Happy Thursday everyone. Three more observations from the self-managing side of rental property.

A lot of landlords keep an eye on the bank account to see how the rental is doing. I do too. But the balance in that account and the financial performance of the property are not necessarily telling you the same thing.

 Three Landlord Tips

1.    Cash and profitability aren’t the same thing.

A healthy checking-account balance can include prepaid rent, security deposits, or cash that will eventually be needed for upcoming obligations. Having cash available doesn’t necessarily mean the property is performing well.

2.    Timing can distort the picture.

Rent received early, an annual insurance payment, a property-tax bill, or a major repair can make one month look unusually strong or weak. Look beyond a single month before deciding something has changed.

3.    The transaction tells you what happened. The financial picture tells you what it means.

Looking at your income, expenses, liabilities, and timing together gives you a much better picture of the property than the balance in your checking account.

 Two Things To Think About

• Cash answers, “Can I pay the bills?” Profitability answers, “Is this property actually performing?”

• A landlord can have plenty of cash in the account and still have a property moving in the wrong direction—or have a temporarily low balance while owning a property that is performing well.

 One Question

When you want to know how one of your rentals is actually performing, what number do you look at first?

Looking forward to hearing your answers.