An owner disbursement is money that an investment property owner pays to themselves from the proceeds of their rental units. Now that the tax threshold for landlords has changed, it's more important than ever to pay attention to the income received from your property.
A property manager can help handle owner disbursements for landlords to simplify the process. Read on to explore what disbursements are, how to manage them, and how to calculate them.
Types of Owner Disbursements for Landlords
Investment properties generate income from a variety of interrelated sources, as reflected in the owner's statements. The most common ones are:
Rental Income Disbursements
This is the primary source of revenue for an investment property owner. It is usually paid directly to the landlord or their property management company.
This income includes payments from the tenants, or the Housing Choice Voucher Program in the case of Section 8 landlords.
Other types of owner disbursements related to income include:
- Late fees
- Pet fees
- Application fees
- Security deposits
Expense Reimbursements
These amounts are paid back to the landlord to reimburse them for expenses related to maintenance and repairs to the property. They don't count as income for the landlord, as most of these expenses are tax-deductible.
Profits
This is the amount left over once you deduct the monthly expenses from the rental income associated with a property. It will vary monthly depending on the costs associated with the property each month.
Managing Property Owner Disbursements
Many factors affect the frequency and value of owner disbursements. Rental market conditions play a role, while occupancy rates, unexpected expenses, and financing agreements also impact the landlord's payment schedule balance.
One of the most important landlord financial tips is setting up a budget that anticipates these variables. Landlords should compile a comprehensive budget, in conjunction with their property manager, to plan for expected expenses.
These might include:
- Property management fees
- Mortgage payments
- Routine maintenance
- Property taxes
- Insurance
Setting aside funds for these ongoing expenses helps prevent financial strain and helps you anticipate your owner's disbursements.
It's important to keep your investment income separate from your other income. Opening a separate account for your rental business is a first step.
Some landlords prefer to pay themselves a fixed salary from their rental profits and leave the rest to gather interest. This helps with budgeting and record-keeping and provides a useful backup fund for repairs.
Alternatively, you can set aside a certain amount for maintenance and repairs in your monthly budget.
Simplifying Owner Disbursements
Careful management of owner disbursements for landlords is important for budgeting, meeting your tax obligations, and financial peace of mind. For these reasons, hiring a property manager is instrumental in managing owner disbursements.
These experts can help you budget effectively, identify tax savings, and save on maintenance costs.
We offer a full range of property management services to ensure you maximize your owner's disbursements. Our team is dedicated to providing customized service to each landlord and has many years of experience with Nashville real estate.
Better budgeting, decreased vacancies, and profitable returns are within reach when you work with us.
