Financial Reports /Real Estate Reports are also known as Financial Statements and can be defined as the formal record of the financial activities of a business entity or a firm. Financial statements are also the records of an individual involved in carrying out different types of business activities or as personal investment activities.
In case of the management of income-producing real estate assets, an investment property owner needs to know everything about the financial condition of his or her properties in the form of real estate reports or property management reports.
Property managers are hired to handle the daily operations of a real estate investment such as upkeeping the investment, screening tenants, conducting regular checks, increasing your rental income, preparing financial records and more. A property manager should have expertise in managing all types of properties from single-family homes to multifamily apartments.
It is necessary as a property owner to hire the right property asset manager who is capable of maintaining and increasing the value of your assets in addition to providing you accurate and detailed financial reports to help you in tracking your financial goals towards the real estate properties.
Your property manager should provide the following six financial reports every month that sum up the totality of your real estate reports. These six financial reports include the following ones-
A Balance Sheet is also known as the statement of financial position as it summarizes the assets and liabilities and equity of the property owner as on the date of the report. In this balance sheet, the property owner can find his or her actual balances in bank accounts, vacancy amounts, security deposits, sum owed to creditors and much more.
It is called a balance sheet because the asset side of the sheet equals the liability side of the sheet according to the double-entry accounting system. Your property manager should prepare a property management balance sheet for your real estate investments with accuracy and on time.
The Monthly Income and Expense statement or report consists of information about the detailed breakdown of income and itemized expenses with the comparison to the budgeted numbers in a month to date and year to date format. A monthly income and expense statement, when created properly would help in the creation of monthly management reports that help the property owners in comparing actual figures to budget figures to achieve their budgeted goals.
A monthly income and expense statement is more commonly known as a profit a loss statement in real estate financial reporting. This records all the expenses such as rent, accounting fees, insurance, taxes, legal fees and more on one side and all the income such as investment income, rent, interest, tax credits and more on the other side.
A General Ledger is a detailed record of accounting transactions of a company over a period that allows businesses to keep track of their incoming and outgoing cash flows as well as in generating financial reports and statements to gain a better understanding of a firm’s/owners financial health. Accounts such as Accounts Payable, Cash, Accounts Receivable, etc are some of the accounts included in the general ledger.
These need to be made with utmost scrutiny and accuracy so it is better that the real estate accounting financial reporting is done by your real estate management company.
The Accounts Payable Report provides information about all payments made during the reporting period for debts and other financial obligations. Account payable report is prepared to provide the property owner a clear audit report of all funds for each of his or her property.
Items included in the accounts payable report in real estate financial reporting are short-term loans, mortgages, maintenance, utilities, advertising, repairing, equipment, and more.
It is a type of ledger having details of individual tenant delinquents and prepaid accounts summarized on the balance sheet and income/expense statement.
In simple words, this account keeps track of the amounts that they receive from the tenants in the real estate financial statement. It may also include accounts that are receivable but have not been received yet. Tenant receivables and prepaid reports include rent, security deposits, utility payments, late fees and more.
Monthly bank statement along with reconciliation statement should be provided by your property manager as this statement helps in substantiating the bank accounts reflected on the balance sheet along with the deposits and debits reflected on the general ledger.
Finally, it can be said that it is the sole responsibility of a property manager to provide the above mentioned six real estate reports to the property owner or investor to help the investors in getting to know about the true value of their properties.
Not only that but you can take the stress of financial matters away when you have a property manager who will do the tedious work for you.
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