pay on time. Security deposits refer to the money renters give you as "collateral," which you can use to fund repairs if your tenants damage your property.
Managing Owner Disbursements
One of the most crucial financial management tips to abide by when dealing with disbursements is to keep records of all transactions related to your rental. These include the following:
- Rental payment receipts
- Owner payment schedules
- Late fees received
- Contractor receipts for property maintenance and repair services
- Tax records, including payments
Organizing transaction records lets you determine if your rental is profitable, if you spend too much on repairs, or if your tenants pay rent on time. You can then take the necessary steps to address issues before they cause you to lose more income. For example, if you notice you've spent a lot on repetitive HVAC repairs, replacing it with a new one may be more cost-effective.
Let PMI Aspire Simplify Owner Disbursements
As critical as owner disbursements are to determining your rental property's financial health, they can be complex, especially for new landlords.
The good news is that you don't have to handle the property income distribution process alone. Our full-service property management company, PMI Aspire, can help.
We specialize in accounting, recordkeeping, marketing, maintenance, and tenant screening. We're also a franchise of PMI, a larger company that has served the property management industry for over 20 years.
So, if you're ready to simplify managing your Denver properties, call us today. We'd love to get to know you better and evaluate your property for free!
