As your real estate portfolio grows, it becomes impossible to remember things like when you receive rent payments, when insurance is due, and other details about each individual property. That’s why it’s incredibly important to have a system in place to account for your cash flow.
Last year was a year of exponential growth in our real estate business. In fact, our portfolio doubled in one year! We were glad to have executed our goals beautifully, but we missed a few important steps in terms of managing those properties.
We didn’t know when our leases ended, when we collected rent payments, or when we had tax payments due. We were simply relying on bills coming in, and hoped that everything worked out. This is a terrible system! Without keeping track of these expenses and payments, it’s easy for things to spin out of control.
So we decided to put together a five-step system in order to keep track of our cash flow. The first tip is to set calendar notifications for insurance and tax payments. Especially since we moved to a new house, there was a huge margin for error. We could have easily forgotten to change our address, not received a bill, missed a payment, and suffered the consequences. When you have multiple properties, you simply have to have this kind of system in place. Any kind of calendar works, you can use Gmail, your phone, or an app.
The second tip is to set calendar alerts for payment days and lease expirations. This can easily fall through the cracks, unless you're proactive. Hopefully you’re working with a fantastic property management team who pays in a timely manner, and manages the leases, but you as a landlord still need to be cognizant about what is happening in your investment property.
Another practice is to set a budget for your next purchase. When your rent checks come in, know how much you plan to set aside in order to grow your portfolio. If your goal is to expand, focus on putting aside as much as you can.
Next, consider creating a master spreadsheet. This is helpful because it allows you keep track of all the little things that can easily be overlooked. For example, our has columns for everything we want to track. Ours contains items like property address, LLC, if we have possession of the deed, current lease, current property management agreement, current insurance, tax payments, and more.
Our last tip for managing your real estate cash flow is to share it with your business partner! This way, anytime a change is made or a question arises, everyone is in the loop.
Please remember, this is simply the system we use for managing cash flow in our real estate business. Find a system that works for you, and stick with it! Be the advocate for your own wealth building. This is something we wish we had implemented back when we just had one or two properties. The sooner you have a solid system in place, the better.