The Ultimate Guide to Rental Real Estate Finance

Rental real estate is all about generating profits from cash flowing investment rental properties. In order to successfully generate a profit, every investor needs to understand the topic of rental real estate finance which covers many subjects ranging from mortgages, taxes, budgeting, and more. Below we take a deep dive into these main components that make up rental real estate finance.

Investing in rental real estate now stretches far beyond the common thought of purchasing an apartment or renting out your old single family house. While that method still works very good, not everyone wants to nor can afford to invest the large amounts of time and capital needed to successfully undertake a rental property remodel project. Thanks to the rise of the internet and stock market, new and creative ways to invest in rental real estate have risen in popularity and accessibility. Nowadays, almost anyone can start investing with publicly traded real estate stocks on their phone, or even participate in a syndication deal to get in on a large rental property investment previously out of reach.

Purchasing a rental property requires a lot of capital. With investment property prices in the hundreds of thousands or even millions of dollars, it is very common for investors to use financing (i.e. a mortgage loan) to acquire an asset. By utilizing a mortgage, investors are also able to capitalize on the benefit of “leverage” but using borrowed money at a reasonable interest rate, to generate more money. Many different types of mortgage products exist, serving different rental property types and purposes.

Rental property taxes are a major financial component of governmental tax system and individual taxpayers. In the United States, taxes are applied to rental properties in the form of a State Property Tax (if applicable) and Federal Income Tax on profits from income. While rental property income must be claimed on your taxes, there are many deductions provided to rental real estate investors that can greatly reduce the income tax obligations on your profits.

Insurance is not only an expense, but often a requirement in real estate investing. Rental property insurance is specifically designed to protect landlords, their properties, and the tenants residing in them. Rental property insurance policies typically provide coverage for damage to the dwelling and personal property, as well as accidental injuries that can occur on the property.

Rental property financial statements help landlords, investors, and property management companies  understand the financial health and performance of how well a rental property is doing. These reports provide a summarized and detailed snapshot of a property’s financial health by tracking income, expenses, assets, and liabilities over time.

Rental real estate finance can get complicated quickly with so many different components of financial analysis to calculate and keep track of. We have created a set of helpful online real estate calculators to help understand and calculate some of the most common rental property financial metrics.

Rental property accounting software helps property owners, property managers, and tenants track rent payments, property expenses, and other real estate related accounting. The data generated and organized by real estate accounting software simplifies tax preparation, budgeting revenue projections, and much more. When properly integrated, accounting software for rental properties streamlines operations while providing meaningful insights into rental property finances.

Rental real estate finance is the broad subject of all financial related topics when it comes to rental properties, such as financing, taxes, deal analysis, appraisals, budgeting, and more.