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What is a Rental Property Profit and Loss Statement?

January 8, 2025 8 min read

What is a Rental Property Profit and Loss Statement?

As a landlord, you’re constantly on top of your day-to-day finances. Money flows in and out of your business, and it can be difficult to see the big picture at times. If for a moment you need to zoom out and take a look at your finances from a distance, then it may be time to utilize a profit and loss statement for rental property that you currently manage.

What is a Rental Property Profit and Loss Statement?

A rental property profit and loss statement, otherwise known as a rental property income statement or a profit and loss report (P&L), is a basic financial statement that does exactly what it sounds like. It reports details surrounding the financial profits and losses of your business over a designated period so that you can get a crystal-clear image of your cash flow.

It summarizes and organizes all of your expenses and income into categories so that you can analyze your business’s profitability in one neat place. They’re easy to follow and typically only consist of a few columns—though they’ll include as many rows as you need since that’s where the detailing will take place.

A profit and loss statement for rental property is also a great tool to use when gauging the growth of your business. With monthly or quarterly statements, you’ll be able to compare profitability from period to period while simultaneously highlighting any potential problem areas that need to be assessed.

What Can a Profit and Loss Statement Tell You?

In addition to summarizing your expenses and income, a P&L report tells you the sum of your total income and expenses, which can help you to calculate metrics such as your NOI—Net Operating Income. This is calculated by subtracting the sum of your expenses from the sum of your income, and it’s a helpful metric that will show how much of a profit you’re making. By comparing profit loss statements from different periods and calculating your NOIs, you’ll be able to adequately assess your business’s financial health and growth.

It’s best to regularly create and compare a profit and loss report with past ones. Do you feel you made a smaller profit this month compared to the last? A P&L will be able to report if that’s the case as well as why.

Benefits of Using a Profit and Loss Statement

Profit and loss statements keep landlords and real estate investors like you in the loop, so if you regularly generate these reports, you’ll be able to catch any potential issues early on. Plus, if you keep your statement categorized, you’ll be able to easily detect your problem areas.

Additionally, if you’re looking to grow your business, you’ll likely look to prospective lenders and/or business partners. They’ll want to see tangible proof of your business’s success before they get on board, which is where your profit and loss report comes in. A P&L will showcase all of the smart business decisions you’ve made and will outline exactly how much profit you’re making over time. With multiple P&Ls, you’ll be able to prove your business’s growth as well, which is exactly what they’ll be looking for.

Enhancing your professionalism by using a profit and loss statement for rental property is another great reason to begin regularly creating them. You’ll build your image as a real estate professional if you’re willing to put in the work, and this will also look great for potential lenders and partners. Regularly creating P&Ls will show lenders that you’re an accomplished professional who takes their business and their finances seriously.

Components of a Rental Property Profit and Loss Statement

A rental property profit and loss statement will generally consist of three things: revenue (gross rental income), costs (expenses), and net profits or losses. You’ll have a section dedicated to each component, where you’ll track the categories of each type of revenue and expense as well as the total sum of each.

Your revenue section will likely be smaller and will only consist of categories such as rental income, services provided, fees, and any other income relevant to your business. Costs, however, should be broken up into more specific categories such as expenses related to marketing, salaries, maintenance, taxes, property management fees, and other operational expenses (this does not include mortgage payments, though).

Once you have these two sections created, you’ll subtract the total of your expenses from the total of your income to find your NOI. Yes, it’s that easy! P&Ls are relatively simple reports, which is why they’re so incredibly helpful. With these three simple components, you’ll be able to zoom out for a moment so that you take a broader look at your business’s financial success.

How to Create a Profit and Loss Statement for Your Rental Business

To create a profit and loss statement, you’ll first have to pick the period you’d like to get a microscopic view of. Monthly and quarterly P&Ls are the most common kind, as it’s best to regularly do a thorough check of your business’s overall health.

Once you’ve decided on the time frame, you’ll need to begin compiling data, which, if you keep your books organized, should be a piece of cake. You’ll add together all of your business’s gross income, both rental income and any other source such as services provided, etc., and track it on the report. Then you’ll track your expenses by sorting them into categories and finding the total sum of each category. You’ll only put the total of each category for your financial period into your P&L, but keep the details of each expense organized elsewhere, as this information is very important in case you encounter any hiccups or would like to do further investigation.

Finally, as previously discussed, you’ll create another section that shows the subtraction of your total operating expenses from your profits, which will result in your pre-tax net income or NOI. It’s important that you specify the exact time frame on each report so that you can easily compare and go over past reports, as well as any other information that you think will be helpful for yourself in the future. All in all, a very simple P&L may look something like this:

Profit and Loss Statement for Business X - October 2024

It’s important that you tailor your profit/loss statement to your preferences and needs while also making it easy to read for potential lenders and the like. You can find a profit and loss template Excel sheet online, but there's another option that you’ll find the easiest of all: Accounting software.

Using Software to Automate Financial Reporting

To make your life even easier, rental property accounting software like Ledgre will help you create P&Ls for both your individual properties and your entire portfolio—so putting together a report can be as easy as clicking a few buttons. Ledgre offers account syncing, so it’ll actually do the day-to-day tracking for you, which will then simplify the report generation process later on.

Using the data provided, it’ll help you automatically generate an updated profit and loss report any time you need it. Additionally, Ledgre boasts integrated expense categorization, so you can save yourself even more time when creating a P&L by having your expenses already sorted. With very little upkeep, modern rental property accounting software gives you the power to create vital financial reports with the click of a button.

Conclusion

Creating a profit and loss statement is much easier than it may sound. If you do your research and closely track your finances, regularly analyzing your real estate business’s financial health will become second nature. Use financial reports such as P&Ls to stay on top of your books and responsibly foster your growth, and if you’re looking for a place to start, then look no further than Ledgre.