Miami has some of the highest rents in the United States, so it seems like a profitable market for real estate investors.
High rents alone aren't enough to guarantee that you'll profit from an investment property. You need to get the balance right between income and expenses by carefully managing your owner disbursements.
Keep reading for insights into effective disbursement management.
Types of Owner Disbursements
Three major types of owner disbursements apply to rental properties. These are:
These costs refer to items associated with managing a rental property. They include things like refurbishments, maintenance, and repairs.
Rental income is the most straightforward type of disbursement. It refers purely to the agreed rate that renters pay to enjoy the use of your property.
Profits are what's left over once you've deducted all the costs from your rental income. Owners can withdraw these amounts from their real estate business monthly or at other suitable intervals.
Late fees, pet deposits, and security deposits are also types of disbursements.
Factors that Affect Disbursements
It's vital to understand how various factors affect owner disbursements when you invest in rental properties. The following can affect how you calculate and manage owner disbursements:
Location of the Property
The location of your property has a major impact on your home's value and how much rent you can charge. For instance, waterfront properties, or those with a view, always cost more.
In this way, location also affects your property taxes, which in turn impact your income taxes and your disbursements.
Different rental property ownership structures can impact your taxes and how you manage disbursements.
If a single person owns your rental business, you can withdraw money from your rental income without paying business taxes on it. In a sole proprietorship's profit-and-loss statements, there's no distinction between draws and additional distributions.
Disbursements for partnerships and LLCs aren't taxes when distributed to the owners. The ownership shares in the business determine how much each person gets.
How Does a Property Manager Handle Disbursements?
Hiring a property manager simplifies everything to do with owner disbursements. They know all the most effective methods for managing these calculations.
Accurate property bookkeeping records are key for disbursement management. These help you track your income, expenses, and tax obligations.
Your property manager should provide you with detailed monthly reports that list your income and expenses.
Timely rent collection ensures property owners receive regular disbursements. Late payments can cause them difficulties in covering their expenses.
Reputable property management companies have clear, convenient payment procedures and technology in place. These ensure you get paid on time.
The Easy Way to Manage Your Rental Property
Calculating owner disbursements is a complicated and time-consuming process. It's best attempted with the help of an accountant unless you have an experienced property management firm to fall back on.
At PMI Miami Dade, our team has over 25 years of combined real estate management experience under their belts. Get in touch today to discuss your Miami property management needs.