One of the most underutilized management tools that landlords often forget about is the rental ledger. A rental ledger is a simple way to get immediate insight into your rental portfolio, your finances, and how profitable your business is at any given moment.
Do you have a tool that allows you to find discrepancies quickly while also managing the financial expectations of your business? There are many ways to track income and expenses, but none are quite as effective for landlords as the rental ledger.
Additionally, these tools are incredibly helpful when working through eviction hearings. Clear, well-supported documentation is key to winning an eviction case, and rental ledgers are one of the best ways to keep that type of information organized and on file.
Are you ready to learn more about what a rental ledger is and how to use it? Today’s RentPrep guide will detail rental ledgers, their uses, and give a template for you to try out.
A Table Of Contents On Rental Ledgers For Landlords
Rental ledgers are relatively simple tracking documents, but they are an incredible tool when you need to quickly or accurately recall precisely when and how rent payments were made. There are no substitutes for this great tool.
- What Is A Rental Ledger?
- The Importance Of Landlord Rental Ledgers
- Rental Ledger Template: What Your Ledger Should Include
- Rental Ledger FAQs
- A Worthy Creation: Rental Ledgers Rule
A rental ledger, also known as a rent ledger or lease ledger, is a financial report that collates each tenant’s detailed payment history in one place. By generating or tracking rent payments through a rent ledger, this information can be gathered together without needing to look at bank statements, lease terms, or rent receipts.
The exact information presented in a rent ledger varies, but the following is typically included:
- Rent payments received
- Upcoming rent payments
- Outstanding balance, if applicable
- Any security deposits or related deposits paid by tenants
In addition to tracking the amounts tenants have paid and will pay, ledgers also include basic identifying information such as names, addresses, and contact numbers. Keeping this information all in one location makes it easy to contact tenants about late or unpaid rent.
Keeping an official ledger record or having financial management software that makes it easy to generate a ledger is a great way to manage your rental properties more professionally. Those working just a few properties may use a physical ledger, but many prefer to create these documents electronically.
Who exactly uses lease ledgers, and why are they valuable to these individuals? This type of documentation is used in a few different circles for different reasons.
Some property owners like these ledgers because they assist with real estate transactions. A rental ledger is a great way to demonstrate the power of a rental property and how well it is producing income. For those looking to buy or sell a rental property, examining the ledger is likely to be a crucial research step during this process.
Not only do these ledgers make it possible for individuals to show the exact financial status of a property, but it also keeps an up-to-date list of what is owed, when it is owed, and what type of deposits are in play.
Payments and deposits will be essential information gathered from a ledger when it comes to day-to-day management. After move-out inspections, property managers can check the deposit amount and what needs to be returned by reviewing the ledger. This will help them determine how much money is available for immediate repairs and what must be sent back to the tenant.
Buyers and lenders also look at rental income ledgers when determining whether or not a property is a good investment. Buyers may want to consider the potential cash flow, and lenders want to ensure they underwrite only those rental properties that are in good standing, with a profitable history.
Buyers and lenders may also use the ledger to make a quick comparison to similar properties in the area, to determine any hidden potential or room to make more money. This can help with more significant, related financial decisions.
Finally, some tenants choose to keep their own type of rent ledger. By doing so, they have a record of what they paid, when they paid it, and what deposit is on file with their landlord.
Should any discrepancies arise, having this documentation ready to go will make it easier to work with a landlord on resolving things. In some cases, tenants may even use a rent ledger to defend themselves in an eviction hearing.
Additionally, tenants who keep a ledger can use it to show future lenders or potential landlords that they are reliable renters. Renting records aren’t as clear-cut as other financial histories, so some tenants create their own documentation with a rental ledger.
As a landlord and property owner, you’re focused on making sure that your properties are generating income in consistent, maintainable ways. A rental ledger helps make that type of financial management and tracking possible.
However, that isn’t the only benefit of using rental ledgers. Learn more about their importance and why you should deploy them in your business.
Collecting monthly rent is the basis of your business. Without timely collections and precise documentation of those payments, it will be impossible to keep your business running smoothly.
Rental ledgers generate a real-time snapshot of the financial status of your rental business, what current monthly income looks like, and what you can expect in the coming months.
No matter what the eviction laws look like in your state, you’re going to be required to show that rent was not paid, if nonpayment of rent is your reason for eviction. A rent ledger provides clear documentation of when rent was and was not paid. In many eviction cases, the ledger is one of the most important pieces of evidence that a landlord can present.
