If you're a small-time California landlord, you're in good company. The overwhelming majority of landlords in the Golden State are individual holders like yourself, with only one or two properties to their name.
While rental income can be a great way to shore up financial security, it also comes with a lot of complicated financial admin and paperwork. One essential facet of landlord finances that you should understand is what is known as owner disbursements.
These play a crucial role in your overall finances and allow you to stay on top of your cashflow and maintain a profitable portfolio. Here's exactly what you need to know about owner disbursements.
What Are Owner Disbursements?
Owner disbursements, also known as owner distributions or payouts, are funds that landlords receive from the income generated by their rental properties.
These disbursements encompass various financial transactions, including rental income, property taxes, security deposit returns, and other income associated with the property.
You can think of it as a sort of bundled-together payment of your overall profits. They are usually "disbursed" to the landlord by a third party, such as a property management company.
Why They Matter
Owner disbursements are essential for functional, efficient rental property accounting. Understanding them will help you maintain profitability and improve your ability to invest. Owner disbursements are your primary source of landlord income.
Managing them will help you cover expenses and maintain positive cash flow. They are the most efficient way to help you enhance your profitability and generate a maximum return on investment.
Accurate owner disbursements are also important for legal compliance. They will help you to follow all necessary regulations around rent collection, security deposits, and other routine financial activities.
How to Navigate Your Disbursements
So, how can you use owner disbursements to get more out of your rental properties? First off, a transparent approach is always best.
Maintaining accurate and up-to-date financial records-something that a property management service can help you with-will help you generate correct, easy-to-read disbursements.
You can also set clear disbursement policies for your tenants. Consistent rental collection dates every month and crystal-clear deposit return policies can help.
Make sure tenants know what their financial obligations to the property are, and what yours are. Always maintain an emergency fund to cover emergency expenses.
This will help you plan and budget for healthy disbursements over the longer term. Finally, always stay up to date on all legal and accounting developments in California that might apply to you.
We Help You Stay Profitable
Owner disbursements are not just an accounting practice. They are the income that you actually make as a landlord. They are also essential to understand if you wish to maintain profitability and secure a return on your investment.
For this, we are here to help. At PMI Redwood Realty, we manage income and expenses for local landlords.
By doing this, we can help generate positive disbursements for you, now and in the future. Get in touch today to find out how we can help you.
