Managing your rental income may seem tricky, but a making a good budget is better than hoping it works itself out.
Managing any income can be hard to do without some sort of budget in place to monitor whether your income and expenses are really balanced. If you receive rental income, you have a special budgeting problem because rental properties almost always require investment as well. You need to ensure you have worked out a proper balance between income and expenses before you go spend the profit you think you're making.
Instructions
1. Establish a method of payment right off the bat and ensure your tenants pay the rent on time. Don't allow them to pay late. If they do, speak up immediately. Be polite but firm.
2. Manage the rental income apart from your other income. You'll need to make a separate budget for your rental property detailing its expenses (mortgage, utilities, repairs, etc.). If your tenants are not paying enough rent to at least break even with the expenses, then you are actually losing money by renting to them.
3. Break your rental property budget into four parts to deal with four different kinds of expenses. Include regular monthly expenses like a mortgage and variable monthly expenses like the energy bill, which might fluctuate from month to month. Also include periodic expenses like yearly termite treatments and discretionary expenses that include optional payments like remodeling, fixing up the landscaping, installing a deck, etc.
4. Save enough rental income to cover emergencies and repairs on the rental property. About 10 percent of the rent should be set aside for this. Every little problem with the rental property is your responsibility to fix. When something breaks, the tenants aren't going to want to hear, "I can't afford to fix that right now."
5. Sit down and review your rental income budget at least once a month. Make sure you keep good records of where all the rental income is going.
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