Planning your rental business means that you need to keep clear and detailed records of all income and expenses. Experienced landlords find that breaking these numbers down by unit through a rent ledger is the clearest way to see what is happening with their finances.
Where is money bleeding your business dry, and where is there room for even more profit?
Identifying discrepancies in rent payments or overall monetary gain is easiest when looking at the overview provided in a rental ledger.
What needs to go into a rent ledger to make it as useful as possible?
Ideally, you’ll want to use a spreadsheet format that includes the following information:
- Tenant name
- Property address
- Property data (i.e., size)
- Rent paid (date, method)
- Utilities paid
- Pet rent paid
- Outstanding rent
The document should include the data that you find important to reference. Making a rental ledger template that reflects your properties and how you manage incoming rent is the best way to handle things.
If you are already using property management or accounting software to collect and track payments, there is a good chance this software can already generate digital rent ledgers. Many programs developed for landlords allow you to select a specific property or date range and then create the report.
Landlords who want to use software to streamline their business should look at products created specifically for landlords, and that software should always include a rent ledger generation feature. This will save you time and make it easier than ever to review your finances at a glance.
Of course, not all landlords need this feature to be part of the software. You can also create your own spreadsheets to track payments in ledger form, which is just as valuable. Ultimately, it depends on your business style.
Landlords, especially those just getting started, are often overwhelmed by the number of notices, documents, forms, and other things they need to write up. It can be hard to know exactly what each document needs to contain or how you should phrase things.
Here at RentPrep, we aim to make your job as a landlord as straightforward, efficient, and effective as possible. That’s why we’ve put together the Landlord Form Bundle. This mega pack of templates offers you a set of sample documents that can easily be altered for your business.
Keep all documents that you might need on file and ready to go after downloading these forms today. All you will need to do is add the relevant information. What could be easier than that?
One of the easiest ways to understand the value of a rental ledger is to consider the types of information this document can provide. These are the types of questions that can quickly be answered by reviewing the rental ledger for a specific property or rental business:
- Have rental payments been made on time?
- How long has a tenant been at a specific property?
- Is the rent on a unit up to date?
- Are late fees being consistently assessed on late payments?
- Is cash flow increasing, decreasing, or remaining stagnant over time?
- Are there any growth opportunities?
Landlords who are serious about growing their business need to look at the potential of their properties. Doing so through the lens of the rent ledger can be very valuable.
As a landlord, you should try using a rent ledger from day one. If you aren’t yet using one for your rental properties, taking time to get one going as soon as possible is a good idea. The ledger can be an invaluable asset, and there are very few drawbacks to this investment of your time.
There are no specific rules on what a rental ledger should look like. As long as the information is presented clearly and honestly, it can be helpful.
However, many people find that the best rent ledgers are those that can be easily generated for specific date ranges. This is why many property management companies and software programs include the option to generate these reports regularly. Electronically generated reports require less time investment and are generally easier to understand.
Still, you can structure your rent ledger in whatever way works best for your business.
Property owners are not required to keep rental ledgers, but they are expected to keep records of rent payments. For example, imagine that you want to file for a termination of the lease through eviction because a tenant has stopped paying rent. If you do not have any records of rent payments, you will have to dig up that evidence, or you might not be able to prove your case.
Keeping a rent ledger makes your job as a landlord easier, and you are likely to see higher profits through the long-term use of this tool.
Absolutely! It’s vital to have this type of clear documentation of rent payments over time during eviction hearings, especially if you are filing for eviction due to nonpayment of rent. This type of official documentation is typically enough to prove whether or not a tenant has been paying rent in a reasonable way.
If a tenant disputes your records, there is a chance that the court will request further documentation such as bank statements or rent receipts, but this is rare. Usually, a rent ledger is more than enough evidence for an eviction hearing.
No doubt, having a rent ledger or a simple way to generate one as needed will make your life as a landlord easier. A rental ledger can get you out of a variety of challenging situations:
- Use your ledger to prove financial history in the eviction hearing
- Remind tenants of late rent promptly
- Show off profitability when selling rental property
These are just three out of many ways that you might benefit from a rental ledger. If you aren’t yet using one, start considering how you can incorporate this simple report into your future business plans as soon as possible.