Rental Property Budgeting Approaches

10 Replies

Once you get settled into your rental property, I assume it's important to document everything and stay super organize. 

What's your approach to recording monthly income, expenses, etc.? Is Microsoft Excel too simple? Any chance you could share an example of what your budgeting looks like? What numbers should always be included and why?

Hey @Valerie King - if you self manage -- then YES definitely keep everything documented (leases, receipts, etc).  If you hire property management, they should do most (if not all) of that for you.

Recording income/expenses -- you could certainly use excel or google spreadsheets...find a good template (check the BP FilePlace there's some good stuff there).  As your business grows you'll probably want to look into some accounting software (quickbooks, etc) to help as well (and certainly think about hiring an accountant!).

Your budgeting should be very similar to many of the numbers you initially run for when you purchased the property...Rents minus vacancies minus Operating expenses minus Cap Ex.  Think about what big capital expenses you might have coming up in next 6-12-18 months to plan for (replacing furnaces, water heaters, roof, appliances, etc, etc) and start putting that in there so you can plan further out for those things and build up a cash reserve fund to pay for them so you dont get blind sided with a huge bill you weren't planning/budgeting for.

Just a few ideas...hope it helps and good luck!

started off using excel, now use quickbook for everything.

We set back actual taxes , actual inaurance, 10% of gross rents for repairs and such , 5% of rents for vacancy related costs.

Hi all, I'd like to take this question a bit farther. @Brandon Schlichter , @Valerie King , @David Sohn , I also set aside a certain percentage for vacancy, maint, and capital expenditures.. However, let's assume I set that money aside but I have a good year and i don't need to pull from those funds.. How can I shield that money from the tax man?? 

Since I won't have any receipts for those expenses, I'm assuming ill be taxed, right? How can i avoid this? Thanks

Hey @Ryan Taylor - Sorry for the delay here.  I am not a tax expert and don't play one on TV but I'll try to answer as best I can but would strongly advise you to consult with a tax expert.  There are many on here that can likely offer better advice than me.

In my experience, I don't know if you CAN shield that money from the tax man.  Planning and budgeting well is much different than what you actually spent on the property in terms of expenses/cap improvements.  The upside here is if you planned/budgeted to spend that money and didn't that's a great year!  Hold onto that money b/c at some point you WILL need it!

I hesitate to give you more advice here b/c I'm really not qualified to do so but in general
- Your best bet here is to keep really good books and then discuss with your accountant about other ways to reduce your tax liability
- ask about non-reimbursed (partner) expenses - this might be an area where you can maximize your deduction for time spent working on your business or traveling on behalf of your business, etc.  
- meals, mileage, internet, cell phone...all things you can look into in terms of deductions.

Hope that helps a bit, have I mentioned that you should talk to a tax advisor :)



@David Sohn thanks for the great ideas! I'll definitely talk to my tax advisor. 

At this point, all my numbers are hypothetical estimates as I'm still in the process of purchasing my first property. I've got an appointment with my tax advisor to pay last years taxes and run some simulated numbers for 2017 in terms of rental property income. I'm anxious to see how the numbers turn out.

Thanks again for the insight.


@Ryan Taylor Accrual accounting can be your friend for reducing your taxable profit. If you're using the accrual method and you are setting money aside for things like maintenance, capex, taxes, etc, your P&L will reflect these items as non-cash expenses, which will lower your taxable profit. I recommend connecting with your tax pro to weight the pros and cons for your situation.

Hi @Jana Cain . Awesome! Thanks for the message. The accrual method, is that only usable within the scope of a corporation? Also, what is P&L? :)

Thanks again. I'll definitely bring this up with my tax advisor in my up coming appt. 


@Ryan Taylor P&L = profit and loss. This is the financial statement that determines the profit of your business, and therefore the amount you would be taxed on. There will be some adjustments made on your tax return, but the P&L is the starting point.

Every tax paying entity uses an accounting method - cash, accrual, or a hybrid. The accounting method just explains how you track your income and expenses. Your tax pro can talk you through the differences and what that means for your particular situation.

